Fiscal Rangers

Philadelpia Area School District SECOND Payroll Manager "Fooled Auditors for Years" and skims over $500,000

A Philadelphia area School District payroll manager siphoned the funds out of a unwatched bank account containing payments from retired employees for insurance costs. The article below says she "fooled auditors" for years, making payments to herself using a forged check signature. She took over $500,000 and spent it on gambling trips. The problem was uncovered by the bank, and not staff or auditors. BUT, she is the SECOND school district employee in Pennsylvania's Delaware County to embezzle funds. As described below, another employee took $287,000 from "lunch money" funds and also spent it on gambling. From an accounting perspective, it seems the following standard accounting controls were NOT used: - Reconciliation of ALL bank accounts by separate individuals, with sampling of analysis of payment recipients. - Lack of follow in notifying the bank when an approver for the checking account left the District. - Budgeting and cash controls must have been lax, because we assume the bank account collections should have been used for County expenses, rather than left without action over several years. If someone actually was supposed to use the collected funds to offset District insurance expenses, they would have noticed missing funds if they had been... Read more →

Arizona County Manager Convicted of $630,000 Fraud

This conviction happened in Pinal County, Arizona in March, 2007 for fraud and embezzlement that started in 2000. It seems the County manager used his authority starting in 2000 to take County fee payment checks and deposit them in a separate bank account he established, and spent the funds on himself. He used his authority to intimidate staff and ignored requests to close the bogus account. He has to pay the funds back and may be spending up to 51 YEARS in prison. Read the story for more... this guy was clearly a real con artist who thought he wouldn't be caught. A good quote was from the attorney hired to investigate the fraud: He said the case should send a message "to every government official: If they misuse public funds, they will be prosecuted." vj (Note: There was no mention of internal or external auditors - the case was discovered and expanded when the Sherrif's department investigated the County Manager's mis-use of $21,000 of county funds to buy personal firearms.) ================================================ Here is a year end overview of the case, followed by an original article from March, 2007 with more details. Pinal (Arizona) County manager is sentenced In March,... Read more →

San Diego Charter School Staff Embezzle Millions (2005)

This is a 2005 entry from a blog includes an Associated Press articlew about a private Charter School Management firm in California where the management siphoned funds off for excess salaries, inflated purchase payments for supplies to personally owned "side" companies, etc. California shut down four charter schools run by them and left about 10,000 students to find another school. It seems charter schools is another k-12 quagmire susceptible to corruption. This article has a good quote: A California state law that took effect last year gives the school districts that authorize charter schools more control, but critics say even more oversight is needed. vj ================================================== from http://lizditz.typepad.com/i_speak_of_dreams/2005/04/waste_fraud_and.html Friday, April 15, 2005 Waste, Fraud, and Self-Enrichment In Charter Schools California Charter Academy a good deal for one family. Audit: Calif. school misspent millions By Jennifer Coleman, Associated Press Writer | April 14, 2005 SACRAMENTO, Calif. -- Operators of California's biggest charter school system pocketed much of the $139 million the state gave them, spending a fortune on fat salaries for family members, side businesses and overpriced textbooks, according to a state audit issued Thursday. The audit paints a damning picture of the California Charter Academy -- four charter schools that... Read more →

El Paso County & School District Bribery & Fraud Convictions Increase

Finally, we found LOTS of details on all the School District and County bribery and fraud cases in El Paso, TX. Here they are. Two Bear Stearns Investment bankers just pleaded guilty to bribery, which triggered the long article below. Read and learn about how local governments can become corrupt... it also appears that Bear Stearns didn't have an aggressive ethics policy for their representatives. vj ====================================== from http://www.elpasotimes.com/news/ci_7784203 Bankers plead guilty to fraud, bribery in FBI probe By Ramon Bracamontes and Tammy Fonce-Olivas / El Paso Times Article Launched: 12/22/2007 12:00:00 AM MST # Read all FBI public corruption stories Two investment bankers who were financial advisers to almost every government entity in El Paso pleaded guilty Friday to fraud and bribery charges, increasing to six the number of people who have been convicted in the ongoing public corruption investigation. Roberto Gerardo "Bobby" Ruiz pleaded guilty to four counts combined of conspiracy to commit mail fraud, wire fraud and a scheme to bribe elected officials. He is the former managing director for the Bear Stearns Cos. office in Dallas. Christopher Chol-Su Pak, who was known in El Paso as Chris Pak, pleaded guilty to engaging in a scheme to... Read more →

