reprinted from
For some in government, tough times turn into temptation
More public employees reported as stealing, state auditor says
By Bill Salisbury | Updated: 03/13/2010 06:28:13 PM CST
During the Great Recession, a growing number of public employees have ripped off local governments in Minnesota, according to a state auditor's report last week.
Cases of fraud, theft and embezzlement reported to the auditor's office increased from 34 in 2007 to 64 in 2008 and 54 in 2009, the report said.
State Auditor Rebecca Otto said the increase in the number of cases and dollar amounts of fraud is directly related to the economic downturn.
Public employees, like private-sector workers, are under more financial pressure during a recession, Otto said. They may have lost a job or health insurance and consequently may be more tempted to steal public money.
They also have more opportunities to steal, in part because of cuts in local government budgets, she said. Staff reductions often result in fewer people exercising internal controls.
"People can see weaknesses in control systems" and may be more tempted to exploit them, she said. "They are more likely to think that nobody will notice."
In addition, local governments, especially schools, are charging fees for a wider range of services, resulting in more "cash-collection points" that could be vulnerable to theft, she said.
In tough times, she said, people are more likely to rationalize doing things they wouldn't normally consider. "They think, 'I'll pay it back' or 'They won't miss it,' " she said.
"We see good people making poor decisions," she said.
Otto cautioned, however, that the problem shouldn't be blown out of proportion. Her office oversees about 4,300 cities, counties, school districts and other local government entities with thousands of employees, and she said fraud is no more prevalent in local governments than in private businesses.
"Minnesota still has clean government," she said.
But during hard times, fraud prevention is even more important, she said.
In response to the increase in reported financial crimes, her staff has beefed up programs to train local government personnel in how to prevent and detect theft. Her legal and special-investigations team provided training to about 1,000 local government officials and administrators in 2008 and 2009, and her staff is providing more educational material to local governments.
When government budgets are tight, officials tend to scrutinize their finances more closely and are more likely to detect fraud, Otto said.
State law requires local officials or employees who discover evidence of theft of public money to notify the auditor's office. Otto's staff then makes sure local law enforcement officials are notified, offers to investigate or help a private auditor probe the case, and advises local officials on how to improve internal controls.
During the past three years, six local government employees have been charged with crimes after the auditor's investigations. While some cases are still pending, local governments have received $449,268 in restitution or court judgments from the offenders.
St. Paul Public Schools received $86,078 in restitution from an accounting technician who diverted more than $81,000 in district money to pay Xcel Energy electric bills for the employee's home over 44 months between 2006 and 2009, according to the auditor's report. The employee was convicted of theft by swindle and sentenced to 120 days in jail.
In response, school officials simplified the way Xcel bills the district, said Michael Baumann, the district's chief business officer.
They increased oversight of the collection of checks and required more verification, Baumann said. They also are doing a "pattern analysis of all of our billings" to detect any fraud or abuse.
He said the auditor's staff was helpful in strengthening the district's financial controls.
Here are the other criminal cases resulting from the auditor's investigations:
- An investigation of the Aitkin County Planning and Zoning Department found that a bookkeeper failed to deposit more than $26,600 in fees collected between 2005 and 2008. The bookkeeper has been charged with a crime.
- A Norman County East School District bookkeeper embezzled $118,701 from the district from 2006 through 2008. She was convicted of embezzlement and check forgery and sentenced to 180 days in jail. The amount of restitution hasn't been determined.
- The city of Henning's former utilities billing clerk stole more than $16,000 in utility payments between 2005 and 2007. The clerk was convicted of theft by swindle, sentenced to 30 days in jail and ordered to pay $18,461 in restitution.
- A Koochiching Economic Development Authority worker wrote herself over $340,000 in unauthorized checks from 2002 to 2007. She was convicted of forging checks and sentenced to a year in jail. The authority won a civil judgment against her for $341,742.
- The Winnebago Firemen's Relief Association's treasurer deposited $2,800 of pension funds into his private business account. He was convicted of theft and ordered to pay $2,987 in restitution.