Most public sector organizations — from health authorities to municipalities and universities — lack adequate fraud prevention measures, according to a new report from the Auditor General of B.C.
Although 82% of government organizations assigned risk management to a senior manager, only 48% had formal policies to support effective fraud risk management, the auditor’s informal survey of 140 organizations found. Of the 48% that said they have one or more policies to support fraud risk management, only 12% provided a focused fraud risk management policy.
"This is troubling," Auditor General Michael Pickup said via a statement Tuesday. "I would like public sector organizations to have better fraud risk assessment measures in place."
Just 10 out of 93 municipalities have not assigned responsibility for fraud risk management to a senior manager. Among them were Richmond, Delta and Coquitlam. But the vast majority of municipalities also did not have a corporate fraud risk policy.
BC Hydro, which is building the largest taxpayer-backed infrastructure project in B.C. history, was found to have no senior management overseeing fraud policies, according to the report. However, BC Hydro does have internal controls to mitigate fraud risk.
Among the more positive findings, 91% have internal controls to prevent fraud. However, when fraud does occur, only 43% have policies and procedures in place to deal with the fraud. Furthermore, just 17% of organizations know when to call police.
The Provincial Rental Housing Corporation (PRHC), which buys, sells and leases social housing properties, was among the 9% found to have no internal fraud controls, joining some smaller school districts in that boat.
However, the entity that manages and operates said social housing — the British Columbia Housing Management Commission, otherwise known as BC Housing — reported full compliance with the auditor’s survey.
“PRHC does not have any employees and is administered by BC Housing. PRHC is fully covered by BC Housing’s anti-fraud policies,” explained a BC Housing spokesperson.
Other notables without formal fraud policies include: Infrastructure BC, BC Pavilion Corporation (BC Place), BC Liquor Distribution Branch and the British Columbia Institute of Technology.
The risk of fraud is significant and can imperil organizations, noted Pickup.
"The Association of Certified Fraud Examiners, for example, estimates that organizations lose up to 5% of their revenue to fraud every year. A complete and thorough approach to fraud risk management is essential to managing that threat effectively,” stated Pickup.
Pickup noted the report is not a formal audit: “The Fraud Risk Management Survey Report” was conducted as part of the office's 2020-21 annual financial audit work. The survey was not an audit and the office did not audit the responses from organizations.”
A prior version of this story stated The Provincial Rental Housing Corporation was BC Housing. Rather it is the British Columbia Housing Management Commission that is known as BC Housing.