School District in India uses Sole Source food purchase that sickens kids

OK, so this blog seems hard on School District managements, especially the ones that lose over $500,000. But, if you were in India, it could be worse as the article below describes. It seems a school district made a sole source contract for "dal", a food issued to students for lunch, and the quality of the dal was so bad it made lots of kids sick. But, the supplier wasn't investigated because he had ties to a regional Minister. And, complaints by a Parents organization were ignored. So, they have bribery, sole sourcing, political coverups and upset citizens all in one district. My favorite quote: "The quality test report of the supplied dal has been fudged." vj ====================================== from the Statesman.com in India http://www.thestatesman.net/page.news.php?clid=9&theme=&usrsess=1&id=181882 (This is a rather rough translated version, so go with the flow...) No more dal in schools... Statesman News Service KENDRAPARA, Dec. 21: The alleged supply of sub standard and worm-infested dal for the free mid-day meal of the children in government run schools and toddlers in ICDS centres has triggered a simmering controversy with reports of children falling sick pouring in from across the coastal district. Even as allegations of officials concerned being gained over... Read more →

Bali & Al Gore's Global Warming "Facts" Disputed by 400 Scientists

This blog is mostly about fiscal prudence by government agencies, but mis-representing facts is also an issue that needs attention. I don't like politicians or organizations that mis-represent facts to push an agenda. Recently, there was a huge conference on global warming in Bali. And everyone has heard about Al Gore's saying Doomsday is coming and the world's icecaps will melt... But, here is the other side - a Senate minority report that was just issued listing 400 scientists who disagree with those statements. And, the writer makes the point that Al Gore is now associated, and will make lots of money from the environment issue. He recently joined a major venture capital firm establishing investments in "green" companies, and Al said he wouldn't accept a salary. But, as disclosed in other articles, he did NOT turn down a share of all the profits that the partners in the venture firm, including himself, will make. vj ============================================== from Investor's Business Daily - posted at: http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-21855031.htm Global Con-sensus December 21, 2007: 08:05 PM EST Dec. 24, 2007 (Investor's Business Daily delivered by Newstex) -- Climate Change: A Senate minority report lists 400 reputable scientists who think the only melting ice we... Read more →

South Carolina School District Employee Benefits data STOLEN by Internet Hackers

A South Carolina School District's computer system was hacked and personal data including social security numbers of "hundreds" of district employees was STOLEN by the hackers who installed some "malicious software" on a computer in the employee benefits department. The incident was NOT discovered by the District staff, but by Federal investigators monitoring suspicious traffic on the internet. Additionally, the SAME school district was found in 2006 to be selling many older student computers without wiping the hard drives clean, and buyers reported finding personal employee and student data on them. That problem resulted in the District being sued and settling out of court. (See the second article below.) THEN, see the THIRD article below that further discusses this recent event and says the IT department earlier used an internet student portal where a parent reported she could see student info of other students, and the portal was shut down for two weeks until security was "beefed up". There are no details how the "malicious" program was installed on a benefits department computer, but clearly either anti-virus software was not working, or an employee somehow installed the program, probably without knowing it. One way is to use a memory card... Read more →

Auditor says Lee County, FL Schools at high risk for fraud

I recently posted an article about check scams in Tulsa that cost them over $500,000. Here is a long article describing more how it could happen in Lee County, FL. It seems the Lee County Internal Auditor left the State, but said there was a big risk that poor controls over vendor files used for authorizing payments to vendors could let someone change a vendor's address, or create a fictional vendor, then initiate a process that would issue a check to the fictional vendor. This article gives good detail on some of the risks when government agencies do not pay attention to standard accounting control and risk reduction processes. In this case, they apparently don't review and control the massive vendor database they have. The staff also apparently did not retain documentation on changes made to the vendor file. None of the quotes by the accounting management were detailed enough for me to determine if they were valid. Another War Story related to check scams: An IT computer operator used his access to the accounts payable software to issue several payables checks to himself in the 1970's for about $24,000 which he used as down payment on a house in... Read more →

