L E G ISL A T IV E A U D IT O R

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1 ST A T E O F L O U ISIA N A L E G ISL A T IV E A U D IT O R W inn Parish SchoolB oard W innfield,louisiana Investigative A udit D anielg.k yle,ph.d.,c PA,C FE L egislative A uditor

2 LEG ISLA T IV E A U D IT A D V ISO RY C O U N C IL M EM BER S Representative Edw in R.M urray,c hairm an Senator J."Tom " Schedler,V ice C hairm an Senator R obertj.b arham Senator Foster L.C am pbell,jr. Senator Lynn B.D ean Senator W illie L.M ount R epresentative R ick Farrar R epresentative V ictor T.Stelly R epresentative T.T aylor Tow nsend R epresentative W arren J.T riche,jr. D anielg.k yle,ph.d.,c PA,C FE T 1 D aryig.purpera,c PA,C FE Underthe provisions ofstate law,this reportis a public docum ent. A copy ofthis reporthas been subm itted to the G overnor,to the Attorney G eneral,and to other public oficials as required by state law. A copy ofthis report has been m ade available forpublic inspection atthe Baton Rouge o fice ofthe Legislative Auditor and atthe ofice ofthe parish clerk ofcourt. This docum entis produced by the Legislative Auditor,State oflouisiana,post O fice Box 94397, Baton Rouge, Louisiana in accordance with Louisiana Revised Statute 24:513. Sixty copies ofthis public docum entw ere produced at an approximate cost of $110. This materialwas produced in accordance w ith the standards forstate agencies established pursuantto R.S. 43:31. This docum ent is available on the Legislative Auditor's W eb site at ww w.la.state.la.us. In com pliance with the Am ericans W ith Disabilities Act, if you need spe~ia assistance relative to this docum ent,orany docum ents ofthe Legislative Auditor please contactw ayne "Skip"Irwin,DirectorofAdm {nistfation,at

3 W inn P arish SchoolB oard June 28,2001 Investigative A udit O fi ce of the L egislative A uditor State of L ouisiana D anielg.k yle,ph.d.,c PA,C FE L egislative A uditor

4 T able of C ontents Page Executive Sum m ary Background and M ethodology Finding: BookkeeperU sed SchoolBoard FundsforPersonalU se Recom m endation A ttachm enti-m anagem ent'sresponse A ttachm entii-legalprovisions

5 @ DANIEL 0.KYLE,PtLD.,CPA,CFE LEGISLATIVE AUDITOR OFFICE OF LEG ISLA TIV E A U D ITO R STATE O F LO UISIAN A BATON ROUGE.LO U ISIAN A June 28, N ORTIITIIIRD STREET POST OFFICE BOX TELEPHONE:(225) FACSIM ILE: (225) TH E H O N O R ABLE JO E LYN N BRO W NIN G, PR ESID EN T,AN D M EM BER S O F TH E W IN N PA R ISH SCH O O L BO ARD W innfield,louisiana Transm itted herew ith is our investigative report on the W inn Parish School Board. O ur exam ination w as conducted in acco rdance w ith Title 24 of the Louisiana Revised Statutes and w asperform ed to determ ine the propriety of a certain allegation received by thisoffice. This report presents our finding and recom m endation as w ell as m anagem ent's response. C opies of this reporthave been delivered to the H onorable Terry Reeves,D istricta ttorn ey for the Eighth JudicialD istrictof Louisiana,and othersas required by law. Respectfully subm itted SED :M JL :D G P:ss fwl~nsb] Legislative Auditor

