We received an allegation of financial misconduct by Dennis Fiscus, former Department Career and Technical Education programs of study director, and Lois Lamer, former Valley Academy for Career and Technical Education (VACTE) superintendent. Our investigation revealed that from December 2013 through June 2014, Ms. Lamer prepared 3 false VACTE documents when she complied with Mr. Fiscus’s alleged direction to deposit in her personal business checking account $7,500 of federal Carl D. Perkins grant monies he awarded to VACTE. These monies were commingled with her business monies and spent for Mr. Fiscus’s benefit. We submitted our report to the Arizona Attorney General’s Office, which on September 14, 2021, presented evidence to the State Grand Jury. The action resulted in Mr. Fiscus and Ms. Lamer each being indicted on 5 felony counts related to misuse of public monies, fraudulent schemes and artifices, and fraudulent schemes and practices.
As part of their responsibility to prevent and detect fraud, Sunnyside Unified School District (District) officials took appropriate action by reporting to us an allegation of financial misconduct by former Parents as Teachers program coordinator Joan Katz. Our investigation revealed that from January through March 2019, Ms. Katz allegedly falsified, or directed a subordinate employee to falsify, District records to conceal her failure to comply with District purchasing requirements when she obtained services for 2 separate projects totaling $3,874. Specifically, without soliciting for competitive price quotes, as required by District policy, Ms. Katz purchased $1,374 of services from her daughter’s company and $2,500 of services from a District employee’s company. Moreover, Ms. Katz illicitly participated in the District purchase from her daughter’s company and failed to disclose her conflict of interest until after the District had paid her daughter. We have submitted our report to the Arizona Attorney General’s Office, which on September 20, 2021, presented evidence to the State Grand Jury. The action resulted in Ms. Katz’s indictment on 5 felony counts related to conflict of interest, fraudulent schemes, and filing false instruments.
As part of their responsibility to prevent and detect fraud, Tucson Unified School District (District) officials took appropriate action by reporting to us an allegation of financial misconduct by Rosa Ordonez, former bookstore finance manager at Pueblo High School. Our investigation revealed that in July and August 2018, Ms. Ordonez may have embezzled $2,974 of bookstore receipts and change funds, cash provided from the District to Pueblo High School to make change for cash transactions. Additionally, from 2006 through 2015, she failed to deposit checks totaling $3,309, depriving Pueblo High School of its revenue. We have submitted our report to the Arizona Attorney General’s Office, which on September 20, presented evidence to the State Grand Jury. The action resulted in Ms. Ordonez’s indictment on 3 felony counts related to theft and misuse of public monies.
According to the Association of Certified Fraud Examiners, Inc., payroll disbursement frauds related to falsified wages, ghost employees, and commission schemes account for 13 percent of occupational fraud in the U.S. and Canada. Similarly, during the last 9 years, we have identified public money losses in Arizona governments totaling $0.5 million dollars due to payroll-disbursement-related fraud schemes. This alert outlines how some of those payroll disbursement frauds occurred and what actions management can take to deter and detect them.
For the year ended December 31, 2021, we issued 7 financial investigations describing losses totaling $242,729. Six of these investigations led to prosecuting agencies obtaining 30 criminal charges against 8 individuals for losses totaling $45,887. These charges related to theft, misuse of public monies, fraudulent schemes, forgery, conflict of interest, computer tampering, false filing, purchase of appointment to office, and preparing a false return. One of these financial investigations led to a prosecuting agency bringing civil action against 2 individuals, seeking recovery of $196,842. Further, 3 individuals previously charged as a result of our financial investigations pleaded guilty in 2021 to misuse of public monies, fraudulent schemes, and theft. These individuals stipulated to or were sentenced for up to a combined total of 1 year and 10 months of incarceration, 14 years of probation, and $152,369 in restitution.
