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CC SR 20160517 06 - Fraud Waste Abuse Hotline Update ReportRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 05/17/2016 AGENDA REPORT AGENDA HEADING: Regular Business AGENDA DESCRIPTION: Consideration and possible action regarding the Fraud, Waste, and Abuse Hotline RECOMMENDED COUNCIL ACTION: 1) Direct Staff to revise the City's current Fraud, Waste, and Abuse Hotline Policy to incorporate the recommended changes discussed below, or other changes that the Council deems appropriate, and to present the revised Policy to the Council for adoption. 2) Direct Staff to review the City's website — specifically, the pages concerning the Fraud Hotline — and prepare to make updates with The Network/NAVEX that will implement the changes in the revised Policy and help potential reporters to file appropriate reports. FISCAL IMPACT: No fiscal impact. However, the recommendations may reduce City costs incurred by contracting with outside investigatory agencies to investigate hotline reports or increase costs if the Council directs Staff to work with the vendor to make upgrades allowing reports to be redirected to City Service Requests if appropriate. Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A ORIGINATED BY: David J. Aleshire, City Attorney REVIEWED BY: Gabriella Yap, Deputy City Manager +::T APPROVED BY: Doug Willmore, City Manager`;`'.,,,,1-' ATTACHED SUPPORTING DOCUMENTS: A. Government Code § 53087.6 (page A-1) B. City Council Policy No. 50, "Anonymous Fraud, Waste, and Abuse Hotline" (page B-1) C. City of Palo Alto's City Employee Fraud, Waste, and Abuse Hotline Administration Policy (page C-1) D. Table of Hotline Complaints (page D-1) E. Screenshot of RPV Website with revisions (page E-1) EXECUTIVE SUMMARY: The City's Fraud, Waste, and Abuse Hotline ("Hotline") has been live for almost a year. Nine (9) matters have been reported, which are summarized in Attachment D. A recent review with the City's Audit Committee ("Committee"), consisting of Mayor Dyda and Councilman Duhovic, that was held on March 28, 2016, led to the conclusion that the 1 Hotline is not working as intended. There appear to be three (3) main issues that need to be addressed: Hotline reporters do not understand what the Hotline should be used for, and are often making service complaints rather than reports about fraud and waste; Instead of using the Hotline to report employee fraud and waste, reporters have also used the hotline to make politically -motivated charges concerning councilmembers; and, • The City may be over -using outside investigatory services. The Committee directed Staff to prepare an agenda report for the full City Council, with a recommendation that the City Council direct Staff to revise the City's Fraud, Waste, and Abuse Hotline Policy to state that the City will no longer receive reports about members of City Council, and that the City will seek an initial assessment from the City Attorney before referring reports to outside investigatory agencies. Moreover, it is recommended that City Council direct Staff to examine the City's online Hotline interface to determine whether the website can be restructured and revised to more effectively direct potential reporters to the appropriate result — whether it be the Hotline, the "City Service Request" form, or another reporting mechanism. Finally, in order to ensure that the Committee, which is tasked with overseeing the Hotline, has sufficient information to fulfill its duties, it is recommended that the City Council direct Staff to revise the Hotline Policy to require that the Committee receive an update regarding the resolution of each Hotline report, as well as a quarterly report on Hotline issues. Such updates and reports will enable the Committee to determine when to meet and what issues need to be resolved. All suggested Policy revisions and recommendations for website changes would be returned to the City Council for review and adoption at a later date. BACKGROUND AND DISCUSSION: Since May 2015, the City of Rancho Palos Verdes ("City") has had a Fraud, Waste, and Abuse Hotline ("Hotline"), which provides employees and members of the public with an avenue for anonymously reporting incidents of fraud, waste, or abuse that affect the City. Government Code § 53087.6 authorizes cities to maintain whistleblower hotlines and establishes requirements for their use, focusing primarily on cities' obligations to keep certain kinds of information confidential (Attachment A) The City's Hotline is governed by City Council Policy No. 50 (Attachment B) The City currently contracts with a vendor called The Network, Inc. (recently acquired by NAVEX Global) to manage the Hotline. Users may contact the Hotline either by phone or through an on-line portal. Both phone and on-line reporting may be anonymous, and reporters are asked to either call back or log back in with a designated case number in order to facilitate the answering of follow-up questions while maintaining anonymity. 2 After a report is submitted, the administrator generates its own report, which is then stored in a secure database that can be accessed by authorized individuals via a web - based interface. Once generated, each report is also immediately forwarded to a case manager at the City. The Human Resources (HR) Manager is typically the only case manager. At the time of this writing, that position was vacant so the case manager is currently the Deputy City Manager, who oversees HR. If the report warrants immediate action, it will be forwarded to law enforcement or government agencies. If the report does not warrant immediate action, the City will conduct an investigation into the allegations in the report. The City currently has contracts with Kevin Harper for CPA investigative services and Meyers Nave for outside attorney investigative services. When the investigation is concluded, the results are reported to the City Manager and City Attorney, and may also be reported to others, as appropriate. The City Council, City Manager, or designee, then take appropriate action regarding any misconduct, including suspension, termination, and referral to law enforcement and the District Attorney's Office for further investigation and prosecution. The City's Audit Committee is responsible for ensuring that the Policy is properly implemented and that proper procedures are followed regarding the receipt, retention, treatment, and appropriate resolution of Hotline reports. The Audit Committee is discussed in City Council Policy No. 44 "Audit Committee." The Audit Committee is a subcommittee of the City Council, comprised of two members of the City Council, annually appointed by the Mayor, and may also retain the services of a third -party professional. The City also has a designated avenue for reporting non -fraud -related