6 EX ECUTIV E SUM M A RY INVESTIGATIVE A U D IT R EPO RT W INN PARISH SCH O O L B OARD The follow ing sum m arizesthe finding and recom m endation as wellas m anagem ent's response th at resulted from this investigative audit. D etailed inform at ion relating to th e finding and recom m endation m ay be found atthe page num ber indicated. M anagem ent'sresponse m ay be found ata ttachm enti. Schoolboard o~ clals discovered possible improper activity. The districtattorney nohfled the legislative auditor. Form er bookkeeper, A ngela H utto Sm ith, used $30,947~ r p ersonal use. M oney wasused for cas h,personal utilities, tuition,and the purchaseof a tanning becl o Schoolboard records were m issing and~or alterecl o Scboolboard sbould sep arate cer tain incompatible duties and secure signature plates. O n M arch 12,2001,ofi cials of the schoolboard discovered that an em ployee issued checks payable to herself and had apparently cashed these checks or otherwise used them for her personal benefit. O n M arch 16, 2001, the H onorable Terry R. Reeves, D istrict A ttorney for the Eighth Judicial D istrict of Louisiana inform ed the legislative auditor of these activities. This investigative attdit w as conducted to determ ine the propriety of these transactions. Finding (Seepages4-8.) From February 11,1999,to February 20,2001,M s.a ngela H utto Sm ith,form erbookkeeper,issued 57 schoolboard checkstotaling $30,947.27,to w hich she w as not entitled,for her personaluse. M s.sm ith issued,endorsed,and cashed m any of the checks and used others to pay her utility bills,cable television,and tuition at N orthw estern State U niversity and to purchase a tanning bed. It appears that M s. Sm ith attem pted to conceal this activity by rem oving records from the school board's paym ent files and altering the recorded payee on schoolboard docum ents. Recom m endation (Seepage 9.) W e recom m end thatthe W inn Parish SchoolBoard develop and im plem ent proced ures to ensure that checks are only issued for valid expenditures of th e school board. In addition, th e school board should ensure that em ployee duties are adequately separated to ensure thatincom patible functionsare notperform ed by the sam e em ployee including preparing checks, having signature authority for checks,and reco rding and reconciling the bank account. Furtherm ore, th e supply of checks and the signature plate should be keptin a secure location atalltim es.

7 W inn Parish SchoolBoard In addition, w e recom m end that the D istrict A ttorney for the Eighth JudicialD istrictof Louisiana review this inform ation and take appropriate legalaction regarding possible violationsof state law s,to include seeking restitution. M anagem ent'sresponse (See pages ) U Schoolboard o20~cialsdiscovered unauthorized practicesby the bookkeeper. r~ Schoolsystem has taken actionsto strengthen the bookkeep ing and accounting procedures. On M arch 12, 2001, discoveries w ere m ade of unauthorized practices by the school board bookkeeper, M s. A ngela Hutto Smith. M s. Smith was immediately suspended from her job responsibilitiesand herem ploym entw asterm inated in accordance w ith schoolboard policy. Since discovery of these unauthorized practices, the school system has taken certain actions to strengthen the bookkeeping and accounting procedures to safeguard againstthese types of w rongfulactions. The safeguard measures include the following: (1) each check written on all accounts is accounted for by an em ployee w ho has no check preparation responsibilities; (2) reconciliatory responsibilities have been assigned to individuals w ho do not have check preparation responsibilities;and (3)the businessm anagerreviews accounts m ore thoroughly on a m ore frequentbasis. Every effort is being m ade to ensure that all bookkeeping and accounting procedures are efficiently and com petently conducted according to statutesregulating the receiptand expendituresof public funds.

8 B ack ground and M ethodology The W iim Parish SchoolBoard w as created by Louisiana Revised Statute 17:51 to provide public ed ucation for the children w ithin W inn Parish. The school board is authorized by Louisiana Revised Sta tute 17:81 to establish policies and regulations for its ow n governm ent consistentw ith th e laws of tile Sta te of Louisiana and th e regulations of th e Louisiana Board of Elem entary and Secondary Education. The schoolboard iscom prised of eleven m em berswho are elected for term s of four years.the schoolboard operates eightschools w ithin th e parish w ith a totalenrollm entof approxim ately 3,253 pupilsforth e yearended June 30,2000. O n M arch 12,2001,officialsof th e schoolboard discovered th atthe schoolboard bookkeeper had prepared checks,w ith outauthorization,payable to herself and had apparently cashed these checks or otherw ise used th em for her personalbenefit.o n M arch 16,2001,the H onorable Terry R.Reeves,D istricta ttorney for th e Eighth JudicialD istrictof Lo uisiana inform ed the legislative auditor of these activities. This investigative auditw as conducted to determ ine th e propriety of these transactions. The proceduresperform ed during th isinvestigative auditconsisted of (1) interviewing employeesofthe schoolboard (2) interviewing otherpersonsasappropriate; (3) examining selected documentsand recordsofthe schoolboard (4) making inquiries and performing tests to the extentwe considered necessary to achieve our purpose;and (5) reviewing applicable Louisiana laws W e acknowled ge the assistance provided thisinvestigation by SuperintendentSteve Bartlettand m em bersof hisstaf.

