Edmonton Audit Exposes Critical Flaws in Municipal Gift Card Program
An extensive audit of Edmonton's municipal gift card system has revealed alarming vulnerabilities, including nearly $460,000 worth of improperly coded cards and hundreds of instances where the same employees both issued and redeemed gift cards. The findings, presented to the city's audit committee on Wednesday, highlight systemic weaknesses in financial controls that could potentially expose taxpayer funds to fraud.
Substantial Financial Irregularities Uncovered
The audit examined gift card transactions spanning from 2017 to 2024, covering $1.5 million in total issued cards. Of this amount, auditors identified $459,000 in gift cards that raised immediate red flags due to improper coding or documentation issues. The investigation found that 791 gift cards with improper codes had been both issued and redeemed by the same municipal employees, creating clear conflicts of interest and potential avenues for abuse.
"I'm glad it's been identified and is being actioned," stated Mayor Andrew Knack in response to the audit findings. "There's really no excuse one could give to not implement an audit recommendation." The mayor emphasized that city administration recognizes the critical gaps identified by auditors and is committed to implementing necessary corrections.
Systemic Access and Control Failures
The audit report paints a picture of a gift card management system with dangerously broad access permissions. According to the findings, the gift-card registry system remains wide open to anyone with access credentials, providing complete visibility into sensitive information including card numbers, issuance dates, and monetary values. This lack of restricted access creates significant opportunities for potential fraudulent activities.
Auditors discovered 393 active gift-card accounts belonging to "inactive or terminated" employees, along with an additional 141 accounts held by staff across multiple departments outside the recreation division. Perhaps most concerning, the audit identified 28 accounts that were actively selling or redeeming gift cards despite not appearing on the list of approved users.
Data Integrity and Coding Problems
The investigation revealed substantial data integrity issues within the gift card system. Auditors found that several issued cards lacked the required five-digit identification codes, accounting for $454,000 of the problematic transactions. Additionally, 31 gift cards were issued with numbers falling outside the approved range for five-digit codes, while 21 cards appeared to be duplicates in the system.
The report suggests that misplaced keystrokes during manual entry likely contributed to these errors, as the majority of gift cards are issued through in-person transactions at various municipal facilities including recreation centers, the Valley Zoo, and Muttart Conservatory.
Immediate Corrective Actions Implemented
Following the audit committee's approval, city management has initiated a comprehensive review of all active staff members with database access privileges. This review aims to ensure that only properly authorized personnel can access the gift-card registry system, with completion targeted for June 30. The audit specifically recommends overhauling access controls to improve the integrity of the entire gift-card management framework.
Beyond the employee self-dealing concerns, auditors identified additional problematic patterns including 117 cards issued with redemption dates earlier than the dates printed on the cards themselves, six cards issued with negative balances, and eight cards showing balances that differed from the amounts actually paid by users.
While the audit flagged 1,605 instances where employees both sold and redeemed gift cards, the report cautiously notes that this pattern "does not necessarily indicate something wrong" in all cases. However, the concentration of improper codes among these transactions raises legitimate concerns about potential systemic abuse.
With $744,000 already redeemed from the $1.5 million total issued and $760,000 still in circulation, municipal officials face urgent pressure to implement robust controls that protect public funds while maintaining legitimate access for authorized transactions. The audit serves as a stark reminder of the critical importance of financial oversight in municipal operations.
