For the year ended December 31, 2018, we issued 5 financial investigations that led to prosecuting agencies obtaining 38 criminal charges against 6 individuals for losses totaling $1,033,060. These charges related to theft, misuse of public monies, fraudulent schemes, conflict of interest, money laundering, assisting a criminal syndicate, and conspiracy. Further, 6 individuals previously charged as a result of our financial investigations pleaded guilty in 2018 to charges related to misuse of public monies, fraudulent schemes, forgery, conflict of interest, conspiracy, illegally conducting an enterprise, and aid in preparing a false tax document. These individuals either stipulated to or were sentenced for up to 2.5 years of incarceration, 10 years of probation, 160 hours of community service, and $229,830 in restitution and fines.
During our fiscal year 2016 financial audit of Maricopa County, we noted a questionable transaction by Dexter Thomas, former director of support services for the Maricopa County Justice Courts Administration, and made further inquiries of management, who informed us of possible financial misconduct by Mr. Thomas. Our investigation revealed that from February through September 2015, Mr. Thomas allegedly falsified 5 county travel expense forms and received $1,296 he was not entitled to, in addition to using his county purchasing card to pay for 5 personal purchases totaling $1,135. We have submitted our report to the Maricopa County Attorney’s Office, which on October 24, 2018, presented evidence to the Maricopa County Superior Court Grand Jury. The action resulted in Mr. Thomas’ indictment on 4 felony counts related to theft, misuse of public monies, and fraudulent schemes.
As part of its responsibility to prevent and detect fraud, the Pima County Joint Technical Education District (District) took appropriate action and reported suspected fraud to the Pima County Sheriff’s Office, which requested that the Office of the Auditor General investigate allegations of financial misconduct by a former District account services manager. Our investigation revealed that from March through August 2016, the employee failed to deposit in District accounts $12,321 of cash he received that was collected from District students, parents, and other individuals. He also manipulated District records and may have forged a District deposit form to conceal his actions. We have submitted our report to the Arizona Attorney General’s Office for appropriate action.
We received an allegation of financial misconduct by Suzanne Perkins, former office administrator and governing board clerk at Thunderbird Irrigation Water Delivery District of Pinal County No. 2 (District). Our investigation revealed that from March 2006 through October 2012, Ms. Perkins allegedly issued District warrants, many with at least one forged signature, for personal purposes totaling $278,371. Specifically, Ms. Perkins paid for $172,569 worth of personal credit card, District credit card, and district line of credit charges and issued warrants totaling $105,802 payable to her family members that were deposited or endorsed to her and her husband’s joint personal checking account. We have submitted our report to the Pinal County Attorney’s Office, which on February 27, 2019, presented evidence to the Pinal County Superior Court Grand Jury. The action resulted in Ms. Perkins’ indictment on 9 felony counts related to theft, misuse of public monies, fraudulent schemes, and forgery.
As presented in our previous 2 Fraud Prevention Alerts, using risk-based assessments and data analytic techniques to identify trends, patterns, anomalies, and abnormal relationships in data can be an effective anti-fraud control. Data analytic techniques can be separated into 3 categories for practical applications: basic, statistical, and advanced. This alert, the third in a 4-part series, focuses on the practical applications for statistical techniques and describes how using these techniques on an organizations’ data and investigating associated findings can help public officials identify fraudulent activity before it becomes significant.
We received information that some government entities’ computer systems and data have been encrypted and made inaccessible by ransomware. This alert addresses the growing threat of ransomware. Specifically, this alert describes IT standards and best practices to protect against ransomware and steps entities should take if a ransomware attack were to occur.
As part of its responsibility to prevent and detect fraud, the Arizona State Board of Technical Registration (Board) took appropriate action by reporting a fraud allegation to us. Our investigation revealed that from November through December 2017, Travis Holbrook, former administrative services officer, may have embezzled $1,008 of cash payments Board customers made for their licensure and renewal fees. Mr. Holbrook failed to deposit these payments and manipulated deposit-related information in the Board’s accounting software to conceal his actions. We have submitted our report to the Arizona Attorney General’s Office, which on July 29, 2019, presented evidence to the State Grand Jury. The action resulted in Mr. Holbrook’s indictment on 6 felony counts related to fraudulent schemes and computer tampering.
