The Fraud Examiner
The “Lost Deposit Bag” and Other Frauds in Schools, Government Organizations
Dennis Dycus, CFE, CPA, CGFM, recently retired as Director of the Division of Municipal Audit in the Office of the Tennessee Comptroller of the Treasury, having been with the office for more than 39 years. In a Q&A with the ACFE, he provides his candid insight on fraud investigation from the government agency perspective.
Can you describe a “typical” fraud case in your line of investigation?
We conducted many fraud investigations involving school student activity and cafeteria funds and related school support organizations. Most people have no idea how much cash goes through a large centralized high school in Tennessee. It is not uncommon for a school to generate $1.5 million a year in activity and cafeteria funds. That does not take into consideration what a related school support group(s) may generate. The school football booster club can easily raise several hundred thousand dollars in a large high school with a winning program. The same goes for basketball and band boosters.
The opportunity to commit fraud is provided by the fact that most of the revenues generated by a school are cash, with very little internal control. In a typical fraud, the bookkeeper does not give receipts for all collections; they substitute nonrecurring revenues for cash; they fail to account for or deposit basketball/football game receipts; issue school checks for personal purchases; use the school's credit card for personal purchases; and often, they just write themselves a check.
Why do you find so much fraud in public schools?
As Willie Sutton said, “…because that’s where the money is!” Sutton was talking about banks, of course, but there is a lot of money involved in public schools – and it is mostly in cash with very few internal controls. Need I say more?
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