Policy on Losses of Money and Illegal Acts Against the Crown

For questions or comments, please contact us :
NC-CFOB-Financial_Policy_Questions_Politique_Financière-GD

Last revision: June 2011
This document last modified: January 2013

Please Note: This policy/document is currently under review and is being updated to reflect new procedures and terminology associated with the implementation of myEMS (SAP)

Branches are responsible and accountable for the security and proper use of funds entrusted to them. Money that is lost through carelessness or weak control systems reflects poorly on the government as a whole and undermines the confidence and responsibility that is placed upon us by the citizens of Canada.

All employees, and managers in particular, must be alert to control weaknesses, improper practices and illegal acts that arise in their day to day activities. It is also incumbent upon them to act promptly to report such acts to their supervisors when made aware of such activities.

1. Policy Objective

To create awareness and effect potential recovery of losses of money and other offences and illegal acts against the Crown by reporting, investigating, and taking disciplinary action as appropriate.

2. Policy Statement

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 for an opinion on the seriousness of the incident before further action is taken. Otherwise, all losses of money and suspected cases of fraud, defalcation or any other offence or illegal act against Her Majesty must be reported to law-enforcement authorities and the Treasury Board Secretariat (TBS).

Branches must ensure that employees are aware of, and are periodically reminded of, this policy, their potential liability under section 78 of the Financial Administration Act (FAA), and sections 122 and 126 of the Criminal Code. Employees need also to be aware of their personal responsibility under paragraph 80(e) of the FAA to report any knowledge of:

a contravention of the FAA or of its regulations;
a contravention of any revenue law; or
any fraud against Her Majesty.

Departments must take reasonable measures to protect the identity and reputations of both the person(s) reporting offences and the person(s) against whom allegations are being made. In particular, it is important that departments:

Take prompt action on any complaints of harassment of persons who have made legitimate reports; and
consider taking appropriate disciplinary action, when warranted, in cases where a person has made wilful or malicious unfounded allegations.

When a person is accountable for a loss of money, the loss must be recovered from that person unless:

legal proceedings are required to effect recovery;
the Deputy Attorney General advises against such action or recommends that proceedings be discontinued; or
the Treasury Board has specifically authorized the department to waive recovery due to extenuating circumstances.

When a department determines that disciplinary action is warranted, such action is distinct from any steps that may be taken by law-enforcement authorities.

3. Application

This policy will apply to Human Resources and Skills Development Canada (hereinafter referred to as HRSDC, the “Department” or “Departmental”).

4. Policy Requirements

4.1 Reporting Instructions

Incidents of theft, break-and-enter, and the like, not involving an employee but requiring an immediate response, are to be reported directly to the local police agency without delay. Cases of fraud, defalcation or any other illegal act against Her Majesty must be reported promptly to the RCMP for investigation.

Suspected cases of theft, fraud, defalcation or any other illegal act involving employees but not requiring an immediate response by a police agency may be referred to departmental legal services. They, in turn, will consult with the Criminal Prosecutions Section of the Department of Justice before providing an opinion.

When, after consulting legal services, it is determined that the act is of a minor, employment-related nature more appropriately dealt with by disciplinary action, appropriate action should be taken after consulting with departmental staff relations advisors.

When, after consulting legal services, it is determined that the act is of a more serious nature, in addition to taking any appropriate disciplinary action that the department determines is warranted, the matter must be referred to the Criminal Operations Branch of the RCMP. They, in turn, will decide what investigation will be undertaken and by whom.

Note: Although each case has to be judged on its own merits, examples of minor, employment-related incidents include:

falsified leave application;
a false claim for compensation for overtime;
unauthorized personal use of commercial long-distance service;
unauthorized personal use of taxi vouchers

Note: In providing an opinion, 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.

In addition to being reported to law-enforcement authorities for investigation, all incidents, including those employment-related incidents handled internally must also be reported to the Economic Crime Directorate of the RCMP.

