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City of Chestermere investigating $600,000 in unauthorized payouts

The City of Chestermere is investigating two employee payout packages totalling $600,000 to two separate ex-employees’ bank accounts.
The City of Chestermere is looking into what it's calling irregular severance payout packages to two former employees that totalled $600,000. File photo/Rocky View Weekly.

The City of Chestermere is investigating two employee payout packages totalling $600,000 to two separate ex-employees’ bank accounts.

One payout equals $200,000 while the second is for $400,000, according to a July 26 press release from the City.

The two since-resigned employees have been accused of being in violation of the City’s policy which states council must approve any payment over $75,000, according to the release. 

A third-party investigation is underway and some details regarding the payouts could not be disclosed, such as when the payouts occurred, said City of Chestermere Mayor Jeff Colvin, who added the investigation is estimated to last approximately three to four months. 

“We’re informing residents right away rather than not tell them to keep it quiet and sweep it under the rug,” he said. “That just isn’t the kind of administration that we’re looking to run.” 

Colvin explained the third-party firm will conduct an analysis. Depending on the analysis findings, the payout concerns will either be resolved or passed along to the relevant authorities to ensure the case is handled properly. 

“They’re looking into it,” he said. “It’s important that we’ve identified the irregularity and that we now get it away from us so that there’s no opportunity for us to affect it in any way, positive or negative.” 

While a third-party investigator will look into the matter, City of Chestermere staff have been directed by council to discover why the severance packages were paid out without council’s approval, discover if these payouts have occurred in the past, evaluate the current employment template, make changes to ensure future contracts do not contravene the City’s Employment Policy, and ensure current severance agreements do not breach the City’s Employment and Severance Policy, added the release. 

Colvin said the particularly concerning aspect of the payouts is how the large fund's withdrawal originally went unnoticed. 

“[There is] a process for any amounts that are over $75,000 need to come to council for a council approval and that didn’t happen,” Colvin said. 

He added that sums this large need multiple council members' approval, including the mayor’s sign-off, but these particular payouts never reached council. 

The funds were withdrawn by a manual transaction using the City of Chestermere’s payroll system, according to Colvin. The funds were allocated into the ex-employees’ accounts by changing the amount they were supposed to receive during a regular payroll deposit. 

“What’s odd about it is that even if they had a contract that said that they had some kind of severance that allowed this, it’s too high to not go through council,” Colvin explained. 

As per the Alberta Employment Standard Code, the two former employees were legally entitled to two weeks' salary following their resignation. However, severance payouts must be presented to council to receive approval as an unbudgeted expense. 

Although the sum is large, according to Colvin, this year’s City budget will not be affected, as the City has reserves available.

However, the missing funds are causing frustration for council, Colvin said, as it may impact some of the social programming and recreation activities Chestermere offers in the coming year. How much this impact may be felt will not be known until the end of the year financial audit is complete, he added. 

Colvin said there is a possibility other staff members still employed by the City may have been involved in accessing the funds and releasing them into the former employees’ bank accounts. 

“That still has to be proven…we really have to let the investigation follow its steps and find out who and how,” he said. 

To prevent these types of unauthorized payouts from occurring in the future, the City of Chestermere will begin using a coded entry system in partnership with its bank. The system will ensure each manager will have their own personal code and three codes would have to be entered in order to reallocate funds. 

The coding system would be necessary for transfers as small as $1 and it would hold managers accountable as each code would identify the name of the manager who supplied their code and therefore authorized the transaction. 

“It’s surprising that that’s not the kind of system that was employed here previous,” Colvin said.