concerns, called "City Service Requests." These requests can be submitted online, and can be addressed to several different departments in the City. Areas of Concern with the Current Hotline The reports received by the City's hotline to date raise concerns that the hotline is not being used as intended. The City has received nine (9) hotline complaints since the hotline went live in 2015. Of these nine (9) complaints, four (4) clearly did not involve fraud, waste, or abuse, and were closed without investigation; four (4) regarded councilmembers, were investigated by Meyers Nave, and were found to lack merit; and one (1) regarded a dispute over a building permit and other issues concerning an ongoing lawsuit, and was resolved without investigation. To date there have been no substantiated reports of fraud, waste, or abuse. Based on these reports, there appear to be three (3) main problems with the hotline as it is currently being used: 9 Hotline reporters do not understand what the hotline should be used for and are often making service complaints rather than reports about fraud and waste; Instead of using the hotline to report employee fraud and waste, reporters have also used the hotline to make politically -motivated charges concerning councilmembers; and, • The City may be over -using outside investigatory services. Recommended Changes Provide Clearer Guidance for Potential Reporters Wherever the Hotline is advertised, the City should make very clear what kinds of things should and should not be reported, and should clearly guide potential users through the web portal to make sure that they end up calling the proper phone number or using the proper on-line form. Many people have only a vague idea of what fraud actually is, so it would be helpful for the City to make this clear by giving examples. The following examples of fraud could be included on the fraud Hotline webpage: submittal of fictitious invoices for personal goods and services; theft of City property, such as inventory or supplies; payroll or timekeeping fraud; falsely reporting expenses for reimbursement; stealing a check the City issued to another payee; taking or "skimming" cash paid for City services, such as parking, permits or fines; utilizing City property for personal use; computer fraud or information theft; accepting a bribe, kickback or illegal gratuity; bid -fixing; recording a fictitious sale; and auditing or accounting irregularities. The City should also give examples of what does not count as fraud — for example, discrimination, sexual harassment, substance abuse, and workplace violence/threats — and should give examples of what the City Service Request website can be used for — for example, fallen trees, graffiti, and potholes. The current Policy includes a short list of things that do not fall within the purview of the Hotline, but this list also needs to appear on the website at critical junctures where potential reporters are deciding whether or not to use the Hotline. Staff has already revised the City's website to include links to show the existing City Service Request page (Attachment E), such as graffiti or trash removal, before a user reaches the Hotline page in an effort to try to direct requests for City services to the appropriate department. Additionally, Staff contacted The Network/NAVEX for information regarding how they could more effectively guide potential users to the right outcome, namely, the Hotline or a City Service Request. In order to have the capability, the City would need to upgrade to the company's newest web platform, resulting in a one-time Web Intake Setup fee of $1,500 and an annual Web Intake Subscription of $500 annually. 2. As the Disciplinary System for Council Members is Administered by Other Jurisdictions (FPPC, DA) beyond the Control of Staff, the Fraud Hotline should El be Focused on Internal Employee Fraud and Abuse, which can be Remedied through the City Process The Hotline was originally intended as a mechanism for citizens to report on perceived fraud, waste, and abuse by City employees. Particularly during the election cycle, it seemed that a number of complaints were made concerning political conduct by councilmembers. Even though they seemed inappropriate, because Staff could not opine on councilmember conduct, they were turned over to the outside investigator, the law firm Meyers Nave.' After investigating these complaints, Meyers Nave found them all to be unsubstantiated. The fraud hotline seems ill -adapted to investigate elected officials who cannot be disciplined by the City's internal procedures. Moreover, there are adequate outside legal mechanisms to deal with such conduct. Consequently, Staff recommends that the Hotline Policy be revised to make clear that reports about councilmembers will neither be accepted nor investigated. In order to assure that there is still some accountability for councilmembers, the City can direct potential reporters to outside agencies such as the District Attorney (DA) or the California Fair Political Practices Commission (FPPC). The authorizing statute expressly allows City's to "refer calls received on the whistleblower hotline to the appropriate government authority for review and possible investigation." (Gov. Code 53087.6(b).) The authorizing statute does not require that the Hotline receive reports about elected officials. This solution is especially appropriate in Rancho Palos Verdes where the Audit Committee, which oversees the Hotline, is composed of two councilmembers, which may create an appearance of a conflict of interest when the Committee is required to assess reports made about councilmembers. The City of Palo Alto has similarly chosen to refer reports involving councilmembers to the DA, the FPPC, or other appropriate outside agencies, since members of Palo Alto's Hotline Review Committee are appointed by the City Council (Attachment C, at p. 4.) 3. Seek City Attorney Assessment Before Referring Reports to an Outside Investigator Outside investigators may be necessary when allegations are politically sensitive or highly complex, but they are also very expensive. Meyers Nave charges $335 per hour and an independent investigator, Kevin Harper, charges $200 per hour. To date, the City has paid Meyers Nave at total of $7,922 for its investigation of four (4) complaints. Consequently, the City should consider conducting some form of in-house investigation, where possible, before referring reports to outside investigators. This will reduce costs and potentially allow the City to address or dispose of a report without conducting a full- blown investigation. Meyers Nave was selected for this role through a competitive process. 