Segregation of duties failings costs City of Edmonton
Edmonton’s former city manager has come under the microscope recently for accruing almost $140,000 in expenses while travelling outside the city. While extensive travelling in this type of position is not uncommon, what is unusual in this case is that the system allowed the manager to approve his own expenses with virtually no oversight.
Although the city’s policy regarding business expenses clearly states that “no employee may approve his/her own authority to travel or business expense claims”, the city manager was the corporation’s highest ranking employee and therefore had no one above him with authority to approve his travel. In addition, while the city council establishes a budget for the city manager and reviews his or her performance, it does not currently review the city manager’s expense reports. They are all self-approved.
Within the span of three and a half years, the city manager spent 212 days working outside of Edmonton. Between January and September 2015 when he was fired, he spent 24% of his time outside of the city and had already burned through the $25,000 budget the city manager’s office had set for travel that year. Meanwhile, a number of things began to go off the rails in his absence, such as the now well-known and extremely delayed Metro LRT line, two large-scale bridge projects, and a variety of worrisome audit reports.
To limit the opportunity for the city manager to abuse his position, the city should have had stronger segregation of duties (SoD) in place. A critical internal control, SoD reduces the opportunity for fraud or abuse by spreading tasks among multiple staff members—for example, requiring two signatures on a cheque rather than just one. Edmonton has now taken steps to improve their SoD and has updated its policies following a slew of questions from the Canadian Broadcast Commission (CBC). Going forward, city managers will be required to publicly post all of their expenses online to ensure they are held accountable for their expenses.
In future, the city would also be wise to implement a SoD monitoring solution, such as the CaseWare Analytics SoD Monitoring platform. Our holistic approach to monitoring SoD gives companies a bird’s-eye view across all applications, providing greater transparency and the opportunity to prevent fraud. SoD controls are automatically monitored so that any control violations are immediately detected and the appropriate stakeholder is notified.