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HomeMy WebLinkAboutE-05 Staff Report Fraud, Waste, and Abuse PolicyCONSENT ITEM E-5 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: TROY L. BUTZLAFF, ICMA-CM, CITY MANAGER FROM: TALIKA JOHNSON, DIRECTOR OF FINANCE DATE: MARCH 6, 2017 SUBJECT: IMPLEMENTATION OF A FRAUD, WASTE, AND ABUSE POLICY AND HOTLINE SUMMARY: The City of Azusa is committed to upholding the public trust and expects all of its employees, vendors and contractors to adhere to the highest standards of ethics and accountability. Behaviors and actions that could be perceived as embezzlement, theft, misappropriation of public funds or property should be avoided at all times. To help in the detection and prevention of fraud, waste, and abuse by employees and/or contractors engaged by the City, an administrative policy has been prepared for reporting fraud, waste and abuse of public resources. In addition to establishing a fraud, waste and abuse policy, the City has contracted with a third-party provider to operate an anonymous, 24-hour online and telephone system ("Fraud Hotline") to report suspected cases of fraud by City employees, officials, contractors or vendors. The recommended action is to receive and file the Fraud, Waste and Abuse Policy. RECOMMENDATION: Staff recommends that the City Council take the following action: 1) Receive and File the attached Fraud, Waste, and Abuse Administrative Policy. DISCUSSION: The City of Azusa is an organization that values responsibility and integrity. City management expects all employees and those conducting business with the City to act ethically and take responsibility for their actions. To help facilitate the development of controls that will aid in the detection and prevention of fraud, waste, and abuse against the City, and contains procedures for reporting violations, City Staff has created a Fraud, Waste, and Abuse Policy (“Policy”). It is the intent of this Policy to promote consistent organizational behavior by providing guidelines and assigning responsibility for the development of APPROVED COUNCIL MEETING 3/6/2017 Fraud, Waste, and Abuse Policy and Hotline March 6, 2017 Page 2 controls and conduct of investigations relating to complaints of violation. A full copy of the Policy is attached to this report. In conjunction with the Policy, the City has contracted with a third party hotline provider, EthicsPoint, to take anonymous reports of fraud, waste and abuse. The Fraud Hotline is designed for reporting suspected cases of fraud by City employees, officials, contractors or vendors, and/or employee breach of City-Wide Policies and Standards of Conduct which has a financial impact on the City, including but not limited to waste or abuse of City resources. The Fraud Hotline is not a substitute for employment-related grievances or complaints by City employees, as existing City policies and procedures provide channels for resolution of these issues. While face-to-face reporting is the preferred form of communication, it is not always feasible or comfortable. Therefore, the Fraud Hotline provides another vehicle to report fraud or waste. Complainants can choose to remain anonymous. Complaints submitted online are routed directly to the Hotline Administrators, consisting of the Director of Finance and the Director of Human Resources and Risk Management. The Hotline Administrators will maintain the confidentiality of all complaints, including documents relevant to the investigation of a complaint (to the extent permitted by law). In cases where violation of the City’s Policy is suspected, employees or members of the community can call the Fraud, Waste & Abuse HOTLINE at (844) 777-4756 or complete and submit an online complaint form at www.ci.azusa.ca.us.ethicspoint.com. FISCAL IMPACT: The annual cost of the Hotline service is $3,000 and will be programmed each budget year accordingly. Prepared by: Reviewed and Approved: Talika M. Johnson Louie F. Lacasella Director of Finance Management Analyst Reviewed and Approved: Troy L. Butzlaff, ICMA-CM City Manager Attachments: 1) Fraud, Waste, and Abuse Policy City of Azusa Administrative Policy FRAUD, WASTE, AND ABUSE PURPOSE: The City of Azusa’s Fraud, Waste, and Abuse Reporting policy is established to facilitate the development of controls that will aid in the detection and prevention of fraud, waste, and abuse against the City of Azusa (City). It is the intent of the City to promote consistent organizational behavior by providing guidelines and assigning responsibility for the development of controls and conduct of investigations. POLICY STATEMENT: The City offers a Fraud, Waste, and Abuse Hotline (Hotline) with a primary objective being to provide a means for City employees, residents, and other interested complainants to confidentially report (1) any activity or conduct in which he/she suspects instances of fraud, waste, or abuse and (2) violations of certain Federal or State laws and regulations relating to fraud, waste, and abuse as it is defined in California Government Code §53087.6(f) (2). POLICY SCOPE: This policy applies to any irregularity, or suspected irregularity, involving employees