9 W inn Parish SchoolBoard

10 FIN D IN G BOOKKEEPER U SED SCHOOL BOARD FUNDSFO R PERSONAL U SE M s.sm ith, the bookkeeper, adm itted to taking money forher personal use. M s. Sm ith obtained cash and used m oney fo rherutilities,colege tuition, and a tanning becl From February 11, 1999,to February 20,2001,M s.a ngela H utto Sm ith, form er bookkeeper, issued 57 W inn Parish School Board (schoolboard) checks totaling $30,947.27,to which she was not entitled, for her personal use. A ccording to three school hoard officials,superintendent Steve Bartlett;M s.tam i A ustin,business M anager;and M r.ronald Canerday,the schoolboard's director of personnel,m s.sm ith adm itted thatshe issued,endorsed,and cashed 22 checks, totaling $18,604.55,payable to herself and four other em ployees. The rem aining 35 checks, which tota led $12,342.72, included additional paym entsto M s.sm ith asw ellas checks used to pay form s.sm ith's utility bills, cable television, tuition at N orthw estern Sta te U niversity and to purchase a tanning bed. M s. Sm ith served as the bookkeeper forthe schoolboard untilherterm ination on M arch 13,2001.O ne of M s. Sm ith's prim ary responsibilities was to process payroll related expenses, W hile serving the school board, M s. Sm ith issued 57 schoolboard checks on her behalf from tw o of the schoolboard's bank accounts asfollow s: N o.of C hecks Total Explanation ~ $20, Payable to herselfand othersand cashed 7, Payable to utility vendors for her telephone, electricity, natural gas, and cable television bills 2, Purchase of a tanning bed Tuition atnorthwestern State University $30,947.27

11 W inn Parish SchoolBoard FP~ XIX P. 01 Tanning Bed Purchase -invoice faxed j~om Galesburg Electric/ TanForL ess. Tanning bed shipped to A ngle Sm ith. ~ ld ll~r "o l~h~" T~ Javolot N~. Date~ Psp~ Nu.! Check made payable to Erle Johnson of TanForL ess. Check deposited into accountof Galesburg Electric. W IN N PA R ISH $OItO O L BOARD -. ~ ~.',bbu"l lqlt sourm H~.~~zm~c'~.~ " +..~,~ ~ O z 03/O B/O:L 2,S"S4.0 ( + +,+ +,,, ; I+, ##.:

12 M s.sm ith apparently concealed her aetlonsby rem oving and altering docum en ts. ItappearsthatM s.sm ith attem pted to concealthe 57 checksissued for her persona/ use in several different ways: (1) there was no docum entation for the 57 paym ents conta ined w ithin the school board'spaymentfile;(2)in a second file,where a file copy ofthe check is m aintained,there w asno file copy retained for 14 of the 57 checks;and (3)the payee information on 12 of the file copieswere altered to indicate different payees than the payees on the actual cheeks. Example of check madepayable to Sm ith,en dorsed and cashed by Smith,butfile copy altered to read p ayable to State Employees Group Benefits.

13 W ilm Parish SchoolBoard M s.sm ith adm itted to school board o~ dalsthatshe issued, endorsed, and cashed checks totaling $18,604.55, to which she was not en titled. A ccording to Superintendent Bartlett,M s.sm ith explained that she had prepared extra checks for herself because she had losther child supportand thatshe did nothave m oney to pay her utility bills. A s noted previously,m s.sm ith adm itted to SuperintendentBartlettand otherofi cialsthatshe issued,endorsed,and cashed 22 checkstotaling $18, m ade payable to herself and four other em ployees. M s.sm ith further adm itted thatshe: ~ A ltered the payee nam e on the schoolboard'sduplicate of one check ~ Signed the superintendent'sinitialsindicating approvalof paym entfornum erouschecks ~ Signed the endorsem entsof the fourschoolem ployeesin w hose nam es checks w ere m ade payable By using schoolboard funds for her ow n personalgain,m s.sm ith m ay have violated one orm ore of the follow ing law s: ~ R.S.14:67,"Theft" ~ R.S.14:72,"Forgery" The actualdetermination asto whetherthe individualis subjectto form al charge is at the discretion and determ ination of the district attorney.

14 R ECO M M EN DA TIO N School hoard should separate certain incompatible duties and secure signature plates. W e recom m end that the W inn Parish School Board develop and im plem entprocedures to ensure thatchecks are only issued for valid expenditures of the school board. In addition, the school board should ensure thatem ployee dutiesare adequately separated to ensure thatincom patible functions are notperform ed by the sam e em ployee including preparing checks, having signature authority for checks, and recording and reconciling the bank account. Furtherm ore, the supply of checks and the signature plate should be keptin a secure location atalltim es. In addition,w e recom m end thatthe D istricta ttorn ey for the Eighth Judicial D istrict of Louisiana review this inform ation and take appropriate legalaction regarding possible violationsofstate law s,to include seeking restitution.

