NATIONAL SCIENCE FOUNDATION OFFICE OF INSPECTOR GENERAL OFFICE OF INVESTIGATIONS CLOSEOUT MEMORANDUM TO: AIGI File Number: I97070032 Date: 02 March 2002 Subject: Closeout Memo Page 1 of 1 1I There was no closeout written at the time this case was closed. The following information was extracted fiom the file in conformance with standard closeout documents. Our office was informed that the subject1was alleged to have committed embezzlement, theft, or diversion of grant funds. The university's2 audit branch notified NSF-OIG that the subject, a secretary on an NSF grant3,had generated false vouchers and received payments for guest speakers who did not exist, and had stolen computers purchased with NSF funds. The University police executed a search warrant and recovered financial documents and stolen computers worth $5,077. Prosecution of the subject was coordinated with the local district attorney's office. The University returned the remaining loss of $47,034 to the NSF grant, for a total recovery of $52,111. The subject and two other individuals pleaded guilty in state court. The subject was sentenced to one year in jail, restitution, and probation. The two other individuals received probation. Accordingly this case is closed. I Prepared by: Cleared by: Agent: Attorney: Supervisor: AIGI Name: Signature & 'I date: 1 . . . ... SENIOR VICE PRESIDENT--BUSINESS AND FINANCE OFFICE OF THE UNIVERSITY AUDITOR MATHEMATICS AND SCIENCE Internal Audit No. Report on Defalcation December 1997 Prepared by: - --- -- CPA I; Principal Auditor Approved by: -. .A - ,CPA CPA Director of ~u'ait University Auditor TABLE OF CONTENTS Page No. I. INTRODUCTION A. Purpose of the Investigation B. Scope of the Investigation C. Background 11. RESULTS OF INVESTIGATION A. Stipend Payments B. Equipment C. Supply Purchases D. Cost Reimbursement E. Travel Vouchers Appendix A-F INTRODUCTION A. Purpose of the Investigation On June 13, 1997, the University Auditor was contacted by the Director of Administration for Academic Advancement. The Director was concerned about the activities of an employee, inthe, ( ). Department investigation procedures had ascertained that : ordered a Dell Laptop computer that had not been authorized and had apparently forged the signature of the Assistant Vice President for Academic Advancement on an Entertainment Check Request. The Office of the University Auditor initiated an investigation into the concerns raised by the Director of Administration for Academic Advancement. The objectives of the investigation were to: 1. ascertain the validity of the concern raised about 2. quantify the amount of any loss, 3. ascertain the methodology used to commit any fraudulent activities, 4. determine if any other individuals were involved in any fraud identified, and 5. identify internal controls that may have been circumvented by any fraudulent activities. B. Scope of the Investigation The non-payroll transactions of 1 for Fiscal Years 1995-96 and 1996-97 were reviewed as part of the investigation. The investigation included an examination of invoices, independent consulting agreements, contract files, subcontract agreements, canceled checks, travel vouchers, computer reports, correspondence files, personnel records, and interviews of employees and vendors. The investigation also included a limited review of subcontractor (formally known as .. --- -. . The review focused on controls over vendor payments, specifically stipend payments. Investigative efforts were coordinated with the , Police and Special Agents of the Office of the Inspector General, National Science Foundation (NSF). NSF's Special Agents requested and were provided periodic updates on the status of our investigation. NSF Special Agents attended our initial meetings with - -. C. Background is .'s state initiative to promote math and science education reform. Funding for - is provided by a grant fiom NSF. The kite Department of Education ( , was initially responsible for managing and overseeing activities. awarded ' (formally known as a subcontract to operate and administer t's two programs: )and Under the subcontract 's responsibilities included: employing directors for and securing and managing extramural funds, working with in developing policy and strategic plans for and I, assisting with outreach and public relations. Responsibility for was transferred fiom the to the University in September 1994. The University became responsible for managing and overseeing all activities related tc and for providing leadership, policy coordination, and strategic planning and implementation for the entire initiative. The transfer included oversight responsibility of ----- s $1.5 million subcontract. The Office of Academic Collaboratives in Education, within the Department of Academic Advancement, administers the program. Director is the University employee responsible for overseeing 'S operations. _- continues to provide support by allowing '- to purchase airline tickets through the -- ._1 travel agency. Director as overall coordinator is also allowed to purchase airline tickets through the travel agency. was Direct01 r's Administrative Assistant and was responsible for vendor contracts and invoices including 's subcontract. 