Fiscal Rangers

Comments about the Oct. 23rd Lake County School District Board Meeting

Well, I attended the meeting to see the latest exciting developments in how our $700-million budgeted school district is managed. Remember, this blog focuses on fiscal and management control issues, and not teaching or program issues. Here are some details: - Public Disclosure of Personnel Issues and Unpaid Leave - There was a separate Board "workshop" earlier in the day, where the hearing regarding an HR manager accused of harassment was postponed. You have probably read about it in the papers. My only comment on this process is that the Superintendant put the manager on upaid leave, which I think is the wrong message. Until the due process procedures are completed, the employee hasn't had a chance to provide their side of the story, and the accuser's statements and factual situations have not been explored, so his wages should have been continued. I think the person should have been put on paid leave. As it is, all employees get the message that someone can accuse you of something and managment could immediately terminate your wages without completion of the due process phase. That is not a positive morale builder. Also, it is amazing that the Superintendant and others told details... Read more →

Just When are the Lake County Audit Committee Meetings?

This posting contains two recommendations for the School District regarding Open Meeting Notices for the Audit Committee and other meetings. Florida has an open meetings law, which generally specifies that many meetings by government officials should be open to the public and a notice be posted. So, I have been trying to find where the public can learn about Lake County Audit Committee meetings. That is important because any delays in implementing an effective internal audit function should be known by the public and they should have an opportunity to hear about issues such as budget constraints, lack of facilities, inability to access school district records, etc. - The Audit committee meetings are not posted on the district's website. - They are sometimes included in a weekly press release from the District. But, the press releases are not posted on the website, and the Clerk of the Board will not add local citizens to the email list for them. - Meetings are sometimes (no one will take responsibility for this) posted in an ad in the legal sectio of the newspapers. (Did you know that is where open meeting notices are posted? I didn't.) Again, not on the website. Recommendation... Read more →

Miami-Dade School District $100-million Fraud in 2004

Here is another article on a large fraud hitting a school district - in this case Florida's Miami Dade school district. I will keep posting examples here until I see more support for the internal audit and other management control procedures at the Lake County (FL) School District. This article is from 2004, so I will locate follow up information and post it after this article as I find it. vj =================================================================== Commentary from the Reason Foundation School Reform News June 1, 2004 $100 Million Fraud in Miami-Dade Schools By Lisa Snell Corruption and mismanagement have cost taxpayers more than $100 million, according to a forensic audit of the Miami-Dade County (Florida) School Board conducted at the request of a state oversight board. Independent auditors from Lewis B. Freeman & Partners, who produced the report, recommended the appointment of a special prosecutor and statewide grand jury to investigate the Miami-Dade school district's multibillion-dollar Facilities Construction Department, alleging massive disorganization and waste as well as "probable malfeasance, misfeasance, and potential for fraud." District officials dispute the April 28 Forensic Audit Report and argue the auditors provided no evidence to substantiate their claims. The Freeman auditors respond that the district has refused... Read more →

Another School District Caught Improperly Spending Federal E-rate Funds

We posted an earlier news article about a School District improperly spending federal "e-rate" technology funds, and here is another one: Pomona ( Calif.) Schools Misspend Computer Dollars. The Pomona Unified School District has misspent at least $2.4 million from a taxpayer-funded program to connect schools in low-income areas to the Internet. Despite federal guidelines prohibiting spending e-rate funds for personal lap top computers for teachers, the district purchased 460 such computers. The district purchased 48 servers for Marshall Middle School. Curtis Lee, director of technology for the Walnut Valley Unified School District said, "There's no reason for a middle school to have 48 servers. In a typical school, you may need one to five servers." In addition, invoices showed that Pomona Unified paid hundreds of dollars more than the retail price for the computers. (Inland Valley Daily Bulletin, July 22, 2005.) Read more →

Fraud, Waste & Abuse Reporting Hotlines - An Overview

This is an overview of Fraud, Waste & Abuse Reporting Hotlines, how they are used, examples, and why the Lake County (FL) School District needs one. The District recently implemented an internal audit position which is one of several techniques used by organizations to prevent and detect fraud and mismanagement. Another common technique is to establish a Fraud, Waste & Abuse Reporting Hotline (phone and website) so that employees, vendors, citizens and others can report possible fraud and mismanagement issues with complete confidentiality. I was in Baghdad, Iraq during most of 2004 and all of 2005. I worked periodically with auditors in a special audit group. The US Congress established a Special Inspector General for Iraq Reconstruction ( www.SIGIR.mil ) which had oversight over the $20-billion in reconstruction funds for Iraq. That group, like many Federal agencies, established a Fraud Reporting Hotline (and website) where they received many tips for investigation. Notice that they have a link to their Fraud, Waste & Abuse Hotline on the first page. Additionally, I worked as an advisor to an Iraqi anti-corruption agency called CPI. One of the 7 main initial tasks was to establish a country wide, publicized fraud reporting hotline, including phones... Read more →

Lake County School District Auditor Finally Granted access to Records

Today, the local Daily Commercial in Lake County (FL) had a front page article (below) saying that the Lake County, FL School District Superintendant and staff had finally granted their internal auditor access to District documents and records on the internal computer system. This is one of the indicators of resistance to fiscal oversight that has been noted in the papers that led to the establishment of this blog. Now, we will see if it actually happens. Additionally, note that the article indicates the auditor's office is at the "old" Dabney Elementary School in Leesburg. That building is vacant except for two other people (we understand) and is several miles from the main offices and records of the District. In my 18 years of auditing I have never seen such a situation where the management of a $700-million organization makes their own internal auditor stay in "Siberia". That is another indicator of the resistance by the Superintendant and district in allowing professional fiscal oversight. If I was an Internal Audit Director at a company where a subsidiary treated auditors like that, we would send in several auditors to find what was being hidden. ( I actually had a District manager... Read more →

Chicago School District spends $18-million with minority owned enterprise that WASN"T one.

