Fraud — and secrecy about fraud — rampant across B.C. government

Bob Mackin

Fraud is rampant across some of B.C.’s biggest public bodies, according to a report from the Office of the Auditor General. 

But so is secrecy about the rampant fraud, due to a loophole in the Freedom of Information and Protection of Privacy Act.

B.C. Auditor General Michael Pickup (OAG/YouTube)

In March, Auditor General Michael Pickup released the results of his summer 2022-launched poll of 23 Crown corporations, agencies, health authorities, universities and school boards. Pickup and his team found 61% of the public organizations said they were affected by fraud in the previous 12 months, including theft of physical assets (43%), misappropriation of company funds (22%) and information theft, regulatory or compliance breach, and internal financial fraud (17% each). 

“Fraud is a lot more than stealing money or cash out of the drawer,” Pickup told reporters on March 7. “There’s many facets to what constitutes fraud. So we have to think of fraud in that broader context.”

But the report called “Fraud Risk and Financial Statements: B.C. Public Sector, Part 1” did not name names. So a reporter asked each of the 23 organizations Pickup polled, from BC Housing to Vancouver Island Health Authority, to release copies of their completed questionnaires under the freedom of information law. Fifteen refused outright because they relied on the clause in section 3 that calls a record created by or for an office of the Legislature (such as the Office of the Auditor General) “out of scope.”

Two of the organizations have yet to respond, one referred the request to the Auditor General and another delayed response until June, in order to consult a third-party. University of B.C. missed the legislated deadline, blamed a “significant backlog” and suggested it might reply by end of May. 

Only three of the 23 — B.C. Pavilion Corporation, Simon Fraser University and Vancouver Coastal Health — released copies of their questionnaires. 

SFU went one step further and included topical chapters from its policy manual and the July 28, 2022 email from Pickup to the university’s president Joy Johnson.

“We plan to publish a report of the results of our fraud risk assessment, including information obtained through the questionnaire or directly from you or your designate,” said Pickup’s letter. “Our report will include a summary of results and any significant matters. This may include entity-specific information.”

In the report, Pickup did not name any specific entity. He encouraged reporters involved in the March 7 news conference to contact each of the public bodies directly for more information. 

In an interview, Assistant Auditor General Stuart Newton, who is the former Comptroller General, called the questionnaire results an unaudited “initial step” in the summary financial statements process.

Inside B.C. Place Stadium (Mackin)

“It’s a high level indicator, an aggregate of roughly where things might be at, but it is still subject to some follow up work,” Newton said. 

During the same interview, Pickup said it is not for him to tell the government what its policies should be for public reporting about fraud incidents. 

“The elected folks, how they choose to use this report and how they hold government accountable is really their mandate and not mine,” Pickup said.

The executive director of the B.C. Freedom of Information and Privacy Association said he understands why the loophole exists, due to the Auditor General’s investigative functions. But Jason Woywada said both public bodies and the Auditor General should use it sparingly when it comes to such an important issue that demands sunlight.
“One would expect that the government and the Auditor General would be transparent about the steps they’re taking to monitor, prevent and dissuade public employees from defrauding the taxpayer. And if not, then that leads to other questions,” Woywada said.

“If the public interest is paramount, this is information that should be released, and if it’s not paramount, there has to be some pretty good reasons for the Auditor General not to release that and/or for other people not to release it.”

On May 2, Pickup released the second part of his fraud risk survey, this time focusing on government ministries.

In the new report, 10 of the 22 ministries said they had been affected by a form of fraud during the previous year. 

Theft of physical assets (36%) and vendor, supplier or procurement fraud (14%) were the leading categories. None reported internal financial fraud, misappropriation of company funds, corruption and bribery or money laundering.

Six ministries (27%) believed they were “highly vulnerable” to information theft. Half the ministries reported they needed to be “very vigilant” about fraud, but three said that fraud in their ministry was “very unlikely.” 

Half the ministries said they did not have a specific fraud risk management policy, but they had other policies that referred to fraud risk management. One ministry said it had no such policy. 

The Office of the Premier was not included in the survey.

Like the first part, the second part was unaudited and Pickup did not identify which ministries are struggling or succeeding. 

What they said

B.C. Pavilion Corporation answered “no” to the question about having a formal fraud risk management policy. Instead, the Crown corporation that operates B.C. Place Stadium and the Vancouver Convention Centre claimed the “concepts of fraud detection, prevention, mitigation, investigation, education and reporting are embedded within many of our policies, procedures and governance frameworks.”

Vancouver General Hospital (VCH)

PavCo reported that it had no fraud hotline. While it had established policies and procedures when potential incidents of fraud are identified, it answered “no” to the question about “if, when and how police are to be called.” PavCo also did not release its answers to the nine types of fraud. 

Simon Fraser University answered “no” to whether it had been affected in the previous 12 months by: physical assets theft, procurement fraud, information theft, regulator or compliance breach, corruption and bribery, internal financial fraud, misappropriation of company funds, money laundering and IP theft. 

It self-described as being “low vulnerability” to most types of fraud, but “moderate vulnerability” to information theft. 

Vancouver Coastal Health answered “yes” to being affected by physical assets theft and misappropriation of company funds. It self-reported “high vulnerability” to information theft, but “low vulnerability” to most types of fraud, except for “moderate vulnerability” to IP theft. 

Honourable mention: University of Victoria refused to show its questionnaire, but provided its correspondence with the Auditor General’s office and relevant policy manual documents. 

Factbox: By the numbers 

15: Refused to disclose, claiming the FOI law does not apply to the questionnaire: BC Housing, BC Hydro, BC Lottery Corp., BCIT, BC Transit, Community Living BC, Fraser Health, ICBC, Interior Health, Liquor Distribution Branch, Northern Health, Providence Health, Provincial Health Services Authority, Surrey School District and University of Victoria;

4: Charged the $10 non-refundable FOI application fee: BC Housing, Community Living BC., Liquor Distribution Branch and BC Transportation Financing Corp.;

3: Responded with questionnaire: B.C. Pavilion Corp., Simon Fraser University and Vancouver Coastal Health;

2: No response: Columbia Power Authority and Vancouver Island Health Authority; 

1: Delayed to June 5 for third-party consultation: Burnaby School District;

1: Indefinite delay due to claimed backlog: University of B.C.; 

1: Referred to OAG: BC Transportation Financing Corp.

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Bob Mackin Fraud is rampant across some of