B.C. Hydro boosts fraud risk management at Site C, but is it too little too late?

It's hard for the average person to know what to make of the Auditor General's report this week into how B.C. Hydro is, and isn't, managing fraud risk in the construction of the $16-billion Site C dam, the largest and most expensive infrastructure project in the history of the province. 

On one hand, auditor Michael Pickup said B.C. Hydro has elements of fraud risk management in place at the hydroelectric megaproject on the Peace River near Fort. St. John.

But with the project already three-quarters into the 11-year construction timeline, Pickup also said executives at the public utility had not implemented a comprehensive fraud risk management program, highlighting what can be seen as a lack of best practices.

According to the Global Infrastructure Anti-Corruption Centre (GIACC), infrastructure projects all over the world are magnets for shady business dealing. And the bigger and more complex the project, the harder it becomes to detect corruption and fraud.  

That's why GIAAC co-founder Neill Stansbury says it's important to have a highly visible fraud management program in place from day one. 

"A lot of people and a lot of complexity can give rise to bribery and fraud. And inevitably, that's what happens," said Stansbury, speaking in general terms from his office near London, U.K. 

"It's entirely obvious you should put a very high-profile, controlled environment in place upfront."  

"In our experience, people don't pay attention to major infrastructure projects and most countries pay very little attention to fraud. And therefore money is hemorrhaging out of the system as a result," he said.

The Site C audit makes reference to GIACC's anti-fraud and anti-corruption work. Stansbury, a former construction lawyer, co-founded the organization in 2008 to help address what he saw as a rampant problem costing untold millions. 

"We thought that corruption can be stopped in the sector if you develop the right controls and procedures. So, procedurally, how do you monitor for bribery? How do you monitor for fraud? How do you investigate it? How do you uncover it? How do you deal with it? How do you prevent it? That is the core of what we do."

'If no one is watching...'

To illustrate a type of construction fraud, Stansbury cites a hypothetical situation involving a contractor hired to excavate two meters into the ground, replacing the dug out material with gravel.

"If no one is watching, how do you know they've gone down to minus two metres across the whole site? If they go down to minus 1.5 metres, the [contractor] saves half a metre of excavation across the whole site and they save half a metre of gravel," he said.

"It's that type of analysis: are [contractors] doing the correct work to the correct depth and actually providing the correct materials? Because as soon as you cover up excavation with fill, or you cover structural steel with concrete, it's very hard to see what was there beforehand."

To be clear, the audit of Site C did not find fraud. It wasn't looking for it. According to the minister who oversees B.C. Hydro, taxpayers have no reason to be concerned about the megaproject. 

"The B.C. Hydro audit unit audited contract management [and] they audited payment systems, which are two of the particular areas that one would look at. And there was no evidence of fraud discovered," said Energy Minister Bruce Ralston. 

"So I have a fairly high degree of confidence in those results and in the ability of B.C. Hydro to take the necessary precautions to prevent fraudulent activity on this particular project."

CBC requested an interview with B.C. Hydro President and CEO Chris O'Riley or Chief Financial Officer David Wong. Neither was available.

According to B.C. Hydro public affairs manager Greg Alexis, B.C. Hydro has defended against fraud at Site C through its employee code of conduct policy, anonymous reporting line and internal ethics officer. It has also accepted the five recommendations made in the Auditor General's report. 

"We welcome their ideas to help formalize our office management program," said Alexis.

One incident of fraud was detected at Site C in 2016, when an employee was found to have claimed payment for work that was never done, according Alexis.