Toronto nearly lost $2.5M in electricity fraud. City committee suggests police should investigate
Committee suggests council refer case to police board, encourage invoice reviews among departments
Toronto's close call with a $2.5-million electricity fraud scheme will be headed to city council after a motion passed at the audit committee on Friday.
The committee also recommended council to loop in the Toronto Police Service Board and police chief to consider if the case meets the threshold for a criminal investigation.
Last month, the auditor general's office found that in 2019, 14 city-owned properties' electricity accounts were switched to two different third-party energy retailers — instead of Toronto Hydro — without the city's knowledge.
The auditor general's office added in its report that the identities of retired employees with the city's corporate real estate management (CREM) department were fraudulently used to sign contracts.
Auditor general Tara Anderson and CREM executive director Patrick Matozzo told the audit committee that while controls are now in place to detect such frauds, it's important that other departments are made aware of the potential risks.
"There's always the risk of identities being stolen and that fraud could be committed," said Anderson.
"But having good controls in place will help to detect and investigations like this help to know that there's consequences."
The audit committee is recommending that council request the city manager forward the investigation to other departments to encourage diligent invoice reviews and approvals, especially when it comes to electricity invoices.
The auditor general's investigation began in 2020, but was paused due to the COVID-19 pandemic and resumed in 2024.
Retired employees' credentials fraudulently used
The issue first raised flags when CREM identified "unusual" invoices during a routine account review in the fall of 2019 and saw the accounts had been switched in July of that year.
The investigation found that consulting firm owners seemed to be involved in establishing the contracts with third-party retailers, fraudulently using retired city employees' identifications.
The auditor general told the committee there was no evidence the retired employees had any involvement. The investigation even consulted a hand-writing expert to be certain, she said.
The report said there was not enough evidence to determine if other city employees were involved.
The contracts with the third-party retailers were valued at $4.2 million, which is $2.5 million higher than what the city would pay with Toronto Hydro, the report said.
The city was able to recover the $250,000 that was paid to the energy retailers between the time the contracts began and were cancelled.
The auditor general's report said the matter has been referred to Toronto police, which said earlier this week that a review was underway.
The audit committee's recommendation to elevate the case to the police board was made to escalate the consideration for a police investigation.
Controls in place to avoid future fraud: CREM
Patrick Matozzo, the executive director for CREM, said the department now has a team to watch out for these sorts of issues.
"We can't control fraud that happens outside our control processes. But we have processes all the way through to ensure that if something like that were to happen, we'd actually catch it," he said.
Matozzo said Toronto Hydro is also working with them to watch out for any future contract changes.
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