Expert answer:Do it for the Kids by Michael Ammermorn
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Do It for the Kids
MICHAEL AMMERMON
T
hough small in stature, Anita Buck had the energy and work ethic of a Fortune 500 executive. A
happily married mother of two, she was the associated student-organization bookkeeper at Desert View High
School, where her daughter was a sophomore. Anita was well liked and familiar with most of the students;
she volunteered countless hours to help with prom, dances, and various fund-raisers. Recognized for her
tireless efforts, Anita made sure every school club was accounted for properly. In fact, when any of them was
low on funds, Anita was even known to offer financial support from her own pocketbook.
In the first year of her employment with the school district, Anita was assigned an assistant to help
with her many duties. But it wasn’t long before the aide began complaining that she didn’t have enough
to do—Anita refused to give her any accounting responsibilities. After a six-month strained working
relationship, Anita told her district office that an assistant wasn’t necessary, that she slowed the process.
The district listened and again allowed Anita complete control of the accounting records, cash, checks,
and deposits, with the entire office to herself.
Desert View High School is located in the Washington Unified School District, which includes 13
elementary schools, five junior high schools, and three high schools. With an annual budget of $140
million, the district employs over 1,800 teachers and 890 administrators and support staff. The student
clubs at Desert View are largely self-sustaining; they earn money through yearbook and snack bar sales
in addition to other fund-raising activities, often in excess of $160,000 annually. Since there are over 23
student clubs at Desert View, the school uses an electronic bookkeeping system specializing in student
organization accounting.
Sue Blanton, an imposing woman and the district’s internal auditor, was responsible for training all
student organization bookkeepers. She knew the
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accounting software front to back and took her job seriously. As part of district policy, all student
organization bookkeepers were required to submit monthly bank reconciliations, bank statements, and
student-organization financial reports to be reviewed by Sue, as well as the district’s chief business
officer. Sue expected the timely production of these documents and demanded strict adherence.
Along with reporting to the internal auditor, the student organizations had a certificated, credentialed
teacher, Diane Tomkins, who served as the official adviser. Diane worked closely with Anita—they
started off with a positive and productive relationship. In fact, Anita, Sue, and Diane all became good
friends, meeting for lunch once a month and shopping together. Sue and Diane never suspected a thing.
After all, the school district is audited annually by an outside firm, and in the three years Anita had been
in charge, the auditors had uncovered nothing irregular. But that would soon change, thanks to the
persistence of a gut feeling.
A Snake in the Grass
Although each year’s annual audit had followed the proper procedure, with squeaky-clean results, after
three years Sue became concerned that Desert View’s student-organization financial reports were falling
behind. Whenever she raised her concerns with Anita, they were met with a barrage of excuses— I’m
overworked, I have a lot of personal problems, I’ll have it tomorrow—followed by profuse
apologies and promises to improve.
Diane was running into the same problems whenever she tried to talk to Anita. As weeks passed, Sue
began e-mailing Diane to discuss their mutual concerns. What they didn’t know was that Anita had been
intercepting Diane’s e-mails. Diane taught several classes during the day, during which time Anita would
covertly access her computer and delete her e-mails from Sue. Before long she had fostered a strong
animosity between her two supervisors, gradually cultivating feelings of distrust. Anytime a conversation
was directed toward her own shortcomings, Anita would stoke the fire between her two managers to
avert the unwanted attention; the secret to a good magic trick is a well-timed distraction.
Another month passed before Sue determined that something was amiss in Desert View’s studentorganization accounting books. She telephoned the audit firm and requested a special audit of Desert
View’s student organ-ization accounts. The firm sent out a team immediately.
When the auditors arrived, they found Anita Buck looking very distressed and her office in disarray. Once
they explained the purpose of their audit, Anita cooperated skillfully. Having prepackaged the proper
bank reconcili-ations and financial reports, she showed the auditors how the financial data
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components tied together. She even admitted to many of her own errors, requesting that they write up her
poor performance. From time to time during the audit, Anita shed a calculated tear or two while guiding
the team to selected files where they could sample and confirm the accuracy of her reports.
