The city of Ottawa and Ottawa police are investigating after the city made a fraudulent $558,000 payment after being "impacted by an illegal action perpetrated" against a city partner.

City Treasurer Wendy Stephanson says staff became aware of a possible irregularity related to a payment made by the city on Monday.

"Upon further investigation by city staff, it was confirmed that the city was impacted by an illegal action perpetrated against a partnering agency," Stephanson said in a memo to council.

"On confirming the fraudulent transaction, staff immediately reported the incident to the city's financial institution, the Ottawa Police and the Auditor General."

Stephanson says the city is working with Ottawa police and its bank to recover the funds, and staff have launched a comprehensive internal investigation.

"The city will continue to cooperate with the police in their investigation into the incident, and with the financial institution to secure and recover any of the funds fraudulently obtained," Stephanson said.

"Staff can confirm that no personal information was compromised or shared by the city of Ottawa."

Stephanson says no further information will be released due to the active police investigation.

In 2019, the city of Ottawa was scammed out of approximately $130,000 in an email scam. The auditor general said the former city treasurer was the victim of a "whaling scam", receiving an email from an address she thought belonged to city manager Steve Kanellakos.