Sonoma’s new policy to detect, prevent fraud within city operations

Recognizing the need to be proactive about detecting, preventing and addressing fraud within city government, Sonoma City Council unanimously approved its first Fraud Policy for the city at it’s March 5 council meeting.

While the city states there are no instances of fraud currently, council recognized a need for creating a formal policy. City staff and council identified the need in the 2020-21 fiscal year audit.

“This policy is needed to prevent fraud and to strengthen the internal controls, which will also have mandated fraud awareness training and enforces segregation of duties, audit and financial monitoring,” Sonoma Finance Director Prapti Aryal said.

The policy was developed in accordance with Government Finance Officers Association (GFOA) recommendations, and outlines clear definitions of fraudulent activities, responsibilities for city employees and management, investigation procedures, and whistleblower protections.

Fraudulent activities covered in the policy include misrepresentation, theft, misuse of funds, falsification of records, bribery, and unauthorized access to city information.

Aryal said the policy applies to all employees, elected officials, vendors, and contractors in the city.

“It also defines fraudulent activities and what needs to happen to report suspected fraud, which is through a confidential process. The report can be made to the supervisor, city manager or the finance director, with a strong whistleblower protection in place,” Aryal said.

“Fraud investigation will be led by the city manager, with the involvement of law enforcement, external auditors or legal counsel as needed, depending on the case.”

The policy also emphasizes the importance of internal controls with the city manager and finance department tasked with implementing preventive measures and ensuring compliance with reporting protocols.

Along with City Manager David Guhin and Aryal, the human resources manager and other department heads are responsible for instituting and maintaining systems to provide reasonable safeguards and assurances for preventing and detecting fraud.

These systems will also help prevent misappropriations and other similar irregularities that could put city revenue, property, information, and other assets at risk of waste or abuse.

Employees are required to report any suspected fraudulent activity to their supervisor within two working days of becoming aware of the incident. The policy also provides protection for whistleblowers, ensuring that employees who report fraud are safeguarded from retaliation.

Vice Mayor Ron Wellander inquired about the city’s auditor identifying a need for fraud prevention, asking, “It wasn’t a case that he saw something in his document review, right?”

Aryal clarified identifying a need was solely based on the city’s lack of a policy.

“So we’re purely being proactive,” Wellander said.

Guhin or a designee will conduct or oversee an initial review of any suspected fraudulent activity and will determine whether further investigation is warranted and whether it should be conducted internally by human resources or require the involvement of a third-party city investigator.

The policy will be reviewed annually by the finance and human resources departments and updated as needed to reflect regulatory changes, audit findings, and emerging risks.

You can reach Staff Writer Emma Molloy at [email protected].