Two school districts that uncovered cases of employee embezzlement and fraud in the past year are addressing weak areas in their systems that allowed the fraud to take place, according to a legislative audit.
The report, presented to the Legislature's Audit Subcommittee, also indicates that most school districts actually do have controls that would prevent fraud from ever taking place.
"We regret the fact that this did go on, but we have made a concerted effort and put into place the controls that are necessary to eliminate the chances of this going on in the future," said Bruce Williams, business administrator for Davis School District.
Nearly a year ago, a federal indictment accused the former Title I director and her husband of defrauding the Davis District out of at least $4.3 million by selling unauthorized copies of books and materials to the school district at highly inflated prices. A second indictment alleged the director's assistant embezzled another $338,000.
Months later, a former Weber School District secretary admitted to embezzling nearly $1 million over a five-year period.
Those allegations raised concern with state leaders about the efficiency of fraud prevention and detection controls, not only in Weber and Davis but in other school districts as well.
The audit found Davis has addressed the internal control deficiencies, and the sample districts that were looked at as part of the audit generally do not have the weaknesses initially found in Davis.
Davis leaders started working on ways to safeguard against further fraud nearly three years ago after discovering fraudulent activity, which launched an FBI investigation. Since then, officials have limited employees' ability to input new vendors into the computer system and beefed up the process for approving sole-source vendors. And Davis leaders are continually scrutinizing vendors and their prior business relationships with other districts.
A hotline has been established to receive anonymous tips alerting auditors about suspected fraud, and employees are now required to sign a conflict-of-interest and ethics statement.
"We welcomed the audit. ... We have taken very seriously some of the concerns that were brought out, and a lot of the issues have been dealt with," Williams said. "I think the audit validated the things that we have done it's accurate and reflects well some of the things we have done."
According to the report, Weber School District Foundation's pitfalls included using an accounting system separate from the district without developing purchasing and personnel policies and procedures, an inadequate separation of duties and a failure to keep schools informed about available funds.
Those issues are still waiting to be addressed while the new director is assessing the changes.
In looking at other districts' foundations, auditors found that Jordan and Granite had similar control weaknesses, though most were minor because other controls were in place.Auditors also examined Box Elder, Duchesne and Washington school districts.