The federal integrity commissioner has found that a Service Canada manager in Manitoba misused public funds and assets.

Mario Dion's report into the wrongdoings, which was released Thursday in Ottawa, finds that the manager sold items from her her personal fitness business to the federal government — including water bottles priced at $80 each.

The same manager hired a close family friend for a job in a satellite office about 200 kilometres away, even though a fully qualified candidate was already living nearby.

And there are also allegations the manager bought two high-definition TVs for personal use, falsified travel claims, and spent public money on massages.

"Gross mismanagement" is how federal integrity commissioner Mario Dion described the employee's actions.

When asked by CBC News if the case surprised him, Dion replied, "I don't know if I would say surprised.

"It's unfortunate that such transactions that were inappropriate were able to take place during such a long period of time," he said."

In an email, a spokesperson for federal Human Resources Minister Diane Finley said the case was referred to the RCMP in December for "thorough investigation."

"We also look forward to further parliamentary oversight on the matter," the spokesperson said in the email.

Public service investigation

Before the integrity commissioner became involved, the Public Service Commission investigated two hiring processes involving the same manager — one in 2007 and another in 2009 — and concluded that errors were made that affected the fairness of the processes.

That probe looked strictly at the matters associated with hiring practices, whereas the investigation by the integrity commissioner had a much broader scope.

The public service investigation, reported by the CBC News I-Team in February, found that in the 2007 job competition, nearly 500 people applied for a citizen service agent position for Service Canada offices in The Pas, Flin Flon, Swan River and Morden.

Two of the successful candidates did not meet education requirements for the job and should have been screened out, according to the commission's investigation.

In addition, one of the two hired candidates was given a job at Service Canada's office in Thompson, even though Thompson was not a location that was advertised in the job posting.

As a result, job hunters in Thompson would never have known a job was available there.

CBC News learned that the manager in question — who has since retired — was found by the Public Service Commission to have acted improperly.

The former manager could not be reached for comment on Thursday. She declined to comment during the I-Team investigation last month.

CBC News has learned she is now working in human resources with a Manitoba university.

1st report from commissioner's office

In his report, Dion called for for tighter financial controls and better training of federal government employees.

"Part of why you train people is to make sure that they fully realize what they do, what's appropriate and what's not appropriate," he said.

"In this case, the prevalence is such that obviously training alone would not have prevented it."

Dion's report about the former Manitoba manager is the first report of wrongdoing tabled in Parliament since the integrity commissioner's office was created in 2007.

Dion's predecessor, Christiane Ouimet, abruptly retired in 2010 amid allegations that she was failing to do her job and was abusive to her staff.

An auditor general report confirmed the allegations, finding that Ouimet dismissed complaints of wrongdoing and reprisals within government without proper investigation.

Groups like the Federal Accountability Initiative for Reform (FAIR) have criticized both commissioners for not doing enough to follow up on complaints of wrongdoing.

"We're glad to see that the integrity commissioner's office has finally found a case of wrongdoing," said David Hutton, FAIR's executive director.

But Hutton added that Dion did not go far enough in his latest report, as he did not name the manager in question or recommend prosecution under the Financial Administration Act.

"The way that whistleblower legislation works is by deterrence," Hutton said. "On that point, this particular case report gets a failing grade, I'm afraid."

Dion said his office is investigating 37 other cases, including 16 allegations of reprisals against whistleblowers.