This is another example of fraud affecting a school district - this one is in that pillar of honesty, Chicago. These examples are posted here to educate readers and encourage staff and elected officials of the Florida Lake County School District to support and implement fiscal and audit controls to prevent possible fraud. In this example, a landscaping firm used a minority owned front firm to obtain over $18-million in business from a school district when the main firm was NOT minority owned. A way to prevent this is to implement strong due diligence processes to ensure all qualifications of a vendor are confirmed (which was apparently never done - possibly because the firm donated funds to politicians). But, after all, this was in Chicago! Notice that the issue was investigated after the District Inspector General received a "tip". This could have been from a formal fraud reporting hotline, which Lake County School District does not have. (Fraud reporting hotlines as a detection and prevention technique are a future subject). I would hate to be a politician that accepted donations from the Landscaping firm. vj Dated Sept. 28, 2006 and from http://www.chicagotribune.com/business/content/education/chi-0609280281sep28,1,6173068.story?coll=chi-education-hed&ctrack=1&cset=true Contract fraud alleged Minority firm a front, school... Read more →

South Carolina School District Technology Instructor Convicted of Federal Mail & Wire Fraud of $468,000

Here is another example of fraud committed by a non-Florida school district staffer. Each of these actual fraud examples are posted here as a "lessons learned" to educate staff and elected officials in the Lake County, FL School District. This is the type of fraud that could occur in the Florida Lake County School District if there is not a strong management and board oversight and internal audit department. Previous news articles indicate a hesitation by elected officials to allow or support full implementation of a strong internal audit and other controls designed to prevent fraud and improve resource management in the District. In this case, the article is a press release from the US Dept. of Justice because the fraudster committed federal mail and wire fraud from her staff position in a South Carolina School District. Notice that she was able to approve sole source contracts without competitive bidding and got more than $468,000. Again, we see that a favorite method of committing fraud is through the contract or procurement process. Also notice that the article says that "11 individuals and 10 companies have been charged as part of the Antitrust Division's ongoing investigation into fraud and anti-competitive conduct... Read more →

Wake County, NC School District $3.8 million Fraud

Below are three of several articles on the conviction and methods related to a $3.8-million school district fraud in Wake County, NC - home of the famous Wake Forest University. Several people went to jail, and they finally created an internal audit department. Notice that another "unexpected consequence" is that the evidence of poor management by the elected officials may result in an upcoming school bond issue being turned down by the voters. Can you guess how the reputation of elected officials was affected by the fraud? I changed certain statements to red, italic so they were not missed. The third article, from March, 2006, describes some specifics of how the fraud took place, quoting a report from a consultant. It said that many fake invoices under $2500 were submitted because they only required one signature. One thing that internal audit departments do to find these situations is do a computerized accounts payable aging report that would show all payments by vendor with a grand total. This would clearly have shown a huge string of small payments to one vendor - but apparently neither the existing finance staff or one internal auditor knew of that technique and did not do... Read more →

Example of $4-million School District Fraud

One of the main ways to educate elected officials and staff on the importance of fiscal controls and internal audit functions is to distribute examples of frauds and fiscal mistakes made by similar agencies. Many times I hear the statement "That can't happen here - we only hire nice people..." which usually means to me they don't manage well. Below is one example where a school district administrator siphoned out $4-million and the School Superintendant took $2-million. ( I assume LI means Long Island, New York). Notice that they mention there had not been any school audits or oversight in two decades. ======================================== from: http://www.topix.net/content/ap/2366847874225308963920874229663080400726 LI administrator sentenced in $11 million school district scam The Associated Press By FRANK ELTMAN September 19, 2006 While the crimes committed here may not have been 'violent A former school administrator was sentenced Tuesday to up to nine years in prison for stealing more than $4 million from her district treasury for cars, vacation homes and ATM withdrawals in a scandal that eventually uncovered $11.2 million in missing funds. State Comptroller Alan Hevesi has referred to the Roslyn school district case as the 'most extraordinary theft' from a school system 'in American history.' His... Read more →

Introduction & Overview

This "LakeCountyFiscalRangers" (aka Lake County Fiscal Rangers ) blog is focused on monitoring and improving the fiscal management and oversight of the $700-million budget Lake County, Florida School District which runs all the schools in Lake County, Florida. I am an experienced corporate internal auditor and anti-corruption specialist who recently moved to Lake County, FL to establish a small residential construction business (not related to schools or consulting). However, news articles about resistance to the new internal audit function, plus my review of School District documents related to fiscal management indicate that fiscal and business management needs improvement, so I established this blog. The initial issue was published news articles on the resistance of the elected superintendant to a new internal audit department established by the separately elected School District Board in the summer of 2006. As an experienced internal auditor, red flags pop up immediately when a organization manager tries to restrict internal auditing from oversight duties, so I started reasearching the issue more deeply. One personal incentive is that I lived in Orange County, CA where the elected County Commissioners ignored published articles in the early 1990's on questionable investment methods used by the elected Treasurer, and he... Read more →