Tuscaloosa City Board of EducationLocal Government

An adequate system of internal control requires the incorporation of segregation of duties, or proper reviews when adequate segregation of duties cannot be achieved, to ensure the controls are operating effectively. During the audit period, management of the Board noticed unusual activity regarding payments to a vendor. Upon further investigation by management, it was determined, an employee of the board requested approval for a new vendor in the accounting system during fiscal year 2017. Beginning in August 2017, the employee processed, and submitted for payment, invoices from this vendor for electrical/mechanical repairs at various local schools. Management determined this work was never performed at any of the local schools. The first fraudulent invoice was submitted to department superiors for approval. Subsequently, the employee copied the approved signature from the first fraudulent invoice to be used on all future invoices from this vendor. These fraudulent invoices were processed and submitted to be paid until this was discovered in June 2019 due to an unrelated investigation of the employee. Additionally, it was later determined by management that the vendor bank account used to deposit funds received for these fraudulent invoices was the same bank account used by the employee who requested the vendor's approval into the system. As a result, Child Nutrition Program funds were used to pay fictitious invoices in the amount of $53,109.59 from August 2017 through June 2019. The Board?s internal control system was not being adequately monitored to ensure effective operation of the Child Nutrition Program. As a result of not properly monitoring their internal control system, the Tuscaloosa City Board of Education suffered a financial loss by theft.