Stop school district fraud. A simple solution.

Despite persistent reports of financial mismanagement embarrassing school district leaders across  Illinois and mounting financial pressures forcing districts to get more done with less resources, many school districts still lack necessary and fundamental oversight of their financial operations. School leaders often forego an indispensable resource designed to protect their reputations and reduce the risk that their district’s malfeasance will dominate local media reports and newspaper headlines.

The solution is an internal watchdog like an inspector general or internal auditor.

An inspector general (IG) investigates allegations of waste, fraud, financial mismanagement and employee misconduct in an agency. An internal auditor conducts proactive audits to expose the risk of fraudulent acts or point out waste and inefficiency. Some IGs perform an investigative and audit function for their agency – “audigators” as a colleague once referred to the partnering of investigators and auditors to root out waste and expose the risk of misappropriation of funds.

Call it an IG, an internal auditor or an “audigator” – each could serve a district’s needs for far less than the costs districts incur following the exposure of misconduct. Legal bills, compliance with law enforcement investigations, civil recovery actions, even qui tam claims can drain resources and distract district administration and staff from their core function.  Avoid those costs and prevent your district from the embarrassment that accompanies scandal.

Even outsourcing an IG or internal audit function will prove far more effective than doing nothing.  Resourceful districts should even consider pooling resources to have IG services available as needed, on retainer in essence, to respond to allegations or to proactively design an audit plan identifying high-risk areas for review which could expose malfeasance before it can take root.

Perhaps an IG or internal auditor would have exposed plans Lincoln-Way High School District 210 had to spend diminishing resources on a dog training facility, or stopped a deal that allowed a day care provider rent-free access at the district’s four schools, or even argued against the $5 million purchase of land for a fifth school when the district was struggling to fund operations at its four existing high schools. We will never know if an independent internal auditor could have analyzed demographic trends and economic data, then sounded the alarms of financial distress a few years earlier to alert the district on the risks of overexpansion.

School districts educate our children and most do an exemplary job. But we often remember districts more for the financial shenanigans that embroiled superintendents and Board leaders. Recently, we shuttered when we learned the Chicago Public Schools CEO was set to benefit from a sole-source contract she orchestrated for a former employer – a scheme exposed by the district’s IG.  I still recall a Sauk Village superintendent convicted of stealing hundreds of thousands of dollars from an impoverished school district.

There are others. Travel through communities around the state and many taxpayers could likely recount issues that embarrassed their school leaders. The humiliation occurs too frequently. Something must be done to protect diminishing revenues and ensure that funds support classroom needs and stay out of the pockets of school leaders, or even lower level staff, who seize opportunities to walk-off with unsecured activity funds or fundraising money. The subsequent exposure of these misdeeds occurs too late to remedy the greedy actions.

Having systems in place designed to identify high-risk areas, ensure effective controls are in place and, if necessary, respond when controls are circumvented, sets the tone that misconduct will not be tolerated and will be swiftly detected and punished. The fraudster will have to do their own risk assessment before seizing an opportunity to steal or misappropriate funds. If an IG or internal auditor is on the scene, the fraudsters risk assessment will likely reveal that committing a fraud is too much of a risk.

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