The Canada Revenue Agency says there is no evidence that a $381,000 rebate cheque issued to imprisoned mob boss Nicolo Rizzuto in 2007 was due to fraud, collusion or corruption by its employees.

But the investigation, conducted by the agency's Internal Affairs and Fraud Control Division, did find that an employee had failed to follow established procedures for cheque verification, which contributed to the cheque being issued, the revenue agency said on its website Friday night. 

It added that a "system control weakness" existed at the time the cheque was issued.

Rizzuto was issued the rebate while he was in prison and owed more than $1.5 million in unpaid taxes.The cheque was labelled "income tax refund" and was dated Sept. 13, 2007. 

Nearly two weeks later, Rizzuto's daughter notified the Canada Revenue Agency to say the cheque had been issued in error, the agency said. The cheque was recovered and never cashed.

Although an employee failed to follow proper procedure, the approach taken by the employee was "not unique" to the cheque, the revenue agency said.

"Further, 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 agency said that when the cheque was released, there were no guidelines in place to flag these types of accounts. But it said it has since revised its procedures.