As part of its responsibility to prevent and detect fraud, Valley Academy for Career and Technical Education (VACTE) officials took appropriate action by reporting a fraud allegation to us. Our investigation revealed that from June 2015 through March 2016, Celestia Ziemkowski, former business manager, may have embezzled VACTE monies when she issued 5 unauthorized warrants totaling $19,851 for her personal purposes and used a VACTE credit card to make personal purchases totaling $10,746. Ms. Ziemkowski may have also falsified VACTE documents and information in VACTE’s accounting software and Governing Board packets to conceal her actions. We have submitted our report to the Arizona Attorney General’s Office, which on June 24, 2019, presented evidence to the State Grand Jury. The action resulted in Ms. Ziemkowski’s indictment on 19 felony counts related to theft, misuse of public monies, fraudulent schemes, computer tampering, and forgery.
As part of their responsibility to prevent and detect fraud, Ray Unified School District (District) officials took appropriate action by reporting to us an allegation of financial misconduct by former business manager Amanda Holcomb (aka Amanda Kelley). Our investigation revealed that from July 2015 through January 2018, Ms. Holcomb may have embezzled $38,333 from the District and $900 from a nonprofit youth sports organization she was associated with when she used their monies for her own personal purposes. Additionally, Ms. Holcomb may have falsified District records to help conceal her actions. We have submitted our report to the Arizona Attorney General’s Office, which on November 25, 2019, presented evidence to the State Grand Jury. The action resulted in Ms. Holcomb’s indictment on 19 felony counts related to theft, misuse of public monies, fraudulent schemes, and computer tampering, and 2 misdemeanor theft counts.
Annual financial and compliance reports: State and federal laws require Arizona community college districts to receive annual financial and compliance audits, resulting in these required reports:
The annual financial report includes the auditors’ opinion on the reported financial information’s reliability. Auditors are also required to report on internal control and compliance over financial reporting, typically included in the single audit report but may be in a separate document.
The single audit report includes the auditors’ opinion on compliance with federal program requirements and on the reliability of the federal expenditure schedule. It also includes the auditors’ report on internal control and compliance over federal program requirements and any findings auditors reported.
Our Highlights summarize these reports.
Expenditure limitation report: State laws also require Arizona community college districts to issue an annual budgeted expenditure limitation report examined by auditors. This report includes the auditors’ opinion on the reported information’s reliability and the district’s chief financial officer’s certification of compliance with the State’s requirements. Once completed, this report will be available here under additional links.
As presented in previous Fraud Prevention Alerts, using risk-based assessments and data analytic techniques to identify trends, patterns, anomalies, and abnormal relationships in data can be an effective anti-fraud control. Data analytic techniques can be separated into 3 categories for practical applications: basic, statistical, and advanced. This final alert in our 4-part series focuses on advanced analytical techniques and describes how using these techniques on an organization’s data and investigating associated findings can help public officials identify fraudulent activity before it becomes significant.
For the year ended December 31, 2019, we issued 6 financial investigations that led to prosecuting agencies obtaining 65 criminal charges against 6 individuals for losses totaling $363,961. These charges related to misuse of public monies, fraudulent schemes, theft, computer tampering, and forgery. Further, 6 individuals previously charged as a result of our financial investigations pleaded guilty in 2019 to misuse of public monies, fraudulent schemes and theft, and/or were sentenced to a combined total of 12.75 years of incarceration, 26.5 years of probation, and ordered to pay $1,095,298 in restitution and fines.
According to the Association of Certified Fraud Examiners, Inc., nonpayroll disbursement frauds related to billing schemes, check tampering, false expense reimbursements, and illicit register disbursements account for 62 percent of occupational fraud schemes in the United States and Canada. Similarly, during the last 5 years we have identified public money losses in Arizona governments totaling over $4 million due to these types of disbursement fraud schemes. The longer a fraud remains undetected, the greater the financial losses. This alert outlines how certain Arizona disbursement frauds occurred and what actions management can take to deter and detect them.
As part of their responsibility to prevent and detect fraud, Joseph City Unified School District (District) officials took appropriate action by reporting to us an allegation of financial misconduct by former high school attendance secretary Tonnie Pugh. Our investigation revealed that from July 2011 through January 2018, Ms. Pugh may have embezzled $40,436 from the District when she failed to deposit cash receipts and admittedly “borrowed” the money for her personal use. Additionally, Ms. Pugh may have falsified District records to help conceal her actions. We have submitted our report to the Arizona Attorney General’s Office, which on November 2, 2020, presented evidence to the State Grand Jury. The action resulted in Ms. Pugh’s indictment on 3 felony counts related to theft, misuse of public monies, and fraudulent schemes.
