control, and governance
SKIMMING SCHOOL FUNDS
A Santa Rosa, Calif., charter school finance and business manager is facing charges of embezzling nearly US $400,000 to support a prescription narcotics habit, according to an article published in the Press Democrat. Police officials suspect the woman wrote checks for large sums — as much as US $20,000 and $30,000 — to herself, and hid the money through accounting techniques. The investigation was prompted by a tip suggesting that officials look into the manager’s “financial lifestyle.”
During an emergency board meeting, the school’s executive director expressed shock about the alleged embezzlement and said yearly audits always have been “clean.” The sergeant in charge of the investigation confirmed that annual reports never showed any discrepancies, and he said that’s consistent with embezzlement cases.
As a charter, the school not only receives state funds but also receives other grants and donations. Because the suspected loss would represent a significant portion of the annual revenue received by the charter school’s parent organization, a Santa Rosa district official suggested that a key question will be identifying the source of the missing money.
Three factors are constant in most fraud cases, even if the details of the scheme differ: The fraud is a result of poor controls over segregation of duties; it continues until the person is caught; and there are red flags, even when the accounting evidence is cleverly concealed. In the charter school case, the only reason the manager was investigated is because someone reported her “financial lifestyle.”
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