Sunday, April 11, 2010

Clerk steals over half-million dollars from school district -- Cedar Rapids, IA

How do you steal $587,000?

Hindsight is 20-20.

That was Steve Graham’s conclusion when asked how former accounting clerk Jamie May could siphon more than a half-million dollars from the Cedar Rapids school district between 2002 and 2009. Graham is the district’s executive director of business services.

A state audit found that May, who died in November, disguised withdrawals from district accounts as “change requests,” for use when schools have functions that need cash, such as bake sales. She replaced the money she took — between 2002 and 2009 — by depositing payments for student registration, transportation and other fees into the district’s account without recording the payments.

“It is a classic case where the complete lack of segregation of duties would allow someone to do something like that,” said Kevin Den Adel, director of the University of Iowa’s accounting undergraduate program.

State Auditor David Vaudt said May had the authority to collect cash, make deposits and record the balance. No one questioned the numbers.

In fact, district records showed certain fee accounts consistently came in under budget, according to the report. The shortfalls were never investigated. Instead, school officials trimmed the following year’s budget.

Graham said that won’t happen again.

“Everything is on the table,” he said after a news conference last week.

School board members will discuss the state audit findings — which concluded May took at least $587,784 — at Monday night’s board meeting. Superintendent Dave Benson, who started his new job shortly before the embezzlement was discovered, said board input will determine steps the district will take to regain public trust.

Already the district has tightened internal controls. After the theft was discovered in August 2009, the district restructured the accounting department to segregate duties. It hired an internal auditor and an accounting supervisor.

“The person who receives the checks shouldn’t be the person who deposits checks, too,” said John Musso, executive director at Association of School Business Officials International in Virginia.

Vaudt called the district’s response “proactive.” But is it enough?

Musso said embezzlement is a common issue in school districts — even ones with controls in place to spot suspicious action.

“The fact of the matter is, no matter what types of checks and balances you have in place, if somebody wants to (steal), they’re going to do it,” he said.

May, however, had access to the fraud “trifecta” — opportunity, incentive and the ability to rationalize.

In May’s case, the lack of control and oversight gave her opportunity. The incentive was financial, with May using the money to buy high-end electronics and new furniture, according to the Cedar Rapids police investigation.

The rationalization is evident by the amount of money May deposited in her personal bank account. The amounts were small at first and increased over time.

“If you can get away with it in the beginning, you rationalize that you are not going to get caught,” the UI’s Den Adel said.

While there’s no way of knowing why May took the money — she died Nov. 1 of cardiac arrhythmia after battling breast cancer — she could have told herself it was OK because she needed the money or that what she took balanced the work she did. She might have even told herself she’d pay it back eventually.

According to the auditor’s report, May was the only employee involved in the theft. The accounting department reports to Graham. District officials said any disciplinary action taken about the theft is a confidential personnel matter.

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