Our Office has recently issued several reports on instances of criminal activity in which public money has been misused by government employees, resulting in their indictment on felony charges. In addition, the Attorney General’s Office is currently investigating a number of school districts that may have exceeded their express and implied authority by creating and operating foundations or nonprofit corporations, thereby misusing district money, supplies, equipment, and personnel.
This alert outlines how governing bodies can help protect public monies by exercising appropriate oversight. Specifically, public officials should ensure that they do not:
Violate the public monies gift clause of the Arizona Constitution;
Incur costs involving private organizations that exceed the public benefit; and
Commingle public monies with private monies.
Putting effective controls in place can help ensure compliance with state laws and help prevent fraud, waste, and abuse.
A skimming scheme occurs when cash receipts are stolen from an organization before the cash is recorded in its accounting records. Since there is no official record that the cash was received, this type of fraud is very difficult to detect. This fraud alert addresses internal controls and recommends controls that can help prevent fraud, waste, and abuse.
Billing schemes occur when employees cause their employer to issue a payment for an illegitimate or overstated charge. The schemes are especially difficult to detect because the payments get recorded as if they were a legitimate business expense. Two examples of common schemes are:
An employee creates a fictitious company and bills the organization for goods or services never received or rendered.
An employee purchases personal items and submits the invoices to the organization for payment.
This fraud alert addresses internal controls and recommends controls that can help prevent fraud, waste, and abuse.
As part of its responsibility to prevent and detect fraud, the Yucca Elementary School District (District) administration took appropriate action by reporting a fraud allegation to our Office. Consequently, we conducted an investigation revealing that from November 2010 to January 2013, Shannon Cavalliere, former district business manager, may have violated state laws related to theft and misuse of public monies when she embezzled $4,361. Specifically, Ms. Cavalliere used the District’s credit and debit cards 69 times for personal purchases and cash withdrawals totaling $3,891. Additionally, Ms. Cavalliere improperly paid herself $470 for mileage while also using the District’s credit card at service stations for the same trips. Ms. Cavalliere embezzled and misused these public monies by taking advantage of the District’s lack of oversight and inadequate controls over the District’s credit card transactions and a bank account that the District erroneously authorized.
On February 19, 2015, the Mohave County Attorney’s Office presented evidence of Ms. Cavalliere’s alleged crimes to the Mohave County Grand Jury, resulting in her indictment on three felony counts.
As part of its responsibility to prevent and detect fraud, the Glendale Union High School District (District) took appropriate action by reporting a fraud allegation to our Office. Consequently, we conducted an investigation revealing that from November 2008 to April 2010, Shannon May, former bookstore manager at Independence High School, may have violated state laws related to theft, misuse of public monies, fraud schemes, and forgery when she embezzled $70,382 of bookstore receipts that should have benefited students. Specifically, Ms. May deposited in district bank accounts only a portion of receipts collected at the bookstore. Although there were no records to indicate how she used the more than $70,000 she embezzled, Ms. May deposited in her own bank accounts $38,210 of cash. Ms. May abused her authority as the bookstore manager and took advantage of the District’s lack of oversight and inadequate controls over bookstore receipts.
On February 18, 2015, the Arizona Attorney General’s Office presented evidence of Ms. May’s alleged crimes to the State Grand Jury, resulting in her indictment on five felony counts.
As part of its responsibility to prevent and detect fraud, the Tolleson Union High School District (District) administration took appropriate action by reporting a fraud allegation to our Office. Consequently, we conducted an investigation, which revealed that from July 2009 to September 2011, Jamie Fimbres, former principal’s administrative assistant for Sierra Linda High School (SLHS), may have violated state laws related to theft, misuse of public monies, and fraud schemes when she embezzled $10,521. Specifically, Ms. Fimbres personally used public monies she deposited in her personal checking account and in a private bank account that SLHS officials erroneously authorized. These officials relied on incorrect instruction from former district administrators that they should account for certain vending machine revenues outside of the District’s accounts. Regardless, Ms. Fimbres used these monies, along with a school facility rental payment, for her personal benefit.
On December 15, 2014, the Arizona Attorney General’s Office presented evidence of Ms. Fimbres’ alleged crimes to the State Grand Jury, resulting in her indictment on three felony counts.