The audit was a success, or so it seemed. Numerous management recommendations were offered and
Anita promised to do better; everything appeared copacetic. Sue, however, was not convinced—she
believed that Desert View’s student-organization club cash balances should have been higher for that
time of year. So she began reviewing each individual club account and financial statement dubiously,
questioning every club adviser about fund-raising events. To Sue’s surprise, she found that most simply
dropped off their cash and check receipts to Anita, who then counted the money, created the receipt, and
updated the accounts. District policy clearly states that funds must be double counted by two individuals
at an event and a copy of the sales deposit sheet must be retained by the club adviser to ensure accurate
records.
Sue was not happy. She was a stickler for the rules, and the fact that several district policies and
procedures were being circumvented really pushed her buttons. She began to personally go to Anita’s
and Diane’s offices every few days. Some of the visits were emotional and stressful, often resulting in
tears from Anita as she walked away saying: ‘‘Nobody will help me! I’m doing the best I can!’’
The district’s fiscal year-end was right around the corner. Anita had been the student organization
bookkeeper for three years now. Sue approached the superintendent and chief business officer and
suggested that they bring the district’s legal counsel into the matter. She remained unconvinced that
Desert View’s student-organization accounting problems were merely minor errors that simple
management recommendations could correct.
The district’s legal counsel, Charles Allen, was a seasoned attorney with a military background. He
set up a meeting with Anita, during which he witnessed her teary-eyed apologies—routine, by now.
Charles suggested that the district place Anita on paid administrative leave while her office was
inspected thoroughly. When Anita received notification about the move, she seemed relieved. She told
Sue that she would be happy to assist in any way possible and that now maybe everyone would
understand the difficulty of her job.
Next the district IT staff copied Anita’s computer hard drive and hired a computer information firm to
analyze the data. They promptly found an irregularity. For some reason, Anita had eight copies of the
student organ-ization’s accounting program data file. This was a red flag.
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Anita tried to skillfully deflect the situation as she had done in the past, explaining that the extra files
were merely backup data or old experimental files. She said the extras served as a guide for how to
properly apply and post transactions. But this time the internal auditor was not convinced and sent the
miscellaneous files to the accounting software company for their opinion.
The software company issued a preliminary report indicating that they had uncovered quite a few
irregularities. Among the problems, they found that some of the specialized financial data-tracking
features on the software had been disconnected. They recommended that a forensic auditor be hired to
investigate. That’s when I received the call.
Spread Thin
For the past 12 years, I’ve specialized in governmental and organizational fraud and forensic
examinations. I met with the school district legal counsel, superintendent, assistant superintendent of
human resources, and internal auditor. After the meeting, Sue and I drove over to Desert View to take a
close look at Anita’s workplace.
Her office was in complete disarray. Documents, files, and invoices were stacked everywhere
haphazardly. I videotaped and digitally photographed them for evidence. Then we found a large safe in
the backroom. Sue knew the combination and opened it to discover deposit bags containing cash and
checks. The cabinets contained outdated files, and we found a small jar with approximately $200 in cash.
When we opened the cash register drawer, under the tray we discovered checks to organizations that
were undeposited and several months stale-dated. So far we had uncovered eight sets of electronic
accounting records, a messy room, and some outdated checks. Nothing stood out as solid evidence of
financial fraud.
But at the end of Anita’s desk credenza was a drawer we had not yet opened. Inside we found a complete
mess—vendor invoices, Post-it notes, to-do lists, everything stuck together without a trace of
organization. We reviewed each item meticulously; this time nothing would be overlooked. At the very
bottom of the drawer we discovered numerous checks written to vendors and other payees. They were all
computer generated and contained original-ink double signatures, some of them backdated over 15
months, and not one had ever been mailed out. Sue was baffled; she couldn’t fathom why these checks
were still in the drawer, unmailed. But I knew why. I explained that these checks might represent the
amount of cash possibly being diverted. This also clarified the multiple accounting records, which
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were necessary to manipulate bank reconciliations and conceal the scheme.