The Arizona Attorney General’s office requested our assistance with investigating whether Toltec Elementary School District (District) employees misappropriated public monies. Our investigation revealed that from July 2014 through June 2016, former employees Dr. Jeffrey Van Handel, superintendent, and Ms. Eileen Crumbaker, director of business services, who were also governing board members of the nonprofit organization, World School Foundation, Inc. (WSF), secretly used their respective personal monies of $380,845 and $81,549 to fraudulently inflate their Arizona State Retirement System (ASRS) pension benefits. Specifically, they each concealed from the District and WSF that they were using their personal monies to fund an agreement between the District and WSF that fraudulently increased their District compensation and thereby their corresponding ASRS pension benefits. They continued this scheme with a later agreement between the District and WSF that benefited only Dr. Van Handel. Despite his conflict of interest, Dr. Van Handel worked to establish both agreements. Similarly, Dr. Van Handel and Ms. Crumbaker may have received unlawful loans of public monies when on 60 occasions they used District monies totaling $253,983 to advance themselves this fraudulent compensation 33 to 234 days before depositing the agreements’ corresponding monies in a District bank account. Finally, Dr. Van Handel and Ms. Crumbaker failed to pay $26,618 of the agreements’ monies owed to the District. Their actions resulted in liabilities against the District and WSF totaling approximately $1.5 million. We submitted our report to the Arizona Attorney General’s Office, which on May 2, 2022, presented evidence to the State Grand Jury. The action resulted in Dr. Van Handel and Ms. Crumbaker each being indicted on 3 felony counts related to fraudulent schemes, misuse of public monies, and theft, and Dr. Van Handel being indicted on 2 additional felony counts related to theft and conflict of interest.
As part of their responsibility to prevent and detect fraud, Wilson Elementary School District (District) officials took appropriate action by reporting to us fraud allegations of financial misconduct by former budget accounting specialists Ryan Mariano and April Childs. Our investigation revealed that from August 2018 through March 2019, Mr. Mariano may have embezzled $27,582, and in January 2020, Ms. Childs may have embezzled $5,000 when they issued themselves unauthorized District checks with forged signatures. We have submitted our report to the Arizona Attorney General’s Office, which on July 11, 2022, presented evidence to the State Grand Jury. The action resulted in Mr. Mariano and Ms. Childs each being indicted on 5 felony counts related to theft, fraudulent schemes, and forgery. Mr. Mariano was also indicted on 1 felony count of misuse of public money.
According to the Association of Certified Fraud Examiners, Inc., cash receipt frauds related to skimming and embezzlement schemes account for 23 percent of all occupational fraud in the United States and Canada and average about 15 months in duration before detection. Over the last 11 years, we have identified public money losses in Arizona governments totaling $3.2 million due to cash receipt-related fraud schemes. This alert outlines how some of those cash receipt frauds occurred and what actions management can take to deter and detect them.
As part of their responsibility to prevent and detect fraud, Glendale Elementary School District (District) officials took appropriate action by reporting to us alleged financial misconduct by former payroll technician Anna Pacheco. Our investigation revealed that from August 2018 through November 2019, Ms. Pacheco may have deleted 168 of her used leave hours from the District’s payroll software thereby converting those hours to unused leave, creating the opportunity to use those hours twice. She later reused 77 of those converted leave hours resulting in a District overpayment of $1,660. We have submitted our report to the Arizona Attorney General’s Office, which on December 12, 2022, presented evidence to the State Grand Jury. The action resulted in Ms. Pacheco’s indictment on 6 felony counts related to theft, misuse of public monies, fraudulent schemes, and computer tampering.
For the year ended December 31, 2022, we issued 3 financial investigations that led to prosecuting agencies obtaining 25 criminal charges against 5 individuals for losses totaling $983,490. These charges related to theft, misuse of public monies, fraudulent schemes, forgery, conflict of interest, and computer tampering. Seven individuals charged as a result of these or previous financial investigations pleaded guilty in 2022 to theft, misuse of public monies, fraudulent schemes, forgery, conflict of interest, and falsifying an Arizona State Retirement System record. These individuals stipulated to or were sentenced for up to a combined total of 4 years of incarceration, 8 years of probation, 200 hours of community service, and $508,446 in restitution, fines, and costs. Further, 3 individuals previously charged as a result of our financial investigations entered settlement agreements with the State of Arizona, agreeing to pay a combined total of $13,800 in civil penalties.
