A month ago, the community was shocked to learn of an alleged embezzlement from the Northborough Southborough schools. Many details of the alleged theft by the district’s budget officer were under wraps. That included the amount which was reported by media as between $200k – $450k.*
Today, Superintendent Christine Johnson announced that all funds lost, over $380k, have been regained.
Payments made by the district’s insurance carrier cover misappropriated funds identified by a forensic audit. Insurance will also cover the audit cost. $383,602 was diverted from payments due to Southborough, Northborough, and the Northborough-Southborough districts.
Almost as importantly, Johnson released more details that many have been clamoring for. The statement confirms that thefts began in 2013 through a petty cash account and increased over time, “as the activity remained undetected.”
Recently a statement by Johnson said she was cautiously optimistic that any funds “that would result in a loss” for this year would be recovered. Comments on the blog showed some residents were skeptical.
In this month’s Combined School Committee meeting, Johnson told members that she had confidence in the forensic auditors, now identified as Melanson & Heath. According to Johnson, everyone she talked to in law enforcement was asking her if she had contacted them for help tracking missing funds.
Here is the statement issued by Johnson this morning:
To the School Community: 4.1.16
One month ago, I reported to our school community that a former employee allegedly embezzled funds. The scheme to embezzle funds ended on February 29, 2016. Throughout this 30-day period, I have shared four goals: Identify how this happened; recapture the funds; develop a plan of action to recover, monetarily and systemically; and, communicate the on-going status of the investigation to the extent possible. I can report the following progress toward realizing these goals:
- Based on our forensic audit, the alleged perpetrator was given check writing and signage rights in the spring of 2013 on an account that was referred to as an impressed Northborough-Southborough Regional School District checking account. This account was set-up in 2005 as a petty cash fund for operational expenses, such as postage and certified mailings. Reimbursements to this account were made by submitting receipts through the normal warrant process.
- Prior to the spring of 2013, access to this account was limited to the treasurer and the former superintendent. The budget officer was added in the spring of 2013. Historically, the treasurer would authorize a change of access on the account, which included the Superintendent and any subsequent change in administration. However, once the budget officer was added to this account in 2013 no subsequent change of access was made to this account.
- Beginning in the fall of 2013 and until February 29, 2016, when a determination was made of possible financial irregularities, the budget officer allegedly misappropriated checks, endorsing them, depositing and converting them to cash. The frequency of deposits and check writing to this account increased, as the activity remained undetected.
- Deposited checks included vendor payments and payments customarily made from the Town of Northborough and Town of Southborough to the Northborough-Southborough Regional School District, as a regional school district functions by law as a town.
Based upon the results of my preliminary investigation, and in consultation with our District legal counsel, the following actions were taken:
On February 29, 2016, I placed the budget officer on administrative leave pending the outcome of further investigations, contacted the local police and District Attorney’s Office. The District Attorney’s Office provided support, guidance and direction.
The services of Melanson & Heath, a highly reputable accounting firm specializing in forensic audits, were immediately secured to begin a detailed analysis of our financial data. In addition, I requested that a task force consisting of members of the Massachusetts Association of Business Officials conduct a full Financial Operations Review of our current financial practices and provide a detailed report of findings and recommendations. The Northborough-Southborough Regional School Committee supported a recommendation to appoint an Interim Treasurer and an Interim Assistant Treasurer.
I am pleased to report that the forensic audit is complete and the request to recover funds was submitted to Massachusetts Interlocal Insurance Association (MIIA) our insurance carriers on Monday, March 21, 2016 for review, processing and payment. On March 30, 2016, the Northborough-Southborough Regional School District (NSRSD) and the Towns of Northborough and Southborough received payments that represent full recovery of all identified losses as follows: Town of Northborough – $13,573.00, Town of Southborough – $139,198.73 and Northborough-Southborough Regional School District – $230,830.32. Additionally, we have verified the balances on all of our transactional accounts. Final certification of our NSRD Excess & Deficiency (E & D) funds is anticipated within the next two weeks and MIIA has agreed to pay the costs of the forensic accountant.
Our newly appointed auditing firm is continuing to evaluate and generate the documents to close our FY 2015 audit. Our End-Of-Year Report required by the Department of Elementary and Secondary Education is undergoing the yearly audit review. Based on the information provided by the District’s auditing firm and forensic accountant, there is no impact on the FY 2016 budget. Our forensic accountant will complete an audit of our student and athletic revolving accounts as part of a proactive measure.
It is important to restate that the District Attorney’s Office is conducting a full criminal investigation, and our collaboration with them continues. Our insurance provider, MIIA, is launching its own investigation as it seeks restitution from any source, including but not limited to the alleged perpetrator, or any and all other third parties. Our role in both investigations is to collaborate and support their work.
Our mission is to provide our students with the highest quality, comprehensive educational program. Our dedicated staff commits to this mission on a daily basis and the realization that despite checks and balances, best practices, and extraordinary staff, we are not immune from criminal intent by those who seek to engage in activities that are in direct conflict with our beliefs and values. Our collaboration with our town officials embraces our spirit of community, and as we prepare for the 2016-2017 school year, I am confident that the budgets we will bring before you at town meetings are educationally sound and fiscally responsible.
Christine M. Johnson
Superintendent of Schools
*A Telegram.com report indicated that the accused estimated having stolen $200K-400K, including $150,000 worth of checks in the previous three months. But the story also claimed that charges filed estimated $450,000.
Updated (4/1/16 10:53 am): Minor text edits.