as well as consultants, vendors, contractors, outside agencies doing business with employees of such agencies, and/or any other parties with a business relationship with the City. Any investigative activity required will be conducted without regard to the suspected wrongdoer's length of service, position/title, or relationship to the City. POLICY: Management is responsible for the detection and prevention of fraud, waste, and abuse. California Government Code §53087.6(f) (2) defines the terms, "fraud, waste, or abuse" as follows:  Any activity by a local agency or employee that is undertaken in the performance of the employee's official duties, including activities deemed to be outside the scope of his or her employment, that: • Is in violation of any local, state, or federal law or regulation relating to:  fraud, 2 Fraud, Waste, and Abuse Policy 2/21/17  corruption,  malfeasance,  bribery,  theft of government property,  fraudulent claims,  coercion,  conversion,  malicious prosecution,  misuse of government property, or  willful omission to perform duty,.  Is economically wasteful, or  Involves gross misconduct. Each member of the City’s Executive and Middle Management teams will be familiar with the types of improprieties that might occur within his or her area of responsibility, and be alert for any indication of irregularity. Any irregularity that is detected or suspected must be reported immediately to the Director of Finance and Director of Human Resources and Risk Management, who may coordinate investigations with the appropriate entities and personnel. Some of these improprieties may be defined as follows: Violation Definition Comp laint Code Fraud A known is representation of the truth or misstatement of fact to induce another to act to the City's detriment. Fraud, Accounting/ Audit Irregularities Theft of government proper ty Unauthorized taking into one's possession of property owned by the City Theft of Cash, Goods, and Services Fraudulent claims A misrepresentation of facts in a claim to receive compensation Fraudulent Insurance Claims Conversion The wrongful possession of or interference with the City's property as if it was one's own Theft of Cash, Goods and Services Misuse of government property Misuse of City's property Waste Corruption The impairment of a public official's duties by bribery Release of Proprietary Informati on Malfeasance Wrong doing or misconduct by a public official Conflict of Interest Theft of Time Unautho rized Discounts Wage and Hour Issues Customer Relations Policy Issue s 3 Fraud, Waste, and Abuse Policy 2/21/17 Safety Issues and Sanitation Product Quality Concerns Bribery The corrupt payment, receipt, or solicitation of a private favor for official action Kickbacks Improper Loans to City Officials Coercion Compulsion by physical force or threat of physical force; threat of taking or withholding official action or causing an official to take or withhold an action Retaliation Against Whistleblowers Malicious prosecution Intentionally (and maliciously) instituting and pursuing (or causing to be instituted or pursued) a legal action that is brought without probable cause and dismissed in favor oftl1e victim that caused damages Abuse Willful omission to perform duty Intentional neglect to take action requi red by law or contract Abuse Complaints received that allege certain Labor-Management Issues e.g. Discrimination, Sexual Harassment, Substance Abuse, and Workplace Violence/Threats are not included in the statutory definition of fraud, waste, or abuse and are not in the purview of this policy. However, these complaints are forwarded to the appropriate management function for review and action. INVESTIGATION RESPONSIBILITIES: The Director of Finance and Director of Human Resources and Risk Management have the primary responsibility for the investigation of all suspected acts as defined in the policy. If the investigation substantiates that inappropriate activities have occurred, the Director of Finance and Director of Human Resources and Risk Management will issue reports to appropriate designated personnel and, if appropriate, to the City Council in accordance with the Brown Act. Decisions to prosecute or refer the examination results to the appropriate law enforcement and/or regulatory agencies for independent investigation will be made in conjunction with legal counsel and the City Manager, as will final decisions on disposition of the case except to the extent that the initiation of litigation may require approval by the City Council. CONFIDENTIALITY: The Director of Finance and Director of Human Resources and Risk Management shall 4 Fraud, Waste, and Abuse Policy 2/21/17 treat all information received confidentially. Any employee who suspects inappropriate activity shall notify the Director of Finance and Director of Human Resources and Risk Management immediately, and should not attempt to personally conduct investigations or interviews/interrogations related to any suspected act (see REPORTING PROCEDURE section below). Investigation results will not be disclosed or discussed with anyone other than those who have a legitimate need to know. This is important in order