5 The City Attorney is well positioned to play this role as the City Attorney is familiar with City personnel and procedures, and possesses legal expertise. The City Attorney currently charges a rate of $205 per hour. A possible model for this would be as follows: The Network/NAVEX sends each Incident Report to a case manager at the City (not the City Attorney). The case manager then decides whether or not it is an actionable report of fraud (i.e., not a City Service Request, not a personnel matter that should be referred to HR, not a complaint against a councilmember, etc.). If the Report makes an actionable report of fraud, then the Report can be sent to the City Attorney for a determination of whether a full-blown outside investigation is needed or whether an initial in-house investigation may be sufficient. Audit Committee Meetinas and Procedures The current Fraud, Waste, and Abuse Hotline Policy requires the Audit Committee to meet quarterly over the first year of the implementation of the Hotline and then to meet at least annually thereafter to monitor ongoing Hotline utilization. The current Policy further states that throughout the investigation of a report, the case manager "may" inform the Audit Committee of pertinent investigative findings and "may" report the results of an investigation to the Audit Committee. The Hotline's first year will end in May 2016. Hereafter, the Audit Committee will only be required to meet annually, so it will be important that the Committee is kept informed of the status of hotline reports and investigations. Consequently, the Committee felt that it should receive a report following the resolution of each complaint, as well as a quarterly summary report on the Hotline. The Committee may then call meetings when necessary based on the information in the reports. CONCLUSION: The good news is that the Fraud Hotline has revealed few complaints of the nature originally anticipated. As the Hotline reaches the end of its first year, it is timely to review the Hotline's performance. The Committee recommends that the Council direct Staff to revise the current Fraud, Waste, and Abuse Hotline Policy and present the revised Policy to the City Council for adoption. It is also recommended that the City Council direct Staff to continue revising the website and work with The Network/NAVEX to update the Hotline and help potential reporters make appropriate reports as outlined above. ALTERNATIVES: In addition to the Staff recommendation, the following alternative actions are available for the City Council's consideration: Al • 1. Do not make any changes to the current Fraud, Waste, and Abuse Hotline Policy or website. 2. Direct Staff to take different actions regarding the Fraud, Waste, and Abuse Hotline Policy that the City Council deems appropriate. 7 Attachment No. 1 Government Code 6 53087.6 01203.0001/295095.1 A-1 § 53087.6. City or county whistleblower hotline; review and..., CA GOVT § 53087.6 KeyCite Yellow Flag - Negative Treatment Proposed Legislation West's Annotated California Codes Government Code (Refs & Annos) Title 5. Local Agencies (Refs & Annos) Division 2. Cities, Counties, and Other Agencies (Refs & Annos) Part 1. Powers and Duties Common to Cities, Counties, and Other Agencies (Refs & Annos) Chapter 1. General (Refs & Annos) Article 4. Miscellaneous (Refs & Annos) West's Ann. Cal. Gov. Code § 53087.6 § 53087.6. City or county whistleblower hotline; review and investigation of calls; confidentiality; investigative audit; employee discipline; jurisdiction Effective: January 1, 2011 Currentness (a)(1) A city, county, or city and county auditor or controller who is elected to office may maintain a whistleblower hotline to receive calls from persons who have information regarding fraud, waste, or abuse by local government employees. (2) A city, county, or city and county auditor or controller who is appointed by, or is an employee of, a legislative body or the government agency that is governed by the city, county, or city and county, shall obtain approval of that legislative body or the government agency, as the case may be, prior to establishing the whistleblower hotline. (b) The auditor or controller may refer calls received on the whistleblower hotline to the appropriate government authority for review and possible investigation. (c) During the initial review of a call received pursuant to subdivision (a), the auditor or controller, or other appropriate governmental agency, shall hold in confidence information disclosed through the whistleblower hotline, including the identity of the caller disclosing the information and the parties identified by the caller. (d) A call made to the whistleblower hotline pursuant to subdivision (a), or its referral to an appropriate agency under subdivision (b), may not be the sole basis for a time period under a statute of limitation to commence. This section does not change existing law relating to statutes of limitation. (e)(1) Upon receiving specific information that an employee or local government has engaged in an improper government activity, as defined by paragraph (2) of subdivision (f), a city or county auditor or controller may conduct an investigative audit of the matter. The identity of the person providing the information that initiated the investigative audit shall not be disclosed without the written permission of that person, unless the disclosure is to a law enforcement agency that is conducting a criminal investigation. If the specific information is in regard to improper government activity that occurred under the jurisdiction of another city, county, or city and county, the information shall be forwarded to the appropriate auditor or controller for that city, county, or city and county. 3r L L'? )!l { 11 P. t( `,»�l 1 �a.r r- `Ir ¢ r e: s �s... .�I�i,,.:�,`�?�� ., .�ti. �.E�l.,tt,P ,.. IV.., claim i.C� �t'IUi(l�.�i .F. '?. _; f:)1Ai<;+Iii3f.#"}t ;. t�si 3. `tw. § 53087.6. City or county whistleblower hotline; review and..., CA GOVT § 53087.6 (2) Any investigative audit conducted pursuant to this subdivision shall be kept confidential, except to issue any report of an investigation that has been substantiated, or to release any findings resulting from a completed investigation that are deemed necessary to serve the interests of the public. In any event, the identity of the individual or individuals reporting the improper government activity, and the subject employee or employees shall be kept confidential. (3) Notwithstanding paragraph (2), the auditor or controller may provide a copy of a substantiated audit report that includes the identities of the subject employee or employees and other pertinent information concerning the investigation to the appropriate appointing authority for disciplinary purposes. The substantiated audit report, any subsequent investigatory materials or information, and the disposition of any resulting disciplinary proceedings are subject to the confidentiality provisions of applicable