As part of their responsibility to prevent and detect fraud, Coconino County officials took appropriate action by reporting to us an allegation of financial misconduct by Jeff Lee, former Public Health Emergency Preparedness program manager II. Our investigation revealed that from July 2013 through April 2017, Mr. Lee allegedly used his Coconino County purchasing card to make 237 personal purchases totaling $82,550, recording false transaction descriptions in Coconino County’s accounting software to help conceal his actions. Mr. Lee allegedly continued this unlawful practice at Navajo County where he was hired as Public Health Services health director in April 2017. Navajo County officials determined that from August 2017 through March 2020, Mr. Lee used his Navajo County purchasing card to make 135 purchases totaling $9,148 that lacked supporting and/or public purpose documentation, and they requested and received reimbursement from him. Of those 135 Navajo County purchases, we determined Mr. Lee allegedly recorded false information in Navajo County’s accounting software for 6 personal purchases totaling $1,762, helping to conceal his actions. We have submitted our report to the Arizona Attorney General’s Office, which on December 15, 2020, presented evidence to the State Grand Jury. The action resulted in Mr. Lee’s indictment on 16 felony counts related to theft, misuse of public monies, and fraudulent schemes.
For the year ended December 31, 2020, we issued 2 financial investigations that led to prosecuting agencies obtaining 19 criminal charges against 2 individuals for losses totaling $124,748. These charges related to theft, misuse of public monies, and fraudulent schemes. Further, 5 individuals previously charged as a result of our financial investigations pleaded guilty in 2020 to misuse of public monies, theft, conspiracy theft, fraudulent schemes, solicitation to commit fraudulent schemes, attempt to commit fraudulent schemes, forgery, and money laundering. These individuals were sentenced to a combined total of 9.33 years of incarceration, 36 years of probation, 280 hours of community service, and were ordered to pay $1,179,101 in restitution and fines.
The Arizona Attorney General’s Office requested our assistance with its investigation of Higley Unified School District’s (District) practices related to having 2 new schools built in 2012. The investigation identified that between August 2014 and April 2016, former District superintendent Dr. Angela Birdwell received $62,500 from 2 District vendors, and her acquaintance, Kay Hartwell Hunnicutt, received $43,000 from 1 District vendor without either of them claiming these monies as income on their respective State income tax returns. The investigation concluded that Dr. Birdwell had participated in certain District decisions involving these vendors and failed to disclose a substantial interest in connection with such decisions. In March 2023, Ms. Hartwell Hunnicutt pleaded guilty to 1 misdemeanor count related to preparing a false return, was placed on 30 days probation, and ordered to pay a $2,500 fine. In September 2024, Dr. Birdwell pleaded guilty to 1 misdemeanor count related to purchase of appointment to office and agreed to file amended tax returns and pay any outstanding tax, fines or penalties due to the Arizona Department of Revenue. She was placed on 6 months’ probation and ordered to pay a $2,750 fine.
As part of their responsibility to prevent and detect fraud, Gadsden Elementary School District (District) officials took appropriate action by reporting to us alleged financial misconduct by former payroll specialist Carolina Carrazco. Our investigation revealed that from October 2017 through August 2019, Ms. Carrazco may have altered the data in the District’s payroll system 4 times to either stop her payroll deductions of health insurance premiums totaling $7,791 while still maintaining District-provided health insurance, or to conceal her actions. Additionally, by these same system-altering actions, Ms. Carrazco prevented the related employer and employee health insurance premiums totaling $20,439 from being paid to a District trust account for their self-insurance plan costs. We submitted our report to the Arizona Attorney General’s Office, which on August 9, 2021, presented evidence to the State Grand Jury. The action resulted in Ms. Carrazco’s indictment on 7 felony counts related to theft, misuse of public monies, fraudulent schemes, and computer tampering.
As part of their responsibility to prevent and detect fraud, Santa Cruz County officials took appropriate action by reporting to us alleged financial misconduct at the Sheriff’s Office. Our investigation revealed that from June 2013 through September 2018, the former sheriff and captain may have violated State laws related to misuse of public monies and solicitation of forgery when they illicitly authorized $196,842 of compensation by directing 77 Sheriff’s Office employees to record 7,220 hours of unworked overtime on their timesheets. We have submitted our report to the Arizona Attorney General’s Office for appropriate action.
As part of their responsibility to prevent and detect fraud, Wickenburg Unified School District (District) officials took appropriate action by reporting to us an allegation of financial misconduct by former director of operations, William Moran. Our investigation revealed that from June 2017 through February 2018, Mr. Moran participated with a District contract awarded to a vendor he had an undisclosed conflict of interest with, and he may have created 2 false price quotes for other unrelated District contracts. We submitted our report to the Arizona Attorney General’s Office, which on September 13, 2021, presented evidence to the State Grand Jury. The action resulted in Mr. Moran’s indictment on 4 felony counts related to conflict of interest, fraudulent schemes, and forgery.