Hamilton was scammed over $800,000 after staff fell for two separate imposter vendor scams. Pictured: City Manager Marnie Cluckie. Photo Credit: City of Hamilton.
The annual Fraud and Waste Report from the Office of the Auditor General regarding City of Hamilton resources concludes that the municipality suffered $2.35 million in losses due to waste and mismanagement over the past year.
Of those losses, the report details that the city was scammed over $800,000 after staff fell for two separate imposter vendor scams.
The report says that someone posing as an existing vendor contacted the city to change their banking deposit details.
As a result, $274,000 that was owed to the legitimate vendor was transferred to the imposter’s bank account by staff.
In a similar scam, another vendor contacted the city to change their deposit details.
Even though the city was reportedly emailed by the vendor a week prior that their organization had experienced a security breach, staff transferred the money to the imposter vendor.
Making matters worse, that vendor was reportedly only supposed to be paid about $137,000, but the city says that “due to human error” staff ended up transferring the imposter vendor $552,000.
Luckily, through a court order, over $417,000 was frozen and the city hopes to eventually be able to recover that portion of the funds.
Other items in the report include $1.2 million in rental revenues owed to the city that are “unlikely to be fully collected,” a city manager who was working at another job at the same time as they worked for the City of Hamilton, and false benefit claims by three employees totalling almost $22,000.
Corporate Security also reported that a city van was stolen with suspected employee involvement.
The report says that the Office of the Auditor General “requested that Corporate Security and HR investigation,” but that “there is no new information to report” regarding the matter.
The estimated value of the stolen van is over $13,000.
It should be noted that the Auditor General’s report covers the time period from July 1, 2023 to June 30, 2024.
The Auditor General received 127 reports in that time, with a substantiation rate of 33 per cent.
Of the 127 reports, 44 were made directly to the Office of the Auditor General, while the remaining 83 were made using the city’s 24/7, independently operated Fraud and Waste Hotline.
The city says that only $11,500 has been recovered since the last annual report.
Losses in the last report totalled about $1.16 million.
The city says that, since the Fraud and Waste Hotline was launched in 2019, the city has seen $3.635 million in losses and waste.
The investigations by the Auditor General led to five employee terminations and 10 other actions which include discipline and resignation.
Among the major recurring issues in the report is poor contract administration and oversight and a lack of vigilance with respect to cyberfraud, writes Auditor General Charles Brown.
Brown added, “Without a Fraud and Waste Hotline in place, it is likely that many of these cases would have gone unreported and may never have been investigated by the Office of the Auditor General.
The hotline was launched in 2019 as a pilot project but was made permanent in 2023.
Hamilton City Manager Marnie Cluckie assured the public that the city is “committed to implementing the Auditor General’s recommendations and fostering a culture of accountability and integrity.”
Based in Hamilton, he reaches hundreds of thousands of people monthly on Facebook, Instagram, TikTok, and Twitter. He has been published in The Hamilton Spectator, Stoney Creek News, and Bay Observer. He has also been a segment host with Cable 14 Hamilton. In 2017, he received the Chancellor Full Tuition Scholarship from the University of Ottawa (BA, 2022). He has also received the Governor General’s Academic Medal. He formerly worked in a non-partisan role on Parliament Hill in Ottawa.
