Smigielski reviews fraud prevention policy and procedures


In the Agenda Request portion of the December 10, 2018 regular DeFuniak Springs (DFS) City Council meeting City Manager Mell Smigielski presented to the Council a “Fraud & Detention Risk Assessment.” On the agenda request document, the background on the assessment reads, “Fraud & Detection program requested at the April 23, 2018 regular meeting to comply with FY 2015; FY 2016 audit finding. The document is titled “City of DeFuniak Springs Formal Fraud Prevention Review Procedures and Meeting Agenda.”

The assessment reviews policy, scope of policy, policy responsibility, actions constituting fraud, irregularities, investigation responsibilities, confidentiality, reporting procedures, suspension or termination, and administration.

Policy — It shall be the policy of the City of DFS, management, and staff to discourage and minimize potential for fraudulent activities. It is the intent of the City to promote consistent organizational behavior by providing guidelines and assigning responsibility for the development of controls and conduct of investigations. In addition to existing policies and procedures, the City Manager and department directors shall meet at least semi-annually to consider potential means to reduce the prospect for fraud in light of changing technologies, responsibilities, and operating environs.

Those meetings shall review 1) meeting purpose and objectives, 2) review of prior meeting minutes and action items, 3) review of department operating procedures.

Department operating procedures include cash and payment processing; review/approval of invoice and purchase order initiation; review/approval of purchase card use; supplies control and access; review/approval of payroll and timesheet entry; tools and electronic equipment controls and access; fixed asset controls and access; timeliness and accuracy of operational reports; contracts, permits and grants; public communications and reports; and other areas as necessary.

Agenda items must also include the identification of action items to reduce identified opportunities for improvement, areas for further investigation and review; and areas of potential future concern. The meets will also conduct open discussion and consideration of interdepartmental concerns.

Scope of Policy — This policy applies to any irregularity, or suspected irregularity, investigating employees, consultants, vendors, contractors, outside agencies with the City and employees of such agencies, and/or any other parties with a business relationship with the City. Any investigative activity required will be conducted without regard to the individual’s seniority, position/title, or relationship to the City.

Policy Responsibilities — City management is responsible for the detection and prevention of fraud misappropriations, and other irregularities. Fraud is defined as the intentional, false representation, or concealment of a material fact for the purpose of inducing another to act upon it to his or her injury. Each member of the management team will be familiar with the types of improprieties that might occur within his or her area of responsibility and be alert for any indication or irregularity. Any irregularity that is detected or suspected must be reported immediately to the City Manager or his/her designee, who coordinates all investigations, both internal and external.

Actions Constituting Fraud — The terms defalcation, misappropriation, and other fiscal irregularities refer to, but are not limited to: any dishonest or fraudulent act; violations of applicable provisions of Chapter 112, Florida Statutes; misappropriation of funds, securities, supplies, or other assets; impropriety in the handling or reporting of money or financial transactions; profiteering as a result of insider knowledge of City activities; disclosing confidential and proprietary information to outside parties; accepting or seeking anything of material value from contractors, vendors, or persons providing services/materials to the City; destruction, removal, or inappropriate use of records, furniture, fixtures and equipment; any similar or related irregularity.

Irregularities — Irregularities concerning an employee’s moral, ethical, or behavioral conduct should be resolved by the department director. If there is any question as to whether an action constitutes fraud, contact the City Manager or his/her designee for guidance.

Investigation Responsibilities  —  The City Manager has the primary responsibility for the investigation of all suspected fraudulent actions as defined in the policy and may designate a member of the management team as his/her designee in this regard. In that role the City Manager shall utilize law enforcement resources if he/she deems that appropriate. If the investigation substantiates that fraudulent activities have occurred, the City Manager will issue reports to the City Council. Decisions to prosecute or refer the examination results to the appropriate law enforcements and/or regulatory agencies for independent investigation will be made in conjunction with legal counsel.

Confidentiality — The City Manager or his/her designee shall treat all information received confidentially. Any employee who suspects dishonest or fraudulent activity will notify the City Manager immediately, and should not attempt to personally contact investigations or interviews/interrogations related to any suspected fraudulent act. Investigation results will not be disclosed or discussed with anyone other than those who have a legitimate need to know. This is important in order to avoid damaging the reputations of persons suspected but subsequently found not guilty of wrongful conduct and to protect the City from potential civil liability.

Reporting Procedures — Great care must be taken in the investigation of suspected improprieties or irregularities so as to avoid mistaken accusations or alerting suspected individuals that an investigation is underway. An employee who discovers or suspects fraudulent activity will contact the City Manager or his/her designee immediately. The employee or other complainant may remain anonymous. All inquiries concerning the activity under investigation from the suspect individuals, his or her attorney or representative, or any other inquiries should be directed to the City Manager or City Attorney. No information concerning the status of an investigation will be given out.

Suspension or Termination — If an investigations results in a recommendation to suspend or terminate an employee, the recommendation will be reviewed for approval by the City Attorney and, if necessary, by outside counsel, before any such action is taken, the City Manager has the final authority for suspension and termination of employees. The process for suspension and termination found in the City’s Personnel Policy will be followed in all cases.

Administration — The City Manager or his/her designee is primarily responsible for the administration and application of this policy. However, all department directors also have a shared responsibility in the administration and application of this policy. The policy will be reviewed annually and revised as needed during one of the semi-annual fraud prevention meetings.