Throughout the last 25 years, our Office has issued numerous reports on fraud involving Arizona government employees from universities, community college districts, school districts, special taxing districts, counties, and state agencies. Understanding why and how employees commit fraud is crucial to preventing fraud from occurring. The fraud triangle summarizes three elements that are present when an individual commits fraud: opportunity, pressure, and rationalization. Public officials can help prevent fraud by diminishing any one of the triangle’s three elements and, ideally, taking steps to diminish all three elements. This alert, first in a three-part series, will focus on the opportunity element and outline how public officials can reduce dishonest employees’ opportunities to steal and increase their likelihood of getting caught by instituting appropriate internal controls and oversight and establishing a culture of accountability.
As part of their responsibility to prevent and detect fraud, the district administrators took appropriate action by reporting a fraud allegation to a law enforcement agency that referred the complaint to our Office. We conducted an investigation, revealing that from February to April 2013, Kelly Cozad, former district bookkeeper, may have violated state laws related to theft, fraudulent schemes, computer tampering, forgery, and misuse of public monies when she embezzled $30,922. Specifically, Ms. Cozad issued 23 unauthorized district checks with forged signatures totaling $22,016 to herself and her friend Neville McCulloch. They cashed some checks and deposited the rest in their respective personal accounts. Additionally, Ms. Cozad concealed some of her theft by misdirecting into the account from which she embezzled an $8,386 deposit that should have gone into a separate district fund. She also unlawfully deposited to her personal account a retired employee’s $520 insurance subsidy check.
On August 3, 2015, the Attorney General’s Office presented evidence of Ms. Cozad’s and Mr. McCulloch’s alleged crimes to the State Grand Jury, resulting in her indictment on ten felony counts and his indictment on one felony count.
Throughout the last 25 years, our Office has issued numerous reports on fraud involving Arizona government employees from universities, community college districts, school districts, special taxing districts, counties, and state agencies. Understanding why and how employees commit fraud is crucial to preventing it. The fraud triangle summarizes three elements that are present when an individual commits fraud: opportunity, pressure, and rationalization. Public officials can help prevent fraud by diminishing any one of the triangle’s three elements and, ideally, taking steps to diminish all three elements. This alert, the second in a three-part series, will focus on the pressure element and outline how public officials can identify employee pressures to steal and then take timely action to prevent fraud when they notice troublesome changes in an employee’s behavior.
As part of its responsibility to prevent and detect fraud, the Tolleson Union High School District (District) administrators took appropriate action by reporting a fraud allegation to our Office. Consequently, we conducted an investigation revealing that from July 2007 to June 2011, Brenda Busse, former bookstore manager at Tolleson Union High School (TUHS), may have violated state laws related to theft, misuse of public monies, and fraudulent schemes when she embezzled $120,708 of TUHS bookstore receipts. Specifically, Ms. Busse took customer cash payments made at the TUHS bookstore that should have benefited the students and manipulated computer data in the District’s receipt-processing system 374 times to help conceal her actions. Although records are not available to specifically show how the embezzled money was spent, nearly $18,000 cash was deposited into Ms. Busse’s bank account from August 2009 through her last day of employment, July 13, 2011. This cash was commingled with other personal monies and then used mostly for cash withdrawals, including withdrawals at casinos, as well as for retail, living, and other personal expenses. In addition, Ms. Busse gambled $73,474 of cash at a local casino during this same time period.
Ms. Busse embezzled and misused public monies by both abusing her authority as the TUHS bookstore manager and by taking advantage of inadequate controls over collecting and depositing district monies. Additionally, former TUHS and district officials failed to exercise an appropriate level of oversight over Ms. Busse’s activities.
On December 14, 2015, the Arizona Attorney General’s Office presented evidence of Ms. Busse’s alleged crimes to the State Grand Jury, resulting in her indictment on three felony counts.
Throughout the last 25 years, our Office has issued numerous reports on fraud involving Arizona government employees from universities, community college districts, school districts, special taxing districts, counties, and state agencies. Understanding why and how employees commit fraud is crucial to preventing it. As discussed in the prior Fraud Prevention Alerts—Fraud Triangle Part I: Opportunity and Fraud Triangle Part II: Pressure, there are three elements that are present when an individual commits fraud: opportunity, pressure, and rationalization. Public officials can help prevent fraud by diminishing any one of the triangle’s three elements and, ideally, taking steps to diminish all three elements. This alert, the last in a three-part series, will focus on the rationalization element and outline how public officials can minimize an employee’s rationalization to commit fraud by establishing a strong ethical climate.