local, state, and federal statutes, riles, and regulations. (f)(1) For purposes of this section, "employee" means any individual employed by any county, city, or city and county, including any charter city or county, and any school district, community college district, municipal or public corporation, or political subdivision that falls under the auditor's or controller's jurisdiction. (2) For purposes of this section, "fraud, waste, or abuse" means any activity by a local agency or employee that is undertaken in the performance of the employee's official duties, including activities deemed to be outside the scope of his or her employment, that is in violation of any local, state, or federal law or regulation relating to corruption, malfeasance, bribery, theft of government property, fraudulent claims, fraud, coercion, conversion, malicious prosecution, misuse of government property, or willful omission to perform duty, is economically wastefill, or involves gross misconduct. Credits (Added by Stats.2008, c. 325 (A.B.2001). § 1. Amended by Stats.2010, c. 80 (A.B.1666), § 1.) West's Ann. Cal. Gov. Code § 53087.6, CA GOVT § 53087.6 Current with urgency legislation through Ch. 8 of 2016 Reg.Sess. and Ch. 3 of 2015-2016 2nd Ex.Sess. End of Document :c 2016 Thomson Reuters. No claim to of iuinal U.S_ Government Works. 't` F.S.`I�i.Ve° iii)�j�.1.I it c)}'i0 A— Attachment No. 2 City Council Policy No. 50, "Anonymous Fraud, Waste, and Abuse Hotline" 01203.0001/295095.1 B-1 CITY COUNCIL POLICY NUMBER: 50 DATE ADOPTED/AMENDED: 11/4/14 SUBJECT: Anonymous Fraud, Waste and Abuse Hotline INTRODUCTION The City of Rancho Palos Verdes ("City") is committed to protecting its assets against fraud, waste and abuse. Accordingly, it is the policy of the City to identify and promptly investigate any potential fraudulent, wasteful or abusive activities that impact the City's finances, personnel (Human Resources) or the public's assets and, when appropriate, to pursue legal remedies available under the law. To accomplish this purpose, the City will provide a Fraud, Waste and Abuse Hotline ("Hotline") with the primary objective to provide a procedure for members of the public, employees, elected/appointed officials, or other persons to confidentially report (1) any fraudulent, wasteful or abusive activities that impact the City's finances, personnel (Human Resources) or the public's assets and (2) violations of all federal or state laws and regulations relating to finances, personnel (Human Resources) and/or the public's assets. DEFINITIONS Appointed Official Members of the public appointed by elected officials to serve on City committees, City task forces and/or City commissions. Case Manager Every complete Hotline Report shall be immediately forwarded to a designated "Case Manager". Every Hotline Report that is validated by the Case Manager as being within the scope of this Policy shall also be forwarded to the City Attorney who shall ensure that every validated Hotline Report is investigated without conflict or bias. The Case Manager shall be sufficiently trained to evaluate the validity and urgency of the Report and may review any Hotline Report with the City Attorney and City Manager, as appropriate, to determine if further investigation is warranted. Depending on the subject matter of the Hotline report, the Case Manager could be a City employee or an independent third -party. The Case Manager and/or City Attorney and/or City Manager shall determine whether certain Hotline Reports warrant immediate action and, if so, shall take such action, including providing the Hotline Report to any appropriate law enforcement and/or government agencies. Case Reporting System The Hotline Administrator shall provide a web -based interface to its secured database to enable authorized Case Managers, the City Manager, the City Attorney, and Investigators access to view and update cases, including attachments to reports, evidentiary documents, and case status reports. Complainant The person(s) filing a complete Hotline Report is the "Complainant". At all times, information disclosed through the Hotline, including the identity of any anonymous Complainant and any parties identified by the person(s) making the Hotline Report are to remain confidential in accordance with the California Government Code. Contractor An independent person or company that provides materials or labor or performs a service for the City pursuant to a contract. Elected Official A member of the City Council. Employee Any individual who receives compensation, whether full or part-time, from the City. Fraud, Waste and Abuse Fraud, waste and abuse shall be defined in accordance with California Government Code Section §53087.6 as follows: "Any activity by a local agency or employee that is undertaken in the performance of the employee's official duties, including activities deemed to be outside the scope of his or her employment, that is in violation of any local, state, or federal law or regulation relating to corruption, malfeasance, bribery, theft of government property, fraudulent claims, fraud, coercion, conversion, malicious prosecution, misuse of government property, or willful omission to perform duty, is economically wasteful, or involves gross misconduct." Fraud, Waste and Abuse Hotline Administrator The City shall retain a Hotline service provider ("Hotline Administrator") that shall facilitate the receipt of Hotline reports. Reports may be made anonymously (confidentially) at the discretion of the complainant. The Hotline Administrator shall provide hotline services, including, but not limited to: (1) operating a telephone call center, staffed 24/7 by competent, trained personnel; (2) forwarding hotline reports to a designated Case Manager; (3) maintaining a secure database for all reports submitted; (4) providing status updates to complainants, upon request; and (5) providing status and analytical reports to be used by Case Managers, management, elected officials and the public, as appropriate. The phone number for the Hotline and the website URL address for the Hotline shall be prominently displayed on the City's website and other appropriate methods of public outreach will be implemented. Hotline Report Every complete report submitted to the Hotline via its "live" telephone call center and/or its web -based reporting system shall constitute a Hotline report ("Hotline Report"). Investigator The investigation of a Hotline Report will be conducted without conflict or bias by a person(s) or organization ("Investigator") experienced in municipal government. The Investigator shall be selected by the Case Manager, the City Manager and/or the City Attorney in accordance with this Policy. There might be times when the complexity and risk associated with some Hotline Reports could require additional resources or