Departments are responsible and accountable for the security and proper use of the funds and property entrusted to them. Money that is lost through carelessness or weak control measures is a concern to managers and government employees alike. It reflects on their competency and their responsibility to protect the funds entrusted to them by Parliament and the public.
Worse still, when funds or property are lost through criminal acts by public servants, the image of the Public Service is damaged.
All managers in particular and employees in general must be alert to control weaknesses, improper practices and illegal acts that arise in their respective areas of responsibility and must act promptly to resolve them.
To ensure accountability for all losses of money and all allegations of offences and illegal acts against the Crown and other improprieties by reporting and investigating them, and taking appropriate action.
It is government policy that:
This policy applies to all organizations that are departments within the meaning of section 2 of the Financial Administration Act.
Departments shall appoint a coordinator, functionally responsible to the deputy head or to the departmental executive committee, to serve as a single focal point for reporting and coordinating subsequent action. This:
Internal auditors are knowledgeable of the conditions and activities where offences like theft, fraud and defalcation are most likely to occur and, during their normal audit activities, are alert to indicators that such offences may have been committed. However, the primary role of an internal auditor is not to investigate fraud, but to examine and evaluate the effectiveness of internal controls and to alert management to weaknesses in controls. Thus, unless specifically tasked by the deputy minister to look into a particular matter, internal auditors would not normally be responsible for investigations under this policy. Nevertheless, an internal auditor who, during the course of a normal audit, acquires knowledge or uncovers information indicating that an offence or illegal act may have been committed, would be responsible, like any other employee, to inform the designated authority within the department.
Through personnel policies, departments have been fully delegated the responsibility for decisions on the disciplining of employees directly or indirectly responsible for a loss or other incident. In this regard, departmental staff relations advisors are responsible for advising departmental management on appropriate disciplinary action. Departments are also responsible for reporting incidents as required by this policy and for taking preventative measures.
In general, departmental security officers (DSOs) are responsible for the design and maintenance of systems and procedures to protect assets and classified or designated information. They must, therefore, be notified immediately of suspected cases of theft or any other possible breaches of security, in order to ensure that any deficiencies in security measures may be rectified. Except when departments have special organizations established for the purpose, DSOs are also normally responsible for conducting or directing any internal departmental investigation of security breaches and for dealing with the appropriate law-enforcement agency on such cases.
Criminal proceedings, however, are the exclusive responsibility of law-enforcement authorities. Departments do not have any discretion in these matters. The investigating police agency is responsible for laying charges and a Crown attorney is responsible for deciding whether to proceed with the case, ask for a stay of proceedings, or drop the charges.
This policy will be monitored through reports submitted by departments to the RCMP, the Treasury Board Secretariat and Public Accounts.
This chapter cancels chapter 5-8 of the "Financial Management" volume dated August 1, 1993; and this policy supersedes section 10.9 and appendices 10.D and E of the Treasury Board "Guide on Financial Administration".
Enquiries concerning this policy should be directed to your departmental headquarters. For interpretations of this policy, departmental headquarters may contact:
Certain departments have both enforcement and investigative responsibilities within their program areas. Thus, departments such as National Defence, Revenue Canada, and Employment and Immigration Canada, which have their own police force or investigators, may investigate program offences (e.g. unemployment insurance fraud, tax evasion, etc.) themselves. However, associated offences under the Criminal Code and offences under the Financial Administration Act or some other federal statute where the RCMP or a local police department has the primary jurisdiction must be referred to them as outlined in the "policy requirements" section of this chapter. Similarly, program offences by employees themselves are reportable to the RCMP for possible criminal investigation when position, inside knowledge, collusion, or breach of trust, etc. may have been involved.
Any preliminary examination undertaken by a department should be limited to ascertaining whether there is a possible basis to an allegation. As soon as such an examination reaches the point where there is a reasonable basis to suspect that an allegation might reasonably be expected to have some substance, the matter should be reported as outlined in Appendix C.
Persons employed in a law-enforcement capacity, such as peace officers, inspectors and regulatory officials, who, themselves violate the laws or regulations that they are responsible for enforcing are, in addition to the program offence, also possibly in violation of the departmental code of conduct and may even be in criminal breach of trust. Any investigation of such incidents should therefore consider these latter two aspects.
Departments should establish and ensure that employees are aware of procedures to deal with tips about alleged losses, offences, improprieties and improper practices, however obtained or received, and whether anonymous or otherwise.
