Accounting at schools is reform target

Officials propose measures to handle money, prevent incidents of theft by employees

November 19, 2006|By Arin Gencer | Arin Gencer,Sun Reporter

A few months after announcing a former financial secretary's embezzlement of more than $200,000 in funds, Carroll County school officials rolled out a set of proposed reforms that would increase checks on school-based account transactions.

Gathered in a local hotel conference room, administrators and financial secretaries from all levels spent about two hours reviewing the proposed changes, which included more frequent deposits of money designated for school-based accounts and a new Web site that would allow club advisers and teachers to monitor their balances.

The meeting also offered a broader look at fraud.

"We can't control motive, and we can't control rationalization," said Stephen Guthrie, assistant superintendent of administration. "But we can control opportunity."

The session served as the school system's response to "high-profile" thefts at a middle and high school, Guthrie said.

Former South Carroll High School financial secretary, Wendy Sue Bowers, pleaded guilty to siphoning more than $200,000 in school funds for almost seven years - one of the largest thefts the school system has seen in years, officials have said.

Bowers, a school system employee for 16 years, admitted stealing money raised through vending machine profits, yearbooks and athletic events and student fundraisers.

She is scheduled to be sentenced in early January. She can face up to 15 years in prison and a $25,000 fine.

"We found that there were some gaps in our procedures that created an opportunity for someone to divert money," Guthrie said.

Another secretary is also accused of stealing. Linda Sprinkle, a secretary in charge of finances at Shiloh Middle School in Hampstead, was charged early last year with stealing nearly $20,000 in funds from school accounts. Her case is scheduled to go to trial next month, according to court records.

The average organization loses about 5 percent of its total revenue to employee fraud, said Mike Stephens, an assurance partner and auditor with the accounting firm Clifton Gunderson LLP.

That's about $652 billion in fraud losses, Stephens said, noting statistics in a report this year from the Association of Certified Fraud Examiners.

Less than 10 percent of those individuals caught have previous convictions, said Stephens, describing them as people who often are married, socially conforming and in positions of responsibility.

"These aren't outcasts or loners," Stephens said. "These are people actively involved in the business or organization from which they were stealing. They're committing fraud because they can get away with it."

Implementing internal controls - such as the separation of duties and regular system monitoring - is a key to fraud prevention, Stephens said.

In Carroll, the proposed controls emerged from discussions with principals, financial secretaries and auditors, Guthrie said.

The missing link, he said, appeared in the managing of school accounts for things such as clubs or field trips. Advisers and teachers weren't checking - and didn't have a way to check - their accounts.

"We can't have the financial secretaries be responsible for those accounts anymore," said Lisa Rosenberg, a district quality assurance specialist. Regarding deposits, Rosenberg said, "someone independent of the secretary" should verify that collected money has been put into accounts.

Secretaries also should not accept or temporarily hold money that teachers or others have not counted, Guthrie said. Each school should have a lockable, secure safe on site. Also, money from vending machines would no longer go through financial secretaries.

"That's a place ripe for misdirecting funds because no one's watching that account," Guthrie said.

A new intranet Web site would allow school account owners and principals to monitor transactions and balances, instead of relying on secretaries to inform them, said Gregory Bricca, the school system's director of research and accountability.

Although, in terms of procedure, a separation of duties should exist, he said, in practice, most of the responsibility was left to the financial secretary.

arin.gencer@baltsun.com

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