What internal controls might have prevented an Anderson Community School bookkeeper from stealing more than $1 million?

The Anderson Community School Corporation hired Carla Burke in 1998 and then made her the food service department bookkeeper in 2006. She worked as the bookkeeper until she retired in 2019.

Burke was responsible for maintaining the records for the school lunch fund. She reconciled the bank account, maintained vendor invoices, prepared checks to send to vendors, and filed the departments payroll withholding taxes. She also maintained the cash balance records and posted deposits.

There were two required signatures on checks written. Burke’s was one of the required signatures. When checks were prepared electronically, the computer system provided both signatures.

During the special audit after Burke retired, auditors found checks that Burke had written supposedly for vendors that were cashed by Burke. From 2014 to 2019, Burke cashed 312 checks from the school lunch fund that totaled $976,773. All 312 checks were made payable to, endorsed, and cashed by Burke. The lunch fund records including check registers and purchase authorizations showed that the payments were made to vendors, not to Burke. There were not vendor invoices to support the 312 checks.

In addition, Burke did not remit the withholding tax payments in a timely manner, resulting in penalties. Burke also submitted mileage claims for reimbursement but did not use the prescribed mileage claim forms.

As a result of the special audit in 2022, Anderson Community School is now asking Burke to repay more than $1.1 million to taxpayers following a special audit. The $1.1 million includes restitution for the 312 checks, mileage, the cost of the special audit, and penalties and interest for the untimely withholding taxes remittance.

The special audit found that no other employees from the school corporation ever reviewed the bank statements or canceled checks. They also found that the software that Burke used allowed transactions to be changed at any time, including after audits.

Carla Burke’s LinkedIn profile as of July 24, 2022, listed “Handle all the accounts payable, accounts receivable, bank reconciliation, budgeting, cash flow, oversee 10 school cashiers and monitor POS system…” for Anderson Community School.

As of the date of this writing, Burke has not been charged with a crime, but a prosecutor and the FBI are looking into the case.

View a quick tutorial video about internal control at this link and then answer the following questions.

Questions

1. What internal controls might have prevented this theft?
2. Why might Anderson Community School Corporation have not had these controls in place?

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