11. RESULTS OF INVESTIGATION Administrative Assistant 1; 8 dehuded the University of $55,5 17 by initiating fraudulent disbursements, stealing computer equipment and supplies, and stealing cost reimbursement checks. $5,077 of the $55,5 17 has been recovered. was able to accomplish her fraudulent activities in part because she undermined internal control procedures by forging signatures and supporting documents. No evidence of involvement by other University employees was noted. A summary by type of transaction of the $55,517 loss amount and the $5,077 recovered amount is set forth in Appendix A. A. Stipend Payments Finding Administrative Assistant defrauded the University of $3 1,246 by initiating and processing nineteen fraudulent payments to friends and relatives. (See Appendix B for detailed listing.) Comments was hired in September 1995 to be Director - 's Administrative Assistant. Her duties included, among other things, the preparation of expenditure documents, the monthly reconciliation of ( s General Ledger, the preparation of 's budget reports, and ordering department supplies. ' However, :did not have authority to approve expenditure documents. aenerally circumvented this control in two ways. ' would either forge the supporting documentation or forge an approver's signature. Since ----- - performed the G/L reconciliation there was little chance the forgeries would be detected. Characteristics of the fraudulent payments were as follows: checks were delivered tc : instead of being mailed to the payee, payees were family or fiiends of: checks were cashed by payees at local P Bank Branches or deposited into s bank account, and supporting documentation either was forged or did not exist. B. Equipment Finding Administrative Assistant ;tole three Dell computers and one HP DeskJet Printer totaling $1 1,414. (See Appendix C for detailed listing.) Comments Concerns about. first surfaced wher 's Property Management Unit sent Property Tags for two Dell Laptop computers to Academic Advancement's Inventory Manager. The Inventory Manager had no paper work on the computers and requested the paper work from ,,A,, ,,, The paper work provided by showed the purchase of a single Dell laptop computer. Academic Advancement's Inventory Manager contacted 's Property Management Unit to correct the number of computers purchased. However, 's Property Management reaffirmed its position and sent a copy of the Dell Purchase Order which showed the purchase of two Dell Laptop computers. : was then confronted with 1 ~ ' Purchase s Order. stated that she had decided to order the second computer because of discussions she had with the Director regarding a Laptop computer for another individual in the unit. then contacted Dell Computer and obtained a return authorization number. However, the computer was never returned. The Department Inventory Manager contacted Dell Computers on July 10, 1997, to verify that the computer had been returned, but was informed that the computer had not been returned and the return authorization had lapsed. A subsequent physical count of the department's inventory disclosed two Dell Optiplex 5 100/xm computers missing. The Department's Director of Administration stated that a HP DesMet color printer was also missing. A search .of; 's residence by the .'olice recovered one missing Dell Optiplex 5100/xm computer, the missing HP DesMet color printer, and the ' : property tag for the other missing Dell Optiplex 5 100/xm computer. C. Supply Purchases Finding Administrative Assistant I : made twenty supply purchases totaling $6,744 that were fraudulent or had no supporting documentation. (See Appendix D for detailed listing.) Comments One of: : 's duties was to buy supplies for the department. Our review of Academic Advancement's supply purchases disclosed twenty purchases that had no supporting documentation, such as supply