Majority of B.C.'s public sector victim to at least 1 type of fraud in past year: report

A report from British Columbia's Office of the Auditor General says 61 per cent of the public sector organizations canvassed were victimized by at least one type of fraud in the past year, with "theft of physical assets" the most common.

The report is based on a questionnaire administered to 23 "significant" organizations, all with assets or expenditures over $600 million.

They include B.C. Housing, PavCo, B.C. Hydro, the B.C. Lottery Corporation, UVic, UBC, BCIT, the Surrey and Burnaby school districts, and all five provincial health authorities.

Combined, the organizations are responsible for 86 per cent of the financial and physical assets of all public sector organizations, excluding ministries.

Pickup said the survey results show the province's public institutions, including Crown corporations, school boards and health authorities, all need to be aware of fraud risks and educate employees to spot potential instances.

In a video statement, he said the report suggests that public sector organizations are not using all the tools available to manage fraud risk.

"All organizations are vulnerable to fraud," he said. "B.C. has a standardized framework for fraud risk management for ministries but not for the rest of the public sector, so organizations often take different approaches."

According to the report, only 17 per cent of the organizations said they were highly vulnerable to fraud.  Thirty-nine percent said they did not have a process to identify and document ongoing fraud risks. 

The most common type of fraud reported by the organizations in the past year are:

• Theft of physical assets — 43 per cent.

• Misappropriation of company funds — 22 per cent.

• Information theft — 17 per cent.

• Regulatory or compliance breach — 17 per cent.

• Internal financial fraud — 17 per cent.

• Vendor, supplier, or procurement fraud — 9 per cent.

• Corruption and bribery — 4 per cent.

• Money laundering — 4 per cent.

According to the Canadian Auditing Standards, fraud is defined as "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."

The auditor general said the survey is meant to "promote discussion'' about deterring and detecting fraud, and elected officials can dig deeper into the results to hold government accountable about specific instances.

The information in the report will also be used to help auditors plan the annual audit of the province's summary financial statements, which is the largest financial audit in the province.

A second report looking at government ministries will be released later this year.