experts currently not available within the City who may be utilized to assist in the investigation, oversee the investigation, or to conduct an independent review. These third -party experts may include, but are not limited to: the Case Manager, an independent CPA, an independent auditor, specialized labor counsel, a Certified Fraud Examiner, or an independent legal expert. Validated Report A Hotline Report made pursuant to this Policy that alleges fraudulent, wasteful or abusive activities that impact the City's finances, personnel (Human Resources) or the public's assets that has been reviewed by the Hotline Administrator and Case Manager and deemed a report that is covered by this Policy and which requires further review. Volunteer A person who voluntarily offers unpaid services to the City. POLICY This policy is established to ensure members of the public, elected officials, committee and commission members, volunteers, and employees are aware of the following: Acts that are considered to be fraudulent, wasteful or abusive; 2. Procedures for reporting suspected fraudulent, wasteful or abusive acts; and 3. Steps to be taken when fraud, waste, abuse, or other related activities are suspected; 4. The responsibility of City officials and employees to institute and maintain a system of internal controls to prevent and detect fraud, waste and abuse as set forth in this Policy. APPLICABILITY OF POLICY This Policy applies to all contractors, volunteers, employees, elected officials, and members of the City's committees and commissions regarding potential fraudulent, wasteful or abusive activities. This scope of this Hotline policy does not include reports/inquires that deal with customer service requests. The City currently has a "Non -Emergency Customer Service Requests" portal on its website that is designed to address incidents/inquiries that allow users to submit a report that is not related to personnel matters nor acts of fraud, waste and abuse. The process in its current form, requires a user to complete a form on the City's website. From there, it would be routed to the City Manager or appropriate department where appropriate action would be taken. Examples of reports/inquiries that would not fall under the purview of the Fraud Hotline, but would be appropriate for the Non -Emergency Customer Service Requests" portal would include, but not limited to: • Fallen trees • Graffiti • How to obtain a copy of a document • Potholes • Questions about renting park sites • Street signs downed • Neighbor disputes CONFIDENTIALITY All information disclosed through the Hotline, including the identity of anonymous person(s) making the Hotline Report, and the parties identified by the person(s) making the Hotline Report, are to be held in confidence in accordance with Section §53087.6 of the California Government Code as follows: "The identity of the reporting individual may not be disclosed without written permission of that person, unless the disclosure is to a law enforcement agency that is conducting a criminal Investigation. Id., subd. (e)(1). Accordingly, the procedures for receiving complaints must be tightly controlled, and the City staff responsible for complaint intake must be absolutely trustworthy." PROCEDURES It is the City's intent to fully investigate every validated Hotline Report objectively. A. City officials and employees are responsible for the detection, reporting and prevention of fraud, waste and abuse, as set forth in this Policy. B. The Case Manager has the primary responsibility for the complete investigation of all validated reports as defined in this Policy, C. Throughout the Investigation, the Case Manager may inform the City Manager, City Attorney, HR Manager, Department Director(s), any required experts, and the Audit Committee, as appropriate, of pertinent investigative findings. D. When informed of a Hotline Report relating to City personnel, neither the City nor any person acting on behalf of the City shall reach any final determination with regard to the merits of the Report until any related investigation is completed. E. The City shall not take any retaliatory action against any individual who makes a Report. F. Upon conclusion of the investigation, the results will be reported by the Case Manager and/or Investigator to the City Manager and City Attorney, as appropriate. The results may also be reported to Department Director(s), HR Manager, independent third -party expert and/or the City's independent auditors and the Audit Committee. G. The City Council, as appropriate, City Manager, or designee, following review of the investigation results and findings, shall take appropriate action regarding misconduct. Disciplinary action may include: suspension, termination of employment, and where appropriate, referral of the case to an appropriate law enforcement agency and District Attorney's Office for possible investigation and prosecution. H. The City will pursue every reasonable effort, including court ordered restitution, to obtain recovery of City losses from the offender, or other appropriate sources. AUDIT COMMITTEE RESPONSIBILITIES The City Council established an Audit Committee in accordance with City Council Policy Number 44. The Audit Committee shall be responsible for ensuring this Policy is properly implemented and that procedures exist and are being followed with regards to the receipt, retention, treatment and appropriate resolution of Hotline Reports. The Audit Committee shall meet quarterly over the first year of implementation of the Fraud, Waste, and Abuse Hotline in order to review summary reports on Hotline usage and case resolution. Thereafter, the Audit Committee shall meet at least annually to monitor the ongoing Hotline utilization. CITY OFFICIAL AND COMMISSIONER RESPONSIBILITIES A. If a City Council member or commission/committee member has reason to suspect an incident of fraud, waste and abuse has occurred, he or she shall immediately contact either the City Manager, City Attorney, City's independent auditor, when applicable, or immediately submit a Hotline Report. B. The City Council member or commission/committee member shall not attempt to personally investigate or interfere with Hotline Reports. C. Hotline Reports, or investigations thereof, shall not be discussed with the media or any member of the public other than through the Mayor or City Manager in consultation with the City Attorney. EMPLOYEE RESPONSIBILITIES A. Employee's (both management and non -management) responsibilities for this Policy include, but are not limited, to the following: All employees are responsible for being alert to, and reporting alleged fraud, waste, and abuse in accordance with this Policy. Employees should support the City's responsibilities and cooperate fully with the Investigator, other involved departments, and law