requests, receiving reports, invoices, and entries in the Department Procurement Authorization Log. Documentation for two of the twenty purchases was obtained by Police during the search of 1 's residence. One was a $1,564 purchase from -. for upgrading one of the Dell computers that she stole fiom The other was a $213 purchase of software that was later returned. Our review could not locate a credit in the Ledger for the $213. D. Cost Reimbursement Finding Administrative Assistant defrauded the University and the ( Department of Education of $5,95 1 by inappropriately diverting cost reimbursements to herself and her sister. (See Appendix E for detailedlisting.) Comments American Association for the Advancement of Science entered into two agreements, each referred to as a "Memorandum of Understanding," with the American Association for the Advancement of Science (AAAS). The agreements stated that AAAS would provide financial assistance to : in sponsoring conferences. J -- - --,was able to divert an AAAS reimbursement of $4,120 by inappropriately completing the "Payer's Request for Taxpayer Identification Number and Certification." Instead of showing the University as Payee, listed her sister : - .... - as payee. -. Accordingly, AAAS ,sentthe check to '! : instead of the University. - Director . _ , attended a conference in Washington, DC in October 1996. All . costs associated with the trip were to be paid by : . . \ ;1 y. A University "Travel Expense Report" in the amount of $1,831 was prepared by on behalf of Director ... , The "Travel Expense Report" was submitted to in January 1997. Expenses claimed on the J' "Travel Expense Report" were: airfare $1,792, parking $30 and meal $9.17. The costs actually paid by Director ( , were parking and the meal. (The airfare was charged to the , Department of Education's account by - . Once I - ., -- ----., had reimbursed the $1,792 airfare, the _--_ - _ State Department of Education should have been reimbursed the $1,792, since it paid the airfare.) * A search of ,'s bank records disclosed the deposit of the $1,83 1 r check. The check had been endorsed over to ' - ' . by Director 1 However, Director - stated that he had never endorsed any check over to ' , , Director. - ' arivers License number was also on the check. However, during our review of . . -- _ ;'s office we found a photocopy of Director ; dr's - -- - Drivers License. During our interview of Director - he stated that on several occasions he had given ; his wallet. E. Travel Vouchers Finding Administrative Assistant , defrauded the University of $162 by submitting claims for airfare costs did not incur. (See Appendix F for detailed listing.) Comments A review of s travel reimbursements disclosed that she claimed reimbursement for airfare she did not incur on two travel vouchers. The tickets for both trips were purchased through ,. - -.,and charged against the . .__- - -. State Department of Education account. did not incur any airfare cost. ***** -. ..... Investigation Appendix A Project No. Summary of Fraudulent Transactions Loss v Area Amount ELSE Other Reference Stipend Payments $31,246 $29,632 $1,614 Appendix B Equipment 1 1,414 11,414 Appendix C Supply Purchases 6,744 6,744 Appendix D Cost Reimbursement 5,951 4,159 1,792 Appendix E Travel Vouchers 162 162 Appendix F Loss Before Recoveries $55,517 $52,1I 1 $3,406 Less Recoveries Computer Equipment $3,513 $3,513 Appendix C Computer Supplies 1,564 1,564 Appendix D $5,077 $5.077 Adjusted Loss Investigation Appendix B Project No. 1 , - Schedule of Fraudulent Payments Federal i' Payment Check Issue Grantee- Relationshir, nu= Rea Piatr: Amount blnte DOE .' ).-'.. Friend Stipend F594118 25-78065 NSF - Friend Stipend F565439 27-75983 DOE ....-..- .. Friend Stipend F573042 26-02775 NSF Friend Stipend F565438 27-75985 NSF -. . .. .- .. Friend Stipend F565466 25-40558 DOE Cousin Stipend F594117 25-80964 DOE Husband Stipend F573040 25-86474 DOE Husband Stipend F594121 26-02768 NSF Husband Stipend F573016 27-75984 NSF Husband Honorarium F565408 NSF Husband tI F565408 NSF Husband tt F565408 29-23603 DOE . .-.. J Sister Stipend 25-571 59 NSF Sister Stipend F565436 27-76363 NSF Sister Stipend F565409 27-90315 NSF Sister Stipend F565449 28-40556 NSF Sister Stipend F682203 28-76886 NSF Sister Editorial Serv F565416 29-06383 NSF Sister Editorial Serv F565415 29-06384 Note 1' xnceled the first check because accounting mailed the check instead of sending the check to her. The second check was voided by , accounting because of printing errors during the check