control, and governance
EVEN SEWAGE IS NOT IMMUNE TO FRAUD
The Daily Item reports that a former clerk for a Pennsylvania sewer authority has been sentenced to state prison for embezzling nearly US $475,000 by forging the authority president and treasurer’s signatures and for neglecting to file approximately US $420,000 in payroll taxes for the authority’s employees. The clerk was able to conceal the fraud by creating a fake audit report using a local accountant’s letterhead. The fraud went undetected for nine years until a medical problem forced the clerk to take leave.
This fraud comprises all three elements of the fraud triangle:
The case also demonstrates how a small fraud can grow and how it can become easier to commit subsequent fraudulent acts. It is also interesting to note that the former clerk used a fake audit to cover up the theft. While this shows the perceived value of the audit, how are audits normally performed and received by the sewer authority’s senior management? Is there an audit committee and an approved annual audit plan? Apparently, there was no auditor on site, no initial or exit briefings, and no presentation of findings or request for management action plans — just an audit report. The fact that management accepted a fake audit report is disturbing and indicative of additional problems.
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