When fraud, defalcation or any other violation in relation to the collection, management or disbursement of public money is involved, the following must be reported to the Treasury Board Secretariat:

any loss or incident that has, or may have, government-wide implications or application, for example, frauds that may also have been perpetrated against other departments or that other departments should be warned about;
incidents that may indicate a weakness in government-wide policies or controls;
other incidents that have been, or are likely to be, addressed or brought to the attention of the President of the Treasury Board in Parliament or through the media; and
any other incident that, in the opinion of the departmental co-ordinator, is sufficiently serious or significant in terms of its magnitude or its extent to be brought to the immediate attention of the Treasury Board Secretariat.

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.

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:

a preliminary report, within two weeks of identifying a reportable incident, that provides a description of the nature of the offence, the circumstances under which it occurred, and what investigation is being undertaken; and
a final report at the conclusion of the matter that provides a description of what investigation has been undertaken; whether the loss was referred to the Deputy Attorney General and, if a reply has been received, the action recommended or taken by the Deputy Attorney General; describes the safeguards or other action taken to prevent future offences under similar circumstances; describes the measures taken to recover any loss or associated costs, the amount recovered, and the probability of further recovery; the results of any legal action; and a description of any action taken to discipline a public officer or other person by reason of whose actions the loss was suffered or the offence was committed or made possible. The actual names of specific individuals should not be included in these reports.

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.

Incidents occurring outside of Canada that would be an offence if they occurred in Canada are also reportable.

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.

Indemnification for losses of advances 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.

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.

4.2 Charging Appropriations

Losses of money that require a reimbursement to an imprest fund (petty cash, cashier shortages, and all losses of revenue) shall be charged to the appropriation for the related program after approval by the appropriate minister or delegate. 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. 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. Under section3 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:

the prescribed procedures were followed and the petty cash was properly secured;
there was physical evidence of theft, such as forced entry; and
no act or omission on the part of the custodian contributed to the loss

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:

did not ensure that adequate facilities and procedures were in place;
did not provide adequate direction, instruction or supervision; or
permitted improper or inappropriate practices to be followed.

In this case, accountability for the loss would shift to (or be shared by) the manager.

all losses of money and allegations of offences, illegal acts and other improprieties are to be fully investigated by department security officers, and local law enforcement agencies;
the anonymity of both the person making the allegation and the person suspected of an offence is to be maintained at all times;
suspected offences are to be reported to a branch co-ordinator who will act as a the focal point and ensure proper procedure and follow-up;
losses and offences are reported to Parliament through the Public Accounts;
losses should be recovered whenever possible;
measures should be implemented to prevent potential occurrences/recurrences of losses and offences;
when a branch considers that circumstances warrant it, disciplinary action can and will be taken against employees deemed to have shown inappropriate behaviour;
managers who fail to take appropriate action or who directly or indirectly tolerate or condone improper activity, will themselves, be held wholly or partially accountable for losses incurred.

5. Roles and Responsibilities

Branches shall appoint a co-ordinator to serve as a single focal point for reporting and co-ordinating subsequent action. This ensures that employees know where to report any allegations or suspected incidents and avoids interpersonal problems that might arise between colleagues. While not actively involved in the investigation, the co-ordinator will be required to notify the security officer immediately of any possible breaches of security and ensures that all allegations are properly reported and followed up.

The Chief Security Officer (CSO) 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. 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 this matter.

Unlike petty cash and other accountable advances, 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.

In exceptional circumstances, such as a robbery despite due care and diligence, a department may consider it appropriate to indemnify an employee for the loss of an advance against an entitlement to reimbursement for personal expenses. The department must seek the prior approval of the Treasury Board to make a payment as an extraordinary allowance pursuant to paragraph 11(2)(h) of the Financial Administration Act via a letter to the President of the Treasury Board who has been delegated the authority to act on behalf of the Board. Given the requirement to use travellers' cheques, the general availability of travel cards and the prudent practice of carrying 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 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.