As part of their responsibility to prevent and detect fraud, Hyder Elementary School District (District) officials took appropriate action by reporting to us alleged financial misconduct by former office specialist Kalena Renaudin. Our investigation revealed that from April 2016 through March 2018, Ms. Renaudin may have embezzled $7,417 from the District’s Medical Flexible Spending Arrangement (FSA) plan checking account when she admittedly “borrowed” the monies by issuing 16 unauthorized checks to herself for her own personal purposes. Additionally, Ms. Renaudin may have concealed her actions by not following District procedures. In particular, she failed to perform FSA checking account reconciliations and provide them to the business manager for his independent review. She also failed to obtain a second signature on 9 of the 16 unauthorized checks. We have submitted our report to the Arizona Attorney General’s Office, which on April 10, 2023, presented evidence to the State Grand Jury. The action resulted in Ms. Renaudin’s indictment on 6 felony counts related to theft, misuse of public monies, fraudulent schemes, and forgery.
As part of their responsibility to prevent and detect fraud, Gila Bend Unified School District (District) officials took appropriate action by reporting to us alleged financial misconduct by former District employees Margaret Perry, secretary, and her daughter Lindsey Fernandez, accounts payable clerk. Our investigation revealed that from June 2019 through August 2019, they may have participated in unauthorized Amazon purchases totaling $1,476. We have submitted our report to the Arizona Attorney General’s Office, which on May 31, 2023, presented evidence to the State Grand Jury. The action resulted in Ms. Perry and Ms. Fernandez each being indicted on 4 felony counts related to conspiracy, fraudulent schemes, misuse of public monies, and theft.
As part of their responsibility to prevent and detect fraud, Arizona Department of Education (Department) officials took appropriate action by reporting to us alleged financial misconduct by Tyler Grandil, the Department’s former Future Farmers of America (FFA) executive secretary within the Career and Technical Education department. Our investigation revealed that from March 2011 through December 2015, after opening a secret checking account with himself as the only signer, Mr. Grandil deposited therein $1,700,939 of Arizona Association FFA (AZFFA) monies that should have been deposited in a Department checking account, altering Department accounting records to conceal his actions. Without the Department’s or AZFFA’s knowledge, Mr. Grandil spent this money for AZFFA and personal purposes. Because monies were commingled and certain records were not available, we were unable to determine how much of this money was used for AZFFA purposes. However, from this secret account, Mr. Grandil issued 28 checks totaling $40,950 to himself, his family members, or their companies. We have submitted our report to the Arizona Attorney General’s Office, which on May 31, 2023, presented evidence to the State Grand Jury. The action resulted in Mr. Grandil’s indictment on 6 felony counts related to computer tampering and fraudulent schemes.
From 2013 through 2022, we issued 15 reports identifying forgery frauds associated with almost $3.4 million of Arizona public money losses. As shown in these reports, forgery is often used to facilitate or conceal broader schemes such as theft, misuse of public monies, or conflict of interest. This alert outlines how certain forgery frauds occurred and what actions management can take to deter and detect them.
From 2015 through 2022, we issued 12 financial investigation reports associated with about $1.4 million of Arizona public money losses where computer tampering was either the means of theft and/or the instrument used to conceal theft. Pursuant to Arizona law, computer tampering frauds involve knowingly altering, damaging, deleting, or destroying computer data. This alert outlines how some of these computer tampering frauds related to payroll disbursements, nonpayroll disbursements, and cash receipts occurred and what actions management can take to deter and detect them.