enforcement agencies in the detection and reporting of criminal acts, including the prosecution of offenders. iii. Employees must give full and unrestricted access to all necessary records to the Investigator and Case manager. All City assets and property, including desks and computers, are open to inspection at any time by authorized personnel. INVESTIGATOR RESPONSIBILITIES A. The Investigator will promptly investigate the Hotline Report. B. If evidence is uncovered showing possible fraudulent, wasteful, or abusive activities, the Investigator shall perform the following: Discuss the findings with the Case Manager, City Manager, City Attorney and/or independent third -party expert, and/or Department Directors and/or the HR Manager. ii. If applicable, report such activities to the independent third -party expert, City's independent auditor and the Audit Committee in order to evaluate the impact of the illegal activity upon the City's financial statements. iii. Take immediate action, in consultation with the City Attorney, City Manager and Case Manager, to prevent the theft, alteration, or destruction of evidentiary records. Such action shall include, but is not limited to: (a) Removing the records and placing them in a secure location, or limiting access to the records. (b) Preventing the individual suspected of committing the fraud from having access to the records. C. If the Investigator is contacted by the media regarding an alleged fraud or audit investigation, the Investigator will consult with the City Manager and City Attorney who shall collectively determine the appropriate person to respond to the media request for the information or interview. D. At the conclusion of the investigation, the Investigator will document the results in a confidential memorandum report, as appropriate. E. The Investigator may make recommendations to the appropriate department for assistance in the prevention of future, similar occurrences. F. Upon completion of the investigation ( including all legal and personnel actions), all records, documents, and other evidentiary material obtained from the department under investigation will be returned by the Investigator to the Human Resources Department. ACTION This Policy is effective on the date approved by the City Council. Attachment No. 3 City of Palo Alto's City Employee Fraud, Waste, and Abuse Hotline Administration Policy 01203.0001/295095.1 C-1 CITY OF PALO ALTO Fraud, Waste, and Abuse Hotline Administration Policy C I T y 0 F - PALO ALTO Attachment B Page 1. of 7 City Employee Fraud, Waste, and Abuse Hotline Administration Policy C-2 Attachment B 0TY OF PALO AL'"T"'O Page 2 of 7 Froud, Waste, and Abuse rtoiline Administrotion Policy Table of Contents 1. Objective......................................................................................................................... 3 2. Structure......................................................................................................................... 3 3. Hotline Review Committee.............................................................................................3 4. Case Management..........................................................................................................3 5. Case Dissemination.........................................................................................................4 6. Escalation........................................................................................................................ 5 7. Reporting.........................................................................................................................5 8. Prohibition Against Retaliation....................................................................................... 5 9. Terms and Definitions..................................................................................................... 5 10. Security of Incident Reports and Associated Reports, Working Papers, and Other Related Documents.......................................................................................................................... 6 11. Custody of Investigation Documents................................................................... 6 12. Public Requests for Information Regarding All Incident Reports ............................. 6 13. Filing of Malicious Complaints............................................................................ 7 C-3 Attachment B ;ITT OF PALO ALTO Page 3 of 7 f=raud, Waste, and Abuse Hotline Adrninistrotion Policy 1. Objective The primary objective of the City of Palo Alto Fraud, Waste, or Abuse Hotline ("Hotline") is to provide an anonymous mechanism for employees to report fraud, waste, or abuse by City employees. City employees who have specific information that other City employees have engaged in fraud, waste, or abuse are encouraged to report such information through the normal chain of command which includes their immediate supervisor, manager, department head, Human Resources, and the City Manager's Office (CMO). However, there may be certain circumstances where an employee believes it is necessary to remain anonymous. The Hotline provides an anonymous method of reporting such incidents over the phone to a third -party interviewer or via an anonymous web form. The City believes that anonymity is a last resort and should only be used after other reporting methods have been attempted or when the employee has a reasonable good faith belief that it is necessary. All reports made regarding fraud, waste, or abuse should be made seriously and with due professional care. 2. Structure The Hotline is hosted by an independent, third -party provider (vendor) contracted by the City. The vendor provides the option for callers to provide information over the Hotline anonymously. The vendor issues an Incident Report for each call and submits the Incident Reports for review and referral. The vendor provides offsite hotline coverage 24/7/365 and live interviewers who obtain the information deemed necessary to verify and process the complaints. This information is then transcribed into an Incident Report, housed in a case management system. 3. Hotline Review Committee The Hotline Review Committee ("Committee") is composed of the following members or their designees: the City Auditor, the City Manager, and the City Attorney. The Committee meets as needed to review all activity related to the Hotline. The objectives of the Committee are to review all Incident Reports, determine whether an Incident Report should be investigated, assign Incident Reports to the appropriate department or unit for investigation, ensure that Incident Reports that are assigned for investigation are adequately investigated, and address any trends in activity or weaknesses in City policies requiring corrective action to be taken. Duplicate reports or reports that do not suggest fraud, waste, or abuse may be closed without further investigation. 