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 by way of a loan with a financial institution; by taking out a mortgage, or other third party arrangements. The Crown is not be financing this type of recovery.

It is important to protect both the person making an allegation and the person implicated. Reports of incidents are maintained in a single personal information bank that has been duly registered in accordance with the terms of the Privacy Act. Preferably, this information bank would be under the control of the departmental co-ordinator. Except as may be required for a formal legal proceeding, the confidentiality of persons making the allegations is to be maintained. Information is not to be placed in personnel files, unless it relates directly to a staff relations action, such as a disciplinary measure and the employee is aware that such action has been, or is being, taken. When an allegation against an employee cannot be substantiated, all records of the matter not required for audit are to be promptly destroyed. Records required for audit are to be segregated with access restricted to that purpose (audit).

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 is to be reported according to the Reporting Instructions.

6. Delegations of Authority

FULL AUTHORITY to charge losses of cash (ie petty cash, Departmental Bank Accounts, change funds, funds held for deposit) against an HRDC appropriation are delegated to the Assistant Deputy Minister, CFOB at NHQ and to the Executive Head in the Region.

A further AUTHORITY OF FIFTY ($50) DOLLARS is delegated to the Director General, Integrated Corporate Accounting and Accountability Directorate (ICAAD) at NHQ as well as the regional Directors ICAAD.

7. Monitoring and Compliance

Duty to Accommodate - This policy is compliant with the Treasury Board Secretariat Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service

8. Definitions

"defalcation" 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" is a deliberate act of deception, manipulation or trickery, with the specific intent of gaining an unfair or dishonest advantage 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

"losses" include any loss resulting from an offence, as well as public money that is paid to, or collected or received by a public officer or any other person and is misappropriated, lost, destroyed or stolen; paid out by a public officer or other person fraudulently; issued to a public officer or any other person as an imprest fund or change float, and is misappropriated, cannot be accounted for in whole or in part, or is destroyed or stolen; money belonging to others that is given into the custody of a public officer in an official capacity for any purpose and is misappropriated or lost, destroyed, or stolen; an overpayment or erroneous payment that is issued or an unauthorized expenditure that is incurred due to negligence or nonfeasance on the part of a government employee, fraud, defalcation, wilful misrepresentation, or any other offence or illegal act on the part of any person; a cheque or other payment instrument issued by the Receiver General or issued from a departmental bank account or a revenue trust account or a benefit warrant drawn on the Receiver General pursuant to section117(2) of the Unemployment Insurance Act that is fraudulently endorsed and negotiated; revenue that should have been received or collected, but that was not as a result of malfeasance or negligence on the part of any person employed in the receipt or collection of public money

"malfeasance" is the commission of an unlawful act; 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, or regulation

"misappropriation" 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" is the improper performance of a lawful act

"nonfeasance" is the total omission or failure to perform some distinct act, duty or undertaking that one is obliged to do

"offences" involve any offence under the Criminal Code or a federal statute or regulation where the Crown is a victim. These include, but are not limited to, breach of trust; offences under sections 80 or 81 of the FAA, theft or misappropriation of public funds or funds belonging to others that have been entrusted to a public officer; false or fraudulent claims for a social benefit, a grant, a contribution, or any other program payment, refunds or rebate; forgery and fraudulent endorsement of Government payment instruments; conversion of public funds or property to personal use; theft of public property or property belonging to others that has been entrusted to or seized by the Crown; wilful damage to, or destruction of, public property; break-and-enter or attempted break-and-enter; computer-related offences such as unauthorized access or theft of software or data; alteration or destruction of data; colluding, or otherwise arranging with a contractor to bill personal goods or services to the Crown; any fraud, illegality, impropriety or improper interference in the contracting process including kickbacks, bribery, bid-rigging , price-fixing, or deliberate short-shipment or substitution of inferior quality or defective goods

"robbery" 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" 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

9. References

Directive on Losses of Money or Property

Financial Administration Act, Sections 78 and 79

Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service, Treasury Board Secretariat