Topeka, KS School District faces court battle over 2003 $515,000 scam

It seems in 2001-20033, the Topeka School district didn't use very good controls over bank account reconciliations, ignored auditor reports about the weaknesses, and scammers figured how to write 17 fraudulent checks on the School District's checking account for $515,900. Now they are in court trying to sue the bank for processing the checks, even though both the bank and the school district lacked controls to detect the scams. They also sued their auditors, who actually pointed out lack of accounting controls over check account reconciliation procedures. In this case, it partly paid to ignore the auditors, since the District got the auditors in 2004 to cough up $163,000 and provide litigation support. This is a clear example where government administrators were apparently provided reports on accounting control weaknesses which they ignored and it cost them quite a bit. What I can't figure out is why the general director of fiscal services still has a job there if he ignored the audit findings and controls were so weak the scammers got away with over $500,000 without being noticed OVER A TWO YEAR PERIOD. vj PS: My personal War Story: While in college, I worked as a night computer auditor at... Read more →

Business Week Article about Predicting Sub-Prime Mortgage Collapse

This is a good overview opinion article on how the sub-prime mortgage investment program collapse should have been predictable (and was by a few)... it gives good background on the mess... My favorite quote for consumers is: "We (the sellers of risky investments) allow naive consumers to make highly complex financial decisions under the influence of sophisticated sellers. " vj ======================================== from BusinessWeek.com at: http://www.businessweek.com/managing/content/dec2007/ca20071213_764745_page_2.htm Viewpoint December 17, 2007, 4:01PM EST text size: TT Subprime: A Predictable Surprise Michael Watkins on how the subprime crisis provides another textbook example of the theory of predictable surprises and how to prevent the disasters they bring by Michael Watkins In 2004, my colleague Max Bazerman and I published Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them. We defined "predictable surprises" as problems that (1) at least some people are aware of, (2) are getting worse over time, and (3) are likely to explode into a crisis eventually but are not prioritized by key decision-makers or have not elicited a response fast enough to prevent severe damage. We supported our thesis with detailed analyses of the September 11 attacks, the collapse of Enron, and the war in Iraq.... Read more →

Florida State BUNGLES Hurricane Disaster Center

Below is the Orlando Sentinel's story about how the Florida legislature approved $151-million to buy large generators, build a disaster center warehouse in Orlando, but bungled and mis-spent the money. I was in Iraq for 23 months, and this situation reminds me of what we encountered with the way the Iraqis work. Read the article, then return to this list of "lessons learned". If the article makes you mad about Florida government waste, then contact your Florida legislator or Senator. The "responsible" department is the Florida State Dept. of Emergency Management (i.e. FDEMA, like FEMA), run by Craig Fugate. Even the article writer, Aaron Deslatte, said "The generators, however, have been a first-class foul-up." I have emailed requests for responses to Florida State Senatory Carey Baker and State Rep. Alan Hays, and will post their comments here when received. Below is the Fiscal Ranger's list of FDEMA Lessons to be Learned, based upon our analysis of the facts in the article: - This was a new program, and the legislature should have had an oversight specialist participating in the program to ensure it was set up right, but they didn't. In some businesses, internal auditors will participate in planning sessions... Read more →

Today is County Commission Vote on School Impact Fees

Here is a Fiscal Ranger Hunting for Government waste... Results - The County Commission voted to use the lower of two increases - $9324 for single family homes (up from existing $7k). The commission was deadlocked 2 to 2 on the higher impact fee of $14k which included a component for interest charges on financing of new schools. I was at the meeting, and have recorded the 3 hours of hearings and will post some details from both sides (increase and no increase) in a few days. I also decided to establish a formal Fiscal Rangers group, and now have a website www.FiscalRangers.com - by late December I should have more info on it. I have also created a flyer seeking registered Republicans to sign up for email notices of a formation meeting in January. VJ Read more →

Update on Crash of Florida Investment Pool

This is an update of my Dec. 29 posting about the crashing short term investment fund run by Florida State for local governments. It seems a lot of agencies didn't get out, and now they are being asked to take 90 cents of each dollar invested if they pull their funds out. Guess what - they now aren't so trusting of the State. Just like my comments about California's Orange County's similar $2-billion loss, the Florida agencies will go through a whole long process of talks and negotiations just trying to get 100% of their fund balances back. Even the Wall Street Journal article below discusses the Orange County 1994 bankruptcy, and explains how the new sub-prime investments were risky, but qualified for higher investment ratings so government agencies could again buy them. Below are some articles - this subject is now showing up as a major topic in the "business" section of Google news, and listed 53 articles on the subject. Meanwhile, the Daily Commercial did a good job of calling most Lake County government agencies to see who still had money in the State Fund. The City of Tavares is one of them. And, here are some juicy... Read more →