4. Case Management The online case management system allows for all Hotline reports to be recorded, updated and tracked in one centralized system to ensure that all reports are addressed appropriately and that the outcomes are consistent. All Incident Reports are maintained in the secured case management system and are periodically updated with the status of the investigation by the specified department case management users and the OCA. Case management users include staff of the OCA who act as administrators of the case management system, and one or more members of management from each department who will C-4 CITY OF PALO ALTO Froud, Waste, and Abuse Hotline Administration Policy Attachment B Page t1. of 7 be assigned to respond to incidents within their departments. User access is limited to cases assigned to them. Additionally, the CMO will be provided certain administrative functions in the case management system in order to create a check -and -balances system to ensure that the OCA is not investigating reports that could be a conflict of interest for OCA employees. 5. Case Dissemination After a call has been entered as an Incident Report and logged into the case management system by the vendor, the report is sent electronically to the appropriate contacts at the OCA for preliminary review within 24 hours. The OCA will triage the report to determine if immediate action may be necessary. If immediate action appears necessary, the OCA will contact the Hotline Review Committee who will decide whether to initiate an investigation. Incident Reports requiring immediate action include those involving possible fraud, waste, or abuse by City executives, or other incidents based on the judgment of the Hotline Review Committee. All other cases will be referred to the Hotline Review Committee in their scheduled meetings. If an Incident Report involves one or more members of the Hotline Review Committee, those individuals shall be excluded from any decisions or activities related to the review and/or investigation of that Incident Report. If this occurs, a Senior Performance Auditor, Assistant City Manager, and/or Senior Assistant City Attorney, if needed, will act as members of the Hotline Review Committee to ensure there are a minimum of two officials providing oversight of the review and investigation of the Incident Report. Because the members of the Hotline Review Committee are appointed by the City Council, the Hotline will not accept incidents involving members of the City Council. Employees reporting these types of complaints will be referred to the California Fair Political Practices Commission, the District Attorney's Office, or other appropriate outside agency, depending upon the nature of the complaint. Each department will have one or more dedicated contacts who will receive the Incident Report from the Hotline Review Committee, disseminate it to the appropriate staff within their department, and access the Report in the case management system to either assign it to another user in their department to manage the case or make updates as to the case disposition themselves. The dedicated department contact will complete the preliminary case closure before the Hotline Review Committee reviews and formally closes an Incident Report. As the Hotline Administrator, the OCA will be responsible for: • Monitoring of all Incident Reports referred to other departments or units for investigation, and their outcomes, • Conducting an independent investigation of reported incidents when appropriate, • Monitoring the timeliness of department responses based on timeframes established by the Hotline Review Committee, and • Closing Incident Reports after the final review of the Hotline Review Committee. C-5 Attachment B CITY OFF PALO ALTO Page 5 of 7 Froud, Wasie, and Abuse Hotline Administration Policy 6. Escalation An incident is designated for escalation if there is an imminent or significant threat of actual harm to employees, customers, or operations. When a report is designated for escalation by the vendor, they shall immediately call the appropriate designated contact(s) provided by the City. Escalation contacts include the members of the Hotline Review Committee and their designees. 7. Reporting The case management system allows for customized reporting of incidents reported to the Hotline. Users may sort information and run reports on cases assigned to them, and administrators may create reports on case dispositions, status, corrective action taken, and other trends. The OCA will provide a quarterly summary report of complaints received by the Hotline to the City Council as an Information Item. The form and content of the quarterly report shall be at the discretion of the City Auditor, will be presented to and reviewed by the Hotline Review Committee, and will generally include the following: • The number of reports made to the Hotline, • The general types of complaints received, • Any trends in the types of complaints received, and • Any corrective action taken by City management as a result of a complaint received. 8. Prohibition Against Retaliation No department or employee shall take any adverse action or retaliate against any employee for making a report to the Hotline (except as provided in "Filing of Malicious Complaints," below). Additionally, no reprisal shall be taken against any employee who participates in any manner in the investigation and disposition of a Hotline Incident Report. This Prohibition Against Retaliation is a statement of City policy. It is not intended to and shall not create a private right of action enforceable in state or federal court on behalf of any person, against the City or any employee, for equitable relief or damages. 