AgdaPkt 2013-09-23 Closed and Regular

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District employees; auditors; and County Counsel attorneys who have represented the District. Subpoenas • The Grand Jury's presiding judge issued five subpoenas in order to obtain information. (Relatedly, it is noted that the Board declined to waive its attorney client privilege with the County Counsel when the Grand Jury requested it to do so.) DISCUSSION District Embezzlement The noticing by one Trustee in early 2011 of discrepancies between budgeted and actual expenditures led to the discovery of the embezzlement. This Trustee brought the information to the attention of the Manager and the other Trustees. In addition, annual certified audits by the District's outside accounting firm for fiscal years 2009 and 2010 identified significant deficiencies that went unresolved during the period of time in which the embezzlement took place. Examples of such deficiencies included the failure properly to record accounting transactions and petty cash management. The District embezzlement was unique according to one qualified interviewee, because it involved the entire finance department, consisting of two employees. These two employees are no longer with the District, and the County District Attorney has charged them with embezzlement. The employees have pleaded no contest and are awaiting sentencing. Prosecutors alleged that District funds were embezzled between 2009 and 2011 when the finance director and her assistant placed themselves at a higher pay rate, fraudulently took time off, contributed excessively to their deferred compensation funds, used credit cards for personal purchases, and electronically transferred money into personal accounts. The forensic audit (described below) showed more than $635,000 missing but prosecutors charged them with embezzling only $400,000 because they could not prove an actual loss of the greater amount3 The District's forensic auditor calculated the total loss resulting from the embezzlement to be $796,781. (Appendix A.) This is the amount the District reported to its insurance company. The annual certified audits of the District for fiscal years 2009 and 2010 suggested that there was a lack of sound management and fiscal responsibility. A subsequent forensic audit of the District listed "ten distinct loss activities that were executed against the District by 2 former employees,.,,"' These loss activities included incorrect pay calculations to employees, unauthorized and personal use of credit cards, and fraudulent reporting of time off for family Medical Leave Act (FMLA). While taking FMLA, one employee served jail time for a previous embezzlement. End in sight for mosquito district case: Former finance chief expected to plead guilty on 10 charges related to embe=lement ofpublic money, March 22, 2013, Heather Murtagh - Daily Journal Staff. a See Appendix B. 4 L I- abed - 3 L L