As part of their responsibility to prevent and detect fraud, Arizona State University (ASU) officials took appropriate action by reporting to us alleged financial misconduct by Carlos Urrea, former University Technology Office (UTO) manager of information technology. Our investigation revealed that from June 2017 through December 2021, Mr. Urrea may have embezzled $124,093 when he used his ASU purchase card (p-card) to make 810 unauthorized personal purchases. To help conceal his scheme, Mr. Urrea submitted for processing 347 forged receipts and 358 false p-card business purpose descriptions, making it falsely appear as if the purchases were for valid ASU purposes. We have submitted our report to the Maricopa County Attorney’s Office, which on December 1, 2023, presented evidence to the Maricopa County Superior Court Grand Jury. The action resulted in Mr. Urrea being indicted on 14 felony counts related to theft, misuse of public monies, fraudulent schemes, and forgery.
From 2013 through 2023, we issued 40 financial investigation reports that included charges of fraudulent schemes associated with about $5 million of Arizona public money losses. This alert outlines the difference between the 2 fraudulent schemes classifications pursuant to Arizona law, how certain instances of these fraudulent schemes occurred, and what actions management can take to deter and detect them.
As part of their responsibility to prevent and detect fraud, Santa Cruz County (County) officials took appropriate action by reporting to us and the Federal Bureau of Investigation (FBI) alleged financial misconduct by the former County Treasurer (Treasurer). We conducted an investigation to determine the amount of public monies misused, if any, and to identify any deficiencies in the County Treasurer’s internal control structure that may have allowed the Treasurer’s alleged misconduct to go undetected. Additionally, we are cooperating, as allowed by law, with the United States Department of Justice and FBI as part of their review.
Our investigation revealed that from March 2014 through March 2024, the Treasurer allegedly took $39,472,100 when she made at least 182 unauthorized wire transfers from 2 County Treasurer’s Office bank accounts to business bank accounts connected to her.1 To help conceal her actions, the Treasurer allegedly failed to record her unauthorized wire transfers in the County Treasurer’s accounting system and lied to and/or provided numerous false investment statements, cash reconciliations, and Treasurer’s Reports to County entities, officials, and employees; a County financial consultant; and/or the Arizona Auditor General (Office).
Because the primary responsibility for the prevention and detection of fraud rests with those charged with governance and management, including the Santa Cruz County Board of Supervisors, County Manager, and County Chief Financial Officer, we made 9 recommendations to County officials for actions they can now take to improve internal controls over public monies and help deter and detect fraud. Finally, we made 2 recommendations to the Arizona Legislature to consider revising statutes to give the Office independent, direct access to financial institution records and require newly elected or appointed county treasurers and chief deputy treasurers to meet minimum training requirements.
1This report is based on data available to us as of this report date. Additionally, because most bank records prior to March 2017 were not available to us, we obtained certain amounts from information included in Santa Cruz County’s civil complaint against the Treasurer filed in Pima County on August 1, 2024. Specifically, we used bank records to verify 160 wire transfers totaling $37,234,100 and relied on the County’s civil complaint information for the remaining 22 wire transfers totaling $2,238,000.
As part of their responsibility to prevent and detect fraud, Hyder Elementary School District (District) officials took appropriate action by reporting to us alleged financial misconduct by Nubia Gonzalez, former superintendent secretary. Our investigation revealed that in December 2020, Ms. Gonzalez allegedly embezzled $2,486 when, 3 months after she was terminated, an illicit District check in that amount was deposited in her business checking account. The action resulted in Ms. Gonzalez’s indictment on 3 felony counts related to theft, misuse of public monies, and forgery. Moreover, because District officials failed to implement basic internal controls and protect public monies, unauthorized credit card purchases were made and questionable checks were issued, resulting in an additional $9,738 District loss not directly attributed to specific employees.
From 2014 through 2023, we issued 32 financial investigation reports that included misuse of public monies charges associated with about $3.8 million of Arizona public money losses. This alert outlines how certain instances of misuse of public monies occurred and what actions management can take to deter and detect it.