9. Terms and Definitions Under California law, the term, "fraud, waste, or abuse" means: Any activity by a local agency or employee that is undertaken in the performance of the employee's official duties, including activities deemed to be outside the scope of his or her employment, that: • Is in violation of any local, state, or federal law or regulation relating to: o Corruption, o Malfeasance, o Bribery, o Theft of government property, o Fraudulent claims, C-6 t, TY OFPALO ALTO Frond, Waste, and Abuse Hotline Administration Policy o Fraud, o Coercion, o Conversion, o Malicious prosecution, o Misuse of government property, or o Willful omission to perform duty, • Is economically wasteful, or • Involves gross misconduct. Attachment B Fuge 6 of 7 10. Security of Incident Reports and Associated Reports, Working Papers, and Other Related Documents • Incident Reports, associated reports, working papers, and other documents referring to or describing Incident Reports, which are received either through the Hotline, by mail, or e-mail shall remain confidential to the extent allowed by law. • Incident Reports and associated case numbers shall only be provided to individuals who are responsible and essential for conducting the investigation or reviewing of the Incident Report. These individuals are required to hold such information in confidence, to the extent allowed by law. • The confidentiality of all Incident Reports, associated reports, working papers, and other documents shall be maintained at all times by the City Auditor and investigating/reviewing departments, who shall take such measures as they determine are reasonable and necessary to maintain the confidentiality of such information and documents, to the extent allowed by law. • City Staff responsible for reviewing/investigating Incident Reports can make investigative disclosures of information contained in an Incident Report to the extent necessary for obtaining additional information relevant to the investigation. • The Hotline Review Committee is authorized to determine the distribution or release of any Incident Reports, associated reports, working papers, other documents and correspondence associated thereto, in accordance with the California Public Records Act and other applicable law. • The City Council may, at their discretion, authorize the release of information relative to substantiated incident reports. 11. Custody of Investigation Documents The City Auditor shall maintain custody of Incident Reports, associated reports, working papers, emails, and all other pertinent information regarding any investigations of Incident Reports. Other parties involved in the investigation shall also retain their own documentation. All such documents shall be retained and or disposed of in accordance with applicable document retention policies of the City. 12. Public Requests for Information Regarding All Incident Reports All requests for information concerning any Incident Report shall be directed to the City Auditor for a response. The City Auditor, with the guidance of the Hotline Review Committee, shall respond to such C-7 CITY OF PALO ALTO Froud, Waste, and Abuse f-lotline Actministrotion Policy Attachment B (rj,e7of7 requests as permissible and in accordance with applicable state law and City policy, rules and regulations. Departments shall notify the City Auditor of any Public Records Act or other requests for information or documents regarding Incident Reports received through the City Auditor or the Hotline. 13. Filing of Malicious Complaints The City will not tolerate malicious complaints. The processing of a complaint/concern requires staff time and attention regardless of its appropriateness. Complaints/concerns will not be considered malicious merely because they are determined to be unsubstantiated. A malicious complaint/concern is one that is made in bad faith or with knowledge that the complaint entirely lacks any factual basis. Malicious complaints may result in disciplinary action in accordance with applicable City policies and procedures, up to and including termination from employment. • Attachment No. 4 Table of Hotline Complaints 01203.0001/295095.3 D-1 Summary of the Fraud Waste and Abuse (FWA) Hotline June 1, 2015 — February 2, 2016 Date Case Ty pe Description Result Type 6/3/2015 Fraud Caller reported a Informed caller that PH telephone scam and this is not related to that if he did not the City FWA hotline respond he would be and should call the put in jail Sheriff to pursue. 6/5/2015 Fraud Caller reported This turned out to be Web improper granting of a private matter building permits between residents and was settled 8/11/2016 Customer Caller reported the Del Caller was informed PH Relations Cerro Park trash cans to call PW with these and signs had been matters spray painted 8/18/2015 Council Member Caller reported that a Matter was sent to PH Council Member Meyers Nave. After brought a contract investigation, caller before the Council was informed the illegally. agenda was agenized properly and the complaint was Not Substantiated 8/18/2015 Council Member Caller reported that a Matter was sent to Web Council Member was Meyers Nave. After using their City Council investigation, caller signature block and was informed there including their private was no evidence a business interests Council Member violated the Cal. Political Reform Act and the complaint was Not Substantiated 9/8/2015 Council Member Caller reported that a Matter was sent to Web Council Member Meyers Nave. After intentionally misused investigation, caller influence with the was informed Council police. Member appropriately reported the threat and the complaint was Not Substantiated. 01203.0001/295095.3 D-2 Summary of the Fraud Waste and Abuse (FWA) Hotline June 1, 2015 — February 2, 2016 Date Case Type Description Result Type 9/16/2015 Council Member Caller reported that a Matter was sent to Web Council Member was Meyers Nave. After stating that another three attempts to Council Member was call, the investigator living out of the never got a return jurisdiction and cannot call. serve on the City Council. 10/12/2015 Customer Caller reported that in Pursuant to the PH Relations one place the public Development Code, notice states that the the Planning City is proposing a Department, at a change in the trail minimum, typically network plan, and in notifies property another section it states owners within a 500 - the conceptual foot radius of a bikeways plan and that project area. In the City is cases where multiple misrepresenting properties are owned planning documents. by the same owner it is not uncommon for the property owner to receive multiple notices. Albeit, Staff tries to catch the overlap when labeling the envelopes. 11/1/2015 Customer Caller reported that a Caller was informed PH Relations janitor at a school was to address the issue abusing water during with the school. the drought by letting it flow on the sidewalk. Note: Councilmember complaints were all over a 30 -day period. 01203.0001/295095.3 D-3 ` 1pvra.gav ? :t i .5.15 em P — 0 I Ll City Services I rancho Palos,,, x. Sign In =+ Select Lan-guagee Fane � Feature Lrrft , City Systems City Services Fraud. Waste and Abuse Hotline Have a concern about fraud, waste or abuse by City employees, effected or appointed officials? Click here and submit an anonymous request Tor an investigation- Public Warks Assistance Request assistance with things like tree branches in the street, flooding, or potholes. Public Records Request Would you like to request any City retards? Click here for more information- � . Trash or Graffiti Reporting • This City is dedicated to quick removal of blight, click here to get someone out to take care of It. Other City Requests Use this link to make any requests to all other City departments. 4111wl%jwll�a MI I Preparation