$236K in suspicious payments handled by 1 employee shows 'significant gaps' in Pharmacare: auditor general

There were "no supervisory controls and no standards or expectations for documentation," in place to prevent a former Pharmacare employee from processing more than $236,000 worth of suspicious payments between 2007 and 2015, Manitoba's auditor general says.

The payments were made to several individuals over eight years, according to a report released Tuesday by Manitoba Auditor General Norm Ricard.

In the report, Ricarddescribes"many significant gaps" in the provincial drug program's internal controls at the time, which allowed the employee to enter unsupported transactions into the system manually.

As a result, illegitimate payments were issued to several individuals, between the employee's start date in 2007 to the person's termination in March2015.

The employee was terminated after the November2014arrest ofan individual in possession of a Pharmacare cheque, who could not provide a reasonable explanation for why they had the cheque.

Winnipeg police alerted Pharmacare about a potential misappropriation of funds, and the drug programidentified the employee in a preliminary investigation.

Manitoba's finance minister requested a special audit in August 2015, whichRicardcompleted and released on Tuesday.

'No supervisory controls'

The auditor general's report was released alongside two others. One found licences valued at more than $30,000 and an unknown amount of cash went missing from the Sustainable Development office in Thompson, Man. The other found unsupported credit card transactions in the rural municipality of De Salaberry.

In his report,Ricardwrites gaps inPharmacarecontrols permitted employees to process undetected many transactions without support or review.

"These unsupported transactions resulted in 'refund'cheques to many individuals,"Ricardwrote.

"We found no supervisory controls and no standards or expectations for documentation."

• READ THE REPORT | Pharmacare: Special Audit of Financial Irregularities and Controls

Ricard also highlighteda deductible calculation system that dates back to 1994, called the Drug Programs Information Network.

Theonline system connects Manitoba Health with pharmacies but includes "few automated controls," the audit says, and allows employees to make manual entries or adjustments without supervisory oversight.

An emailed statement sent on behalf of Manitoba Health Minister Cameron Friesensaid enhancements to claim-processing procedures were made immediately following the identification of the alleged fraud, consistent with Ricard's five recommendations.

The changes include enhancing the drug program system to include identification and date stamps on manual entries, initiating a supervisory review on chequesand setting out a checklist of required information for documentation on each type of entry into the system.

5 recommendations to improve

Ricard made five recommendations to the province to address the gaps.

A spokesperson for the health ministersaid in an email that the province accepts all of them, and has already made progress on some.

The summarized recommendations are:

• That Manitoba Health forward the detailed audit findings to Civil Legal Services. (Thereport indicatesthe province had scheduled a meeting with Civil Legal Services for July2018.)
• That the department conduct a cost/benefit analysis to make enhancements to the Drug Programs Information Network system, includingbuilding automated internal controls over the processing of manual Pharmacaretransactions.
• That Pharmacare ensures there is supervisory review of all manual transactions and, if applicable, that the review occur before a cheque is generated.
• That Pharmacaredevelop documentation requirements for each type of entry made into the Drug Programs Information Networksystem.
• That Pharmacareestablish a process to compare self-reported income figures with income information from the Canada Revenue Agencyonce it becomes available.

The auditor general was not available to comment on the report on Tuesday.