Hamilton police are investigating a municipal employee suspected of defrauding the city of more than $1 million over a nine-year period.

The city announced Wednesday night that police are investigating an employee in the finance and corporate services department who is suspected of stealing $1,058,235.20 since 2005.

The city confirmed the discrepancy on June 18, said Mike Zegarac, acting manager of finance.

The city noticed that the employee was accepting cash payments from vendors. The discrepancy was discovered during some "preliminary steps" to have the vendors pay by cheque, he said.

The city took "immediate and swift" action on the matter, including reporting it to police, Zegarac said. The employee has been terminated with cause.

An independent forensic accountant is investigating the matter at the city level. Hamilton Police Service's major fraud unit is conducting a criminal investigation. No charges have been laid yet.

The city has undergone a number of internal audits since 2005 to improve its policies and procedures around staff handling cash, Zegarac said. In 2012, there was another review to "reinforce our practices."

It will also take into account the advice of the forensic auditor.

"We'll review the actions and whether we need to review our policies and procedures to protect ourselves going forward," Zegarac said.

Zegarac believes insurance will recoup "a significant portion of the loss," which would alleviate the impact on the tax bill.

City staff are fully co-operating with police, he said.

Earlier this year, the city used video surveillance and GPS records of city vehicles to investigate 31 public works employees for "neglect of duties, time theft and/or breach of trust." It resulted in 29 employees being dismissed.

Coun. Sam Merulla says since then, he's been working with senior staff to establish an accountability office that would deal with matters such as this one. He now wants it to be expedited.

"The bottom line is we caught it," he said. "It shouldn't have taken so long, but at least we're being far more proactive than in the past."