to avoid damaging the reputations of persons suspected but subsequently found innocent of wrongful conduct and to protect the City from potential civil liability. Public disclosure shall be made only in accordance with applicable law. AUTHORIZATION FOR INVESTIGATING SUSPECTED FRAUD, WASTE, AND ABUSE: The Director of Finance and Director of Human Resources and Risk Management, or authorized representative, will have access to, and authority to examine any and all records, documents, systems and files of the City and/or other property of any City department, office or agency. It is the duty of any officer, employee or agent of the City having control of such records to permit access to, and examination thereof, upon the request of the Director of Finance and Director of Human Resources and Risk Management or their authorized representative. It is also the duty of any such officer, employee or agent to fully cooperate with the Director of Finance and Director of Human Resources and Risk Management, or authorized representative, and to make full disclosure of all pertinent information. The Director of Finance and Director of Human Resources and Risk Management shall also be permitted access to any and all records, documents, systems and files of any City vendor or contractor as allowed by City agreements and contracts. REPORTING PROCEDURES: Great care must be taken in the investigation of suspected improprieties or irregularities so as to avoid mistaken accusations or alerting suspected individuals that an investigation is under way. Any employee, or other interested complainant, who discovers or suspects fraudulent activity will have different options to report. Reporting can occur by:  Contacting the Director of Finance and/or Director of Human Resources and Risk Management - either in person, by mail, by email, or by direct phone call;  Hotline Reporting- calling the City's third party reporting firm at (844)777- 4756;  Online Reporting- web intake form at www.ci.azusa.ca.us.ethicspoint.com The following information is necessary to begin and continue processing a complaint/concern:  The alleged misconduct involves a City employee, a contractor, or a vendor doing business with the City.  Name of the individual(s) involved. 5 Fraud, Waste, and Abuse Policy 2/21/17  Specific information regarding the alleged misconduct.  Circumstances surrounding how the alleged misconduct occurred.  Where or in what department the alleged misconduct occurred.  When the alleged misconduct occurred.  The conduct should meet the statutory definition of fraud, waste, and abuse found at California Government Code §53087.6(f) (2). During the initial review of complainant report(s), the Director of Finance and Director of Human Resources and Risk Management will hold in confidence information disclosed through the Hotline, including the identity of the caller disclosing the information and the parties identified by the caller as allowed under applicable state law. The complainant may remain anonymous to the extent allowed by law. All inquiries concerning the activity under investigation from the suspected individual, his or her attorney or representative, or any other inquirer should be directed to the Director of Finance and Director of Human Resources and Risk Management: No information concerning the status of an investigation will be given out. The proper response to any inquiry is: "There is no information to report at this time." No reference should be made to "the allegation," "the crime," "the fraud," "the forgery," "the misappropriation," or any other specific fraud reference when referring to any report. The reporting individual should be informed of the following:  Do not contact the suspected individual in an effort to determine facts or demand restitution.  Do not discuss the case, facts, suspicions, or allegations with anyone unless specifically asked to do so by the City Attorney or the Director of Finance and Director of Human Resources and Risk Management. DISCIPLINE: Once the investigation provides firm indicators through probative evidence that an employee might be subject to disciplinary action by his/her department for the subject matter of the investigation, the Director of Finance and Director of Human Resources and Risk Management will work with the City Manager, City Attorney, and/or department director to ensure a disciplinary process in accordance to the City's Personnel Rules and any other applicable law, rule, or regulation. ADMINISTRATION: For the purpose of this Administrative Policy, the City Manager has designated the Director of Finance and Director of Human Resources and Risk Management to be responsible for the administration, revision, interpretation, and application of this policy. The policy will be reviewed periodically and revised as needed. The Director of Finance and Director of Human Resources and Risk Management may develop any other policies or procedures as necessary to implement this Administrative Policy. ___________________ ___________________ ___________________ _____________ Troy L. Butzlaff Talika M. Johnson Sheri San Miguel Date City Manager Director of Finance Interim Director HR/RM