The Canada Revenue Agency (CRA) says that an internal investigation into a large refund cheque issued to alleged crime figure, Nicolo Rizzuto, has found no evidence of fraud or wrongdoing.

The CRA released the summary findings of an internal investigation into reports that Rizzuto received a refund cheque for almost $400,000 back in 2007, which found that “there is no evidence to support the allegation that the cheque was issued due to fraud, collusion or corruption by CRA employees.”

The CRA’s Internal Affairs and Fraud Control Division conducted the investigation. It concluded that the issuance of the cheque could not have been deliberately orchestrated because its process for managing the issuance of payments is structured to include many verifications and controls at various stages, and much of the payment processing system is automated. “Because of these controls, the investigation determined that the chain of events that led to the issuance of the cheque to the taxpayer could not have been deliberately manipulated,” it says.

The investigation also confirmed that within two weeks of the cheque’s issuance, Rizzuto’s daughter ensured that the CRA was notified that the cheque had been issued in error, and it was later recovered and never cashed. It did find that an employee failed to follow established procedure with respect to cheque verification, and that this contributed to the issuance of the cheque in 2007, it said, noting that this was not unique to this particular cheque.

However, it also said “no evidence was found to suggest that this employee, who lives modestly and has since retired from the public service, acted unethically, lived beyond his means, or obtained any benefit as a result of not following established procedures.”

The investigation also revealed that a system control weakness existed back in 2007, as there were no mandatory guidelines or procedures in place that would have instructed an employee to flag taxpayer accounts for which amounts owed were in dispute and multiple taxation years were at issue. The CRA has revised procedures to ensure that these types of specialized files are flagged clearly and reviewed thoroughly before refunds are issued. “This will mitigate the risk of similar occurrences in the future,” it says.

The CRA says that the conclusions of the investigation have been independently validated by Ernst & Young LLP, who found that the review was conducted in an impartial manner and with due diligence.

In the meantime, the CRA reports that it has revised its procedures “to ensure that files are clearly flagged and reviewed thoroughly before refunds are issued.”The agency says that it has adopted an action plan is that includes additional process improvements, which are to be completed by March 31, 2014. The plan will be reviewed in six months to ensure the new controls are effective.