Tuesday, November 12, 2013

Fraud Raised it's Head Again in Public Schools

We see continuing evidence of fraud in all types of organization including not for profits. corporations, government and yes, even in public schools. Today in the Metro section of the Washington Post there is an article  Fairfax school officials charged with embezzlement and money laundering. As a former Director of Internal Audit for Fairfax County Public Schools I repeatedly reported to the Superintendent about the lack of internal controls over educational staff. This particular embezzlement involved falsifying timesheets for personal gain. The Virginia State Department of Education requires public schools to regularly audit school activity funds administered by principals. As part of that audit the independent contracted CPA firm must conduct an evaluation of internal controls. During my tenure I reviewed the reports issued by the contracted CPA firm and found that control findings (comments) repeated from year to year with no changes or improvements. Internal auditors in public schools have a difficult task in that educators rarely place a high priority on fiscal oversight. Additionally there is a reluctance on the part of public officials to broadcast when fraud occurs as well as not pursuing criminal action or recovery of the ill-gotten gains.

The statement made by a school representative reinforces and sets the stage for leniency on the part of public officials when fraud is found:

Calling the matter tragic, Sandy Evans, the School Board member for Poe’s area, said Swansbrough “has been terrific” and was a warm, well-liked principal who “cares deeply” about Poe’s students. Evans said she wanted to hear the principal’s side.

Here again is an opportunity to report the embezzlement by adding the amounts stolen to the fraudsters tax reporting requirement by issuing a 1099 Misc. 

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