A person may be accountable for a loss of money without necessarily being the person responsible or culpable. For example, a custodian who fails to follow proper procedure and secure cash or other valuables like taxi vouchers and travellers' cheques might still be accountable for any loss or shortage, even if there is no evidence of criminal action on his or her part.
Unlike petty cash and other accountable advances (see Appendix C, paragraphs 2.1 and 2.2), cashier shortages in the normal course of business would not normally be recovered from the cashier unless negligence was involved. When there is an ongoing problem with a cashier balancing within acceptable tolerances, additional training or reassignment to other duties should be considered.
The Crown has no responsibility under this policy for losses of personal funds.
When, in exceptional circumstances, such as a robbery despite due care and diligence, a department considers it appropriate to indemnify an employee for a loss of an advance against an entitlement to reimbursement for personal expenses like a travel advance, the department may seek the approval of the Treasury Board to make a payment as an extraordinary allowance pursuant to paragraph 11(2)(h) of the Financial Administration Act. This may be done via a letter to the President of the Treasury Board who has been delegated the authority to act on behalf of the Board in certain personnel matters. However, given the requirement to use travellers' cheques, the general availability of travel cards and prudence and good risk-management practices in carrying only minimal amounts of cash, such payments are expected to be extremely rare and of a minor amount. When the making of such a payment is not justified or otherwise has not been approved, the loss must be absorbed personally by the employee who lost the advance or claimed from his or her personal insurance.
Note: Departments are encouraged to consult with the Safety, Health and Employee Services Group, Human Resources Policy Branch, Treasury Board Secretariat before sending a request of this nature to the President of the Treasury Board.
When a manager has not provided adequate direction or has permitted inappropriate operational practices to continue, he or she might be deemed to share in the accountability for the loss. In such a case, a department might consider apportioning recovery between that manager and the employee concerned in accordance with their respective accountability.
Factors to consider when determining the amount of any demand or claim for recovery might include:
Where a department is recovering a loss arising from falsified claims, falsified documents, false pretences, fraud and the like, the department should insist on immediate recovery in full. It is up to the individual concerned to make appropriate arrangements to raise the money - through a loan with a financial institution; by taking out a mortgage or a second mortgage; or whatever. The Crown should not be financing this type of recovery and, where there are any delays in obtaining payment, should charge interest at full commercial rates.
In general, recoveries in civil proceedings and disciplinary action under labour law are separate from criminal proceedings and are not dependent on the outcome of those proceedings. Thus, when a department determines that disciplinary action is warranted, it should be taken promptly. Any undue delay may adversely affect the outcome if the matter goes to grievance and third-party adjudication.
If all the relevant facts and circumstances are known, it is not necessary to wait for the results of any criminal investigation or proceedings. Subject to prior consultation with the investigating police agency and departmental staff relations advisors, the two may normally proceed concurrently.
Measures to protect both the person reporting an incident or making an allegation and the person implicated or alleged to be responsible include:
Risk assessment and the taking of preventative measures are often as important - and sometimes even more important - than action taken to respond to a particular incident. These should therefore be an integral part of any investigation. As part of any response to an incident, a department should also assess the possibility of the same thing having happened or happening again; first, elsewhere within the department; second, in other departments with similar programs, clientele or exposure; and third, across all departments.
Measures to prevent or minimize losses include:
(For policy, guidelines and standards, see the "Security" volume of the Treasury Board Manual.)
defalcation (tbd) - is a term usually applied to officers of corporations and public officials who embezzle or misappropriate public funds, trust funds or money held in a fiduciary capacity.
fraud (fraude) - is a deliberate act of deception, manipulation or trickery, with the specific intent of gaining an unfair or dishonest advantage (cheating) or injuring another person or organization. Ordinarily, fraud involves either wilful misrepresentation or deliberate concealment of material facts for the purpose of inducing another person to either part with cash or something else of value or to surrender a legal right.
malfeasance (délit d'action ou de commission) - is the commission of an unlawful act; i.e. the wrongful doing of an act that the doer has no right to do or that the doer is obligated not to do by contract, statute, regulation, etc.
misappropriation (détournement) - is the act of turning money or other property to a wrongful purpose. It is often used in the context of, but is not limited to, the conversion of public funds to one's own use or to the use of others; however, any use not authorized by Parliament is a form of misappropriation.
misfeasance (faute d'exécution) - is the improper performance of a lawful act.
nonfeasance (omission délictueuse) - is the total omission or failure to perform some distinct act, duty or undertaking that one is obliged to do.
robbery (vol avec violence) - is the taking of money, personal property, or any other article of value, in the possession of another, from his or her person or immediate presence, against his or her will, through violence or threat of violence.
theft (vol) - is the taking of money or other property without the owner's consent, with the intent to deprive the owner, temporarily or permanently, of the possession, use or benefit of it. Although both fraud and theft may result in depriving someone of property, a key distinguishing feature is that with fraud the victim is induced through deceit or trickery to voluntarily give up the property. With theft, the owner does not surrender the property voluntarily and, in some cases, may not initially even be aware that it has been taken.
