The Washington Post reports that a former Virginia school board clerk has pleaded guilty to stealing more than US $120,000 from the Montgomery County public schools over a two-year period. Court papers show that the former clerk deposited checks for facility rental and other purposes into her personal bank account.

Lessons Learned

According to The IIA’s International Standards for the Professional Practice of Internal Auditing, internal auditors should consider the fraud risk of business processes — a step that was likely neglected in the case of the former Virginia school board clerk. Because the former clerk cashed rental checks for personal use, clearly the rental process either did not require outstanding receivables to be recorded or enabled the clerk to eliminate outstanding receivables. In either case, this situation points to a serious weakness in the rental process and probable separation of duties issues.

To circumvent this type of fraud, the rental process should separate the rental arrangement from the receipt of payment. It also should include a reconciliation of the rentals and payments. When a rental is arranged, an outstanding receivable should be created, and subsequent payments should be recorded against the outstanding receivables. This measure would allow the manager to ensure that payments were received — and that they were for the correct amounts. The person booking the rentals also should not receive the payments, and a regular report should be run to show all rentals and amounts received. The manager should follow up on all discrepancies.

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