A fledgling whistle-blower hotline program is credited with spurring the city of Sacramento to comply with state mandates to prevent sexual harassment and avoid a contract that could have resulted in a conflict of interest.
Nineteen complaints were reported to the hotline during the program's first 10 months, and 10 of those cases have been closed, according to a report released last week by the Office of the City Auditor, which investigates the complaints.
Two of the complaints were substantiated by the auditor's office and three were referred to departments for investigation.
One of the complaints substantiated by auditors' investigations involved the Information Technology Department's consideration of a sole-source contract with an entity that could have created a conflict of interest, according to the auditor's hotline activity report. The investigation confirmed the potential conflict, and the department competitively bid the project.
The auditor's office also investigated a complaint that many of the city's supervisors had not completed state-mandated sexual harassment prevention training. It found that about 16 percent of the managers who were required to complete the training had not done so during the reporting period.
Consequences of failing to comply with the training requirement include increased liability exposure for breach of an employer's duty to "take all reasonable steps to prevent harassment from occurring," said City Auditor Jorge Oseguera.
A public audit report published in June included eight recommendations, and the Human Resources Department, which runs the training program, is taking corrective action, according to the auditor's whistle-blower hotline activity report.
Three hotline cases were closed when the complaints were found to be unsubstantiated. Another case involved an issue already under investigation by another city department, and the 10th case involved a request for information but no complaint of fraud, waste or abuse.
Nine of the original 19 complaints are still pending.
"You never know what to expect with a young program like this," Oseguera said, noting that some other cities with whistle-blower hotlines have received a higher volume of complaints.
The city is soliciting bids to establish a third-party, toll-free hotline to accept complaints around the clock. Currently, complaints must be made by telephone to a member of the auditor's staff during business hours.
The third-party hotline would provide "a live person to talk to," Oseguera said, and a case management system to document the complaints in a report to the auditor's office, which would prioritize them for investigation. Oseguera said he expects the system will include an online reporting option as well.
The auditor's office will still conduct the investigations, which have been handled thus far with no additional staff or resources. Oseguera said he would like to add a position specifically to deal with whistle-blower issues.
The Sacramento City Council directed the city auditor to establish the whistle-blower hotline program in February. City officials cited an Association of Certified Fraud Examiners study of occupational fraud and abuse, which found that a typical organization loses an estimated 5 percent of its annual revenue to fraud. The association defines occupational fraud as the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources or assets.
If the city of Sacramento's losses due to fraud were in line with the association's estimates, the loss to the general and enterprise funds would amount to $30.3 million per year, according to the auditor's report. The study, however, found that the cost and duration of fraud was less in organizations with whistle-blower hotlines.
Of the 19 complaints received from January through October, three involved the abuse of a position of authority. Two complaints each pertained to contract issues, theft, time abuse, violation of state or federal rules, and wasteful practice. The hotline also received one complaint each involving bribes or kickbacks, hiring irregularities, improper controls, information requests, miscategorized expenses and reimbursement abuse.