- Fraud and bookkeeping errors are so common in school districts, they are to be expected. In fact, over a 20 year period, fraud was detected in 21 Arizona school districts for a total loss of $26 million, District Administration reports.
- Best practices for protecting districts against financial losses due to fraud include implementing money-handling rules that require two people to work together when handling money or deposits, designating an internal auditor to handle complaints about money misuse and making sure the district stays in compliance.
- Districts can also regularly assess how money is being spent to keep high levels of efficiency. And they can access resources in the community by establishing a community advisory council, which gives the district access to financial professionals at no charge.
By their nature, districts are destined to be targets of nefarious financial activity. Schools sell stadium ticket sales, collect field trip money, pay private contractors to complete repairs and even run school stores. Thousands of dollars change hands every day in and around schools, and thieves may feel like no one is watching. It's impossible to keep track of every transaction, but without careful attention to the details of money exchanged, fraud can go undetected for years .
There are actions that schools can take to protect themselves, according to the Association of Certified Fraud Examiners (ACFE). Reconciling bank statements in a timely fashion will warn if something seems amiss. It is also important to segregate responsibilities so more than one person always has eyes on accounts.
Districts can also establish a tip line so people can report suspicious activity without getting involved. The ACFE determined that 39.1% of fraud cases were detected by tip lines. The organization also found that 94.5% of perpetrators attempted to cover up their actions. To prevent the opportunity, implement strong internal control systems.
Use data to detect inconsistent financial patterns. For example, if a football team has a winning season but ticket sale revenue did not increase there may be a reason to dig a little deeper to figure out why. District leaders can also keep an eye out for an employee living beyond their means, close relationships with vendors and controlling behaviors with an unwillingness to share duties. All of these issues should be considered red flags that warrant further investigation.