Alleged fraud at Dunedin City Council

Deloitte Report Referred to the Police

Dunedin (Friday, 22 August 2014) – An independent investigation into an alleged fraud at the Dunedin City Council has been completed and the matter has now been passed to the Police.

DCC Chief Executive Officer Dr Sue Bidrose says the alleged fraud totals more than $1.5 million and centres on the DCC receiving no proceeds from the sale of 152 vehicles from the DCC’s vehicle fleet. A formal complaint was laid with the Police last week following an independent investigation by Deloitte which began in late May.

Citifleet Team Leader Brent Bachop died suddenly on 21 May. His death has been referred to the Coroner.

Deloitte was engaged by the DCC on 23 May to launch an investigation after staff identified what appeared to be a discrepancy in the number of Citifleet vehicles when implementing new financial procedures related to DCC assets.

Dr Bidrose says, “The matter is now with the Police and on their advice, and the advice of the Crown Solicitor, we are not releasing the Deloitte report at this stage, to ensure we do not prejudice any Police investigation.

“We have committed to keeping ratepayers and residents informed, but my first priority has to be that the appropriate authorities hold people accountable and we try to recover some ratepayers’ money.”

It appears the alleged fraud was possible because of inadequate internal checks and balances within the DCC.

Dr Bidrose says, “We are changing things here at the DCC and it is these changes that uncovered this alleged fraud, which occurred over at least a decade. This reinforces the need for these changes which, frankly, are long overdue.”

Measures have been, and continue to be, taken to make sure the appropriate level of accountability and oversight is in place in the future across the organisation. However, this will be an ongoing process that will take time.

“I want to emphasise that this is an organisation in which people can have confidence. The people who work here are overwhelmingly decent, hard-working public servants committed to the best interests of the city. We are committed to getting to the bottom of any issues and ensuring we have best practice across the board. The changes are well underway – in fact it was in making these changes that we uncovered the alleged fraud.”

Dr Bidrose says the DCC has employment processes underway relating to a small number of staff, primarily around the lack of checks and balances which should have been in place.

Mayor of Dunedin Dave Cull says the fact these issues have been found now after more than a decade shows the Council has been right to push for more transparency and tighter processes.

“We tasked Sue, and the previous Chief Executive Paul Orders, with reviewing DCC practices so any problems or issues could be fixed as part of our accountability to ratepayers.

“Paul started with our companies and made a huge improvement in their governance and oversight. Now Sue and her staff are having the same impact inside the DCC.”

Dr Bidrose says a wide range of work has been completed to tighten up DCC processes, including:

• The introduction of a new Audit and Risk Subcommittee, with an independent Chair.

• All tenders that are awarded through the DCC Tenders Board are published on the DCC website for greater transparency.

• A central contracts register has been put in place.

• The ‘whistleblower’ policy has been updated.

• A first review of internal audit work across the DCC has been completed.

• The risk management framework has been reviewed.

Further work in progress includes:

• The appointment of a dedicated Risk and Internal Audit Manager. This position has been advertised.

• A fraud awareness campaign and training for all staff so they know what may be signs of fraud.

• Increasing further the transparency of purchase card use.

• A review of key DCC policies, such as those relating to fraud and cash handling.

• Review the procurement/tendering processes across the DCC.

• A review of internal processes around issues such as the staff receiving gifts, tickets or hospitality.

The Deloitte report has been sent to both the Serious Fraud Office and DCC insurers QBE.

To date, the investigation has cost about $200,000.

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