15 10 W inn Parish SchoolBoard

16 A ttachm ent! M anagem ent's R esponse

17 ~ trite ottl)e ~,uperintelbent POST OFFICE BOX EAST CO URT ~TREET ~Pinn /l~ari~13 ~ t~oo! ~ oarb W INNFIFLD.LOUISIANA TELEPHONE: FAX: June 20,2001 D r.d anielg.kyle,cpa,cfe Legislative A uditor O fi ce of Legislative A uditor State of Louisiana Baton Rouge,Louisiana D eari)r.kyle L- =-a i'rl ~-~ ~ - E:2 O n M arch 12,2001,discoveriesw ere m ade of unauthorized practicesby a W inn Parish SchoolBoard centralofi ce bookkeeper,m s.angela H utto Sm ith. These practicesw ere in variance w ith W inn Parish SchoolBoard policy,resulting in apparenttheftof public funds. Indications w ere thatm s.smi th had w ritten checks w ithoutauthorization; initialed superintendentapprovalof these checks;cashed these checksatlocalbanksan d purchased personalproperty w ith public funds.itw asappar entthatattem ptsw ere m ade by M s.sm ith to concealherunauthorized actions. M s.sm ith'sactionsw ere reported to the W inn Parish SchoolBoar d legalcounselforadvisem ent. M s.sm ith w asinarnediately suspended from herjob responsibilitiesand heremploymentwasterminated in accordance w ith W inn Parish SchoolBoar d policy ata called m eeting of the boar d on M arch 26,2001. D r.kyle,yourofi ce conducted an in -depth investigation of thism atterduring the w eek of M arch 19-23,2001. M r.sam ueld elee wasthe prim ary investigator. M r.d elee presented a sum m ary of hisfindings and recom m endationsto W in n Parish SchoolBoard representativeson June 19,2001. Those attending thism eeting w ere m em bersof the W inn Parish SchoolBoard Executive Com m ittee: M r.joe Lynn Brow ning,board president;m r.d onald Carpenter;an d M r.b.r.audirsch. A lso in attendan ce w ere M s. Tam ia ustin,business m anager;m r.r.d.canerday,personneldirector;and SuperintendentSteve B artlett.the reportw as w ellreceived w ith totalagreem entof findingsand recom m endations. Since discovery of these unauthorized practices,the W inn Parish schoolsystem has assessed itsbookkeeping procedures.a sa resultof thi sassessm ent,certain actionshave been taken to strengthen the bookkeeping and accountin g proceduresto safeguard against these typesof wrongfulactions.the safeguard measuresinclude the folowing: l)each check wr itten on allaccountsisaccounted forby an em ployee w ho hasno check preparation responsibilities;2)reconciliatory responsibilitieshave be en assigned to individualswho do nothave check preparation responsibilities;and 3)the business m anagerreview saccountsm ore thoroughly on a m ore frequentbasis. Additionalinternal 11

18 D r.d an G.K yle -2- June 20,2001 controlproceduresare being developed forim m ed iate im plem entation. Every efortis be ing m ade to ensure thatalbookkeeping and accountin g procedures ar e eficiently and com petently conducted acco rding to statutesregulating the receiptmad expenditur esof public funds. D r.kyle,the W inn Parish SchoolBoard expresses sin cere appreciation to the O ffice of Legislative Auditor forthe professional,effieient,and com petentm annerin w hich this investigative auditw as eondueted. Sincerely, Sieve Bartlett Supe rin tendent 12

19 A ttachm ent!! Legal P rovisions

20 Legal Provisions The follow ing legalcitationsare referred to in the Finding section of thisreport R.S.14:67 provides,in part,thattheftisthe m isappropriation ortaking of anything of value w hich belongs to another, either w ithout the consent of the other to the m isappropriation or taking, or by m eans of fraudulent conduct, practices, or representa tions. R.S.14:72 provides,in part,thatforgery isthe false m aking oraltering,w ith intentto defraud, of any signature to, or any part of, any w riting purporting to have legal efficacy.

21 14 W inn Parish SchoolBoard

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about LEGISLATIVE A UDITOR LO UISIA NA SYSTEM IC INITIATIVES PRO G RA M C O U NC IL STATE O F LO UISIA NA M anagem entletter,dated February 19,1997 Page 2 M anagem entattributes the noncom pliance to insta lation