Canada's Auditor General Suggests Revisiting Fundamentals for Fraud Prevention

“The work done to detect, prevent, audit and investigate fraud is very important,” said Michael Ferguson, CPA, CA, FCA (New Brunswick), Auditor General of Canada at the sold-out 2018 ACFE Fraud Conference Canada. “There are many opportunities for people of your skillset to prevent criminals from siphoning off money from others.” 

Ferguson spoke to 300 anti-fraud professionals during Monday morning’s general session about the types of fraud and corruption the Office of the Auditor General is seeing across Canada.  

“I think in Canada we’re a bit cavalier about fraud and corruption,” Ferguson said. “There are countries where corruption cripples the economy. But all countries have some level of corruption. So, in Canada we can become complacent and think fraud and corruption don’t exist.” 

Ferguson cited the ACFE’s 2018 Report to the Nations: Canada Edition as an example of the presence of fraud and corruption. “We see good signs and worrying signs,” he said. “There’s an expectation gap because people think they should find any and all fraud in the government.” But that’s not necessarily the case, and according to Ferguson, while much of fraud comes from external players, there are internal threats as well.  

He then shared a small taste of the vast potential for fraud in federal governments. The common weakness in most situations is the poor quality of program data that the government collects. Or, the government doesn’t use the data to identify potential problems. “As we use data analytics, it’s important that the data we analyze is in good shape,” said Ferguson. 

Take auditing to prevent corruption in border services, for example. According to Ferguson, it’s important to have controls in place to reduce corruption in border systems. Without them, staff is vulnerable to coercion and external characters can enter the country with inadmissible goods. The Canadian government has to protect employees from being coerced.

Ferguson said that border control does have controls in place, including awareness training; however, the border agency has missed opportunities to detect improper actions in a timely way leaving it vulnerable to corruption. For example, during a 12-month period, vehicles entered Canada without having to show documentation of who they were. The agency wasn’t doing the proper database inquiry.  

Ferguson’s office also learned that border officers shared user passwords and identification despite rules against it. Auditors discovered the same identification information was being used at multiple land border crossing booths. Seven officers regularly shared their information and 144 officers did it at least once. His office learned that it was because when a new officer joined, the agency wasn’t logistically ready to give them a login. “The first thing they learned to do was break the rules,” said Ferguson.  

“Don’t suspect that there’s rampant corruption at the borders,” he said. “But there needs to be better protections in place for our officers.” 

Ferguson stressed the need for auditors to focus on the basics to detect fraud. Emerging technologies are valuable, but not if the agencies or organizations implementing them haven’t designed processes to ensure their essential prevention and detection methods are working. All of us would do well to heed his advice. Sometimes we need to step back and reevaluate our fundamental policies.