Things were beginning to come together.
Sue turned pale. She slowly sat down, clearly frightened at the implica-tions. I looked at her and
calmly said: ‘‘Don’t worry; it’s not your fault. If it is what I think it is—using multiple sets of books—
Anita has duped everyone and done an outstanding job.’’
Sue turned to me anxiously and whispered, ‘‘I’m going to be fired.’’ ‘‘Sue, if it had not been for you,
your gut feeling and persistence, this
might never have been detected by anyone.’’
We continued our search, sifting through the rest of Anita’s office, and discovered more evidence.
Lodged behind cabinet drawers, we found fund-raising deposit bags with cash and more stale checks
made out to the Desert View student organizations. Ultimately, we uncovered $114 in coins and $200 in
cash scattered in seven locations, 21 stale checks payable to student organizations spanning 31 months
totaling $5,974, club fund-raising deposit bags containing cash and checks spanning 30 months totaling
$1,475, and 58 checks payable to vendors spanning 33 months totaling over $12,727.
Sue and I prepared a deposit for the bank totaling around $1,100, comprised of the uncovered cash
and the checks that were still valid. In addition, we found nine cash-advance envelopes with receipts and
balances that fell short by $6,127.
I obtained a complete working copy of the electronic accounting pro-gram and a backup copy of each of
the eight databases of accounting transactions. Returning to my office, I opened each of the eight sets of
accounting books. This process was going to take time. Fortunately, one of the book sets was a
demonstration file, which I quickly eliminated. I com-pared transactions, bank reconciliations, and
numerous journal entries entered within and spanning each set of books. I discovered that the ‘‘Tracks’’
program, used to track student sales, fees, and deposits before they were integrated into the accounting
program, was disconnected and that student cash transactions were being directly entered. Using this
method, the identity of the student transaction was lost. I examined checks written, endorsed, and
prepared for mailing to the vendors, finding that the majority were written using three of the accounting
databases. The bank reconcilia-tions were spread out among four of the databases, and in many instances,
checks were duplicated in some sets of books and omitted from others. The individual club accounts were
full of journal entries without description. The journal entries were primarily records of transferring
money from one club to another. No wonder Anita felt overworked! I couldn’t help but to think that clubs
probably complained that the total in their accounts did not measure up to the amount of money earned,
and in response, Anita simply moved funds back and forth between accounts in an attempt to cover the
holes.
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The Road to Coming Clean
When I finished my analysis, I knew that the electronic accounting records were not sufficient to explain
the amount of cash that had been pilfered over the past three years. So far I’d only determined Anita’s
methodology.
The cash and check deposits that school organizations submitted could be placed aside or hidden. In
time, if the club failed to notice that their deposit wasn’t recorded on their account report, then Anita
could remove the cash undetected. Many of the clubs did not retain their records because they trusted the
bookkeeper.
While reviewing the different versions of the accounting records, it was interesting to note that some
clubs had fewer journal entry transactions than others. It is likely that certain clubs retained their own
logs and records of the deposits and expenditures they incurred and were able to inquire about any
irregular activity. Upon questioning, Anita was probably forced to correct some records, so she adjusted
other clubs’ accounts in order to keep the cash shortages from being discovered.
As more cash was removed from the system, fewer funds were available to pay for the checks that
were written. In order to maintain the facade that the account activity was normal, checks were prepared
and signatures obtained by three signers, as was required; however, Anita never mailed or distributed
these checks.
The use of cash advances seemed to be prevalent, although not allowed by the district. Unmonitored
advances gave Anita ample oppor-tunities to alter the advance and subsequently remove any unspent
cash for personal use. With control of the accounting records and few clubs reconciling their account
activity, she could adjust the advances of each club as she saw fit.
