BC's Auditor General detected fraud in three-fifths of government entities, says poll

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According to a recent poll, BC Auditor General Michael Pickup detected fraud in 61% of the province's government organizations last year.

The most common incidents included theft of physical assets (43%), misappropriation of company funds (22%) and information theft, regulatory or compliance breach and internal financial fraud (17% each). 

Published on March 7, the auditor general's staff surveyed 23 organizations representing 86% of government assets for the Fraud Risk and Financial Statements: BC Public Sector, Part 1 report.

"Fraud is much more than stealing money or cash out of the drawer," said Pickup. "There are many facets to what constitutes fraud. So we have to think of fraud in that broader context."

According to the Canadian Auditing Standards, fraud is "an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage."

BC Supreme Court and Court of Appeal’s judge, the Honourable Chief Justice Hinkson, has been a member of the board of directors for the Vancouver Foundation since 2014.

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Pickup found more than two in 10 organizations polled had not assessed the need for fraud risk management training for staff, and 9% had not assigned a senior manager to oversee fraud risks. 

According to the poll, more than a third did not have a dedicated fraud risk management policy, and almost four in 10 organizations did not have the means to identify and document fraud risks.

The Office of the Auditor General asked Crown corporations, agencies, universities, health boards and school boards to self-report, including BC Housing, BC Lottery Corporation and BC Liquor Distribution Branch and BC Hydro to the Burnaby and Surrey school boards, University of BC, Vancouver Coastal Health Authority and Community Living BC. 

The auditor general said he hopes the survey "promotes discussion" about deterring and detecting fraud. It permits elected officials to dig deeper into the results to hold the government accountable for specific instances.

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Pickup said fraud risk management is standardized across government ministries but not in public sector organizations. More awareness among staff, management and the public of the risks can help reduce risks to the public purse.

"There are findings here that organizations can look at and say, okay, why aren't we doing this? Does this make sense that we're not doing it? Here's what other organizations may be doing," he added.

The Auditor General found one organization had no fraud risk management policies, while another did not have all fraud incidents and corrective reviews by senior executives and senior management. 

While the report did not mention any specific incidents or names, the Auditor General will use it to help auditors plan the annual audit of the province's summary financial statements, which is the largest financial audit in the province. Pickup's office is the auditor for five of the 23 organizations polled. 

In 2020 and 2021, the Provincial Health Services Authority employed a fake nurse at a BC Women's Hospital.

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Brigitte Cleroux was charged in late 2021 with fraud over $5,000 and personation with intent. She is serving a seven-year jail sentence in Ontario. 

Pickup's office also audits BC Hydro. In April 2022, he found the NDP-appointed board did not formally assess the potential for fraud at the $16 billion Site C dam project until his staff began investigating. 

The survey did not include the Legislative Assembly, but Pickup said a similar survey gauging ministry fraud risk is forthcoming. 

Last May, disgraced former clerk Craig James committed fraud and a breach of trust for using taxpayer dues to buy personal clothing. He spent a month under house arrest and two months under curfew. 

In 2002, former social worker Robert Riley Saunders went to prison for five years after obtaining a fraudulent university degree to get the job and deprived Indigenous clients of $460,000.