Auditor targets trustee office
Investigation underway into alleged theft
Alberta’s auditor general and Alberta Justice launched a $2.4-million probe into the Office of the Public Trustee after a senior trust officer was fired for allegedly stealing more than $120,000 from a trust he was administering.
The auditor general began the 22-month investigation in January 2011 to determine whether the veteran employee had misappropriated funds of other clients and find out if there are ad- equate safeguards in place in the Trustee’s Office to protect money managed for vulnerable Albertans.
The revelation is contained in auditor general Merwan Saher’s report, released Tuesday, which also found Alberta Health Services (AHS) exercised lax controls in reimbursing 26,000 employees for spending during a 17-month span in 2011-12.
Opposition critics jumped on the two cases, blaming the Tory government for the lack of stringent controls over health employees and the operations of the Office of the Public Trustee.
The alleged fraud occurred after William Vincent Thompson died in November 1995, but it wasn’t discovered until 15 years later.
The discovery occurred when Service Alberta notified the Public Trustee that facial recognition technology had led them to a trust officer who obtained Alberta identification under another man’s name.
“With more timely, rigorous review while the file was being administered, management may have become aware of it much sooner and prevented it from happening,” Saher said in his report.
Criminal charges were laid in Edmonton in October 2010 against Ned Ephraim Frohlich, 57, for allegedly defrauding William Vincent Thompson and the Alberta government. He is charged with two counts of theft over $5,000 and fraud over $5,000, and three counts of uttering forged documents, but has yet to go to trial.
Saher said the lack of adequate safeguards in the Office of the Public Trustee ultimately cost taxpayers $2.4 million for nearly 20,000 hours of investigation to ensure no one else was victimized and to ensure it doesn’t happen again.
“The fact that the control systems essentially have failed over that period have cost this huge amount of public resources,” he said.
Saher said his review, requested by Alberta Justice, covered more than 550 files handled by the 20-year veteran employee and determined there is a low probability of any other misappropriation. However, he said it is “absolutely critical” the Public Trustee implements the recommendations his office has made.
Saher admitted he was surprised the Public Trustee still hasn’t implemented 58 measures recommended by a private audit firm it hired in 2009 to review its safeguards in the wake of reports of frauds in trustee offices in B.C. and Ontario.
The auditor general’s probe revealed the Public Trustee has inadequate systems to safeguard and administer client assets. In some cases, management was aware of the shortcomings and took no action to correct them, he said.
Saher recommended the Public Trustee ensure all client files are reviewed by supervisors and that the office strengthen its internal auditing procedures.
Frank Oberle, associate minister of services for persons with disabilities, said he accepted the recommendations and is acting on them. He said the ministry will file quarterly updates to the auditor general on its progress and make them public.
But he said none of the 140 staff in the Public Trustee offices in Calgary and Edmonton will be dismissed.
“We’re not going to achieve success by throwing people under the bus,” Oberle said. “I take responsibility for this organization and I will take responsibility for rebuilding it.”
Oberle said the ministry is looking for the victim’s beneficiaries and will pay out the full amount owed, plus interest, because the funds managed by the office are guaranteed.
The ministry has won a civil court judgment of more than $358,000 that it is attempting to recover from the former employee, he added.
Liberal Leader Raj Sherman called the alleged misappropriation of funds a tragedy.
“How could this happen in Alberta?” he asked. “The Office of the Public Trustee is supposed to be protecting the most vulnerable.”
NDP Leader Brian Mason said extremely vulnerable Albertans need an honest Public Trustee to ensure their assets are “not siphoned off into someone’s pocket.”
Bruce Uditsky, CEO of the Association for Community Living, which represents Albertans with developmental disabilities, said he was appalled by the revelations in the auditor general’s report.
“People put a lot of faith and trust in the office of the public trustee, particularly for vulnerable individuals like those with developmental disabilities,” he said. “It’s a very critical position in the lives of a number of individuals who don’t have family or others to assist them with financial management or with estates.”
Uditsky said he hoped it is an isolated incident and Albertans can be reassured that the right controls are going to be put into place.
In his audit of AHS, Saher called for a tightening of expense controls, including more oversight and more reporting of the reason for claims.
He said AHS reimbursed employees for tickets to hockey games, the Calgary Stampede as well as toys and photo radar tickets — and may be reimbursing employees for expenses that have no business purpose.
The auditor general also reviewed the 2012-13 firstquarter fiscal update to determine whether it provided the amount of detail required in the Government Accountability Act, but he said the law is open to interpretation.
“We can’t conclude whether they meet or don’t meet the legal reporting requirements,” he said. “Anyone who thinks that is an unsatisfactory situation would have to either seek some sort of judicial interpretation or seek legislative amendments.”