As the losses and the scheme grew, it became more difficult for Anita to manage so many sets of
books. Accounting for the actual records became confused and mixed with the false accounting records.
Insufficient-funds checks started to pile up and the accounting got further behind. More and more clubs
began to question their accounts. Club activity reports that once reflected simple transactions became
cluttered with journal entries, and that just inspired more inquiries.
The district mandates that the transactions recorded in the Tracks student sales system be imported into
the accounting software. With Tracks disconnected from the accounting program, Anita could alter
deposits at will. After analyzing records and reviewing what the software company provided, we
determined that more than $24,000 worth of student cash transactions was missing.
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Since much of it was unrecorded cash, bank reconciliation discrepancies were used as another
component of quantifying potential losses. In total, these discrepancies were just over $10,000.
Considering that the entire loss was attributable to cash removed from the electronic accounting
system prior to recording, the total was quantified at slightly more than $50,000. What I needed next was
a face-to-face meeting with Anita Buck.
One Admission Please
Before I met with Anita, I wanted to know everything about her. I spent several days on background
analysis, researching her favorite Web sites, learning about her family members, her pets, and her
hobbies. By the time I was finished, I even knew how much Anita tipped her hairdresser. I also
developed a theme underlying the motivation for embezzlement. It became clear to me that Anita loved
luxurious purchases: expensive purses, limo rides for her children’s events, equipment for the student
organization office. She made it a priority to keep up appearances.
I also requested that Sue supervise the complete organization of Anita’s office. That was Anita’s
home territory and where I would conduct the interview. I wanted her to be comfortable. It took three
days to clean her space to perfection. It looked dramatically different from the mess that once surrounded
us.
The stage, the theme, and the evidence were set. We scheduled an interview for Anita to meet me at
9:00 a.m. on a Friday in August, during summer break when very few people would be at Desert View
High School. Thirty days had passed since I started the examination. As we entered the office, the first
words out of Anita’s mouth were ‘‘Wow, this office looks so different.’’
We moved to a table, where I made sure Anita was comfortably seated closest to the unlocked door.
The opening conversation was light. We had a few laughs as we discussed common areas of interest,
family, friends— wherever I found a connection. Anita mentioned that I knew a lot about her and her
family.
‘‘Yes, I’m very thorough,’’ I replied. ‘‘I like to try to understand situations before passing
judgment.’’
’’You’re not like anyone I’ve talked to,’’ she responded.
When the moment was right, I took out a large binder, placed it on the table and said, ‘‘I’m not like any
other accountant or auditor you have worked with; I’m a forensic accountant specializing in financial
fraud examinations.’’
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The expression on Anita’s face changed. Her jaw dropped and she suddenly became very serious. I
sympathized by saying, ‘‘I understood how difficult it must have been for you to see others always
owning nice things.’’ I watched her body language and facial expressions, again waiting for the right
moment, and then I said, ‘‘Anita, based on the evidence I have compiled, I have reason to believe that
you have stolen around $98,000 over the past three years.’’
I purposefully quoted a much larger figure than the actual potential loss. She sat quietly not saying a
word. After a full minute passed, her eyes welled with tears and she said, ‘‘Mike, it can’t be that much.’’
I looked at Anita and told her how proud I was of her for coming clean. As Anita and I talked, she
continually expressed remorse for taking the money. She reiterated that she could not possibly have
stolen $98,000. The truth of the matter was that Anita really did not know how much she had pilfered.
As we discussed the evidence, she agreed to write an admission letter and return $50,000 to the school
district from her home equity line of credit. She also agreed to meet with the economic crimes detective
with the local police as long as I attended the meeting with her.
As Anita and I reviewed my findings, I asked her to tell me, in her own words, how she orchestrated
the scheme. Anita revealed that all of the money she had stolen came from the cash deposits. She
stopped using the Tracks system because it downloaded the student deposit information directly into the
accounting records, which would have shown that her deposits were incorrect. Anita also explai …
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