2.1 For the purpose of reporting to law-enforcement authorities, "offences" involve any offence under the Criminal Code or a federal statute or regulation where the Crown is a victim. These include, for example:
3.1 For the purpose of reporting in the Public Accounts, "losses" include any loss resulting from an incident referred to above as an offence, plus:
The contents of this appendix are mandatory since they relate directly to - and are a further elaboration of - the policy requirements.
1.1 Incidents of theft, break-and-enter, and the like requiring an immediate response are to be reported directly to the local police agency without delay. Subject to paragraph 1.2, below, all other suspected cases of fraud, defalcation or any other offence or illegal act against Her Majesty must be reported promptly to the RCMP for investigation.
1.2 Suspected cases of theft, fraud, defalcation or any other offence or illegal act involving employees that do not require an immediate response by a police agency may be referred to departmental legal services which will consult with the Criminal Prosecutions Section of the Department of Justice before providing an opinion.
Notes: (1) Although each case has to be judged on its own merits, examples of minor, employment-related incidents might include, for example:
(2) In providing an opinion referred to above, departmental legal advisers are acting as representatives of the Attorney General in his capacity as such with particular regard to the equitable administration of Justice, and not as legal representatives of the department concerned.
1.3 In addition to being reported to law-enforcement authorities for investigation per paragraphs 1.1 or 1.2(b) above:
1.4 Departments must establish their own internal reporting requirements, including identifying, in consultation with their minister, what types or classes of incidents are to be drawn to the personal attention of the minister.
1.5 Reports to the Treasury Board Secretariat, when required, are to be submitted to the Director of Financial Authorities, Comptroller Sector, Program Branch, and shall include as a minimum:
Note: The actual names of specific individuals should not be included in these reports.
1.6 There does not have to be an actual loss of money or property before an offence is reportable. An attempted fraud that is detected before payment is made is as equally reportable as a successful fraud. Similarly, offences are still reportable, even if the loss is recovered in full.
1.7 Incidents occurring outside of Canada that would be an offence if they occurred in Canada are also reportable.
1.8 Gross losses (estimated when necessary), irrespective of any recoveries, are to be reported in the Public Accounts, in the form outlined in the Public Accounts Instructions Manual, for the fiscal year in which the loss occurred or, when the loss is not discovered in time, in the first Public Accounts in which it is practicable to do so.
1.9 Indemnifications for losses of advances in accordance with paragraph 8 of the guidelines must also be reported in the Public Accounts, but in the section on claims, court awards and ex gratia payments, rather than in the section on losses suffered by the Crown.
1.10 Recoveries against losses are to be reported in the Public Accounts for the fiscal year in which the amount is recovered or, when that is not possible, in the Public Accounts for the next fiscal year.
2.1 Losses of money that require a disbursement to reimburse an imprest fund like petty cash or another person, cashier shortages and all losses of revenue (irrespective of whether a disbursement is required) shall be charged to the appropriation for the related program, after approval by the appropriate minister or such other member of the departmental senior executive committee as may be designated in writing by the appropriate minister. In the case of cashier shortages and losses of revenue, the appropriation is to be charged and the applicable revenues credited with the amount of the shortage.
2.2 The charging of a loss against an appropriation is an accounting transaction only. Departments are still responsible for attempting to recover the loss and must still take appropriate disciplinary action when it is warranted. In this regard, it is to be noted that under section 3 of the Accountable Advances Regulations, an individual to whom an advance is issued is personally responsible and accountable for that advance and losses or shortages are recoverable from the holder or custodian thereof. Thus, petty cash shortages are recoverable unless all of the following conditions have been met:
However, even when one or more of the above conditions has not been satisfied, a custodian may nonetheless be released from his or her accountability, in whole or in part, if the manager concerned assumes full or partial responsibility for the loss by acknowledging in writing that he or she:
In this case, accountability for the loss would shift to (or in the case of a partial release, be shared by) the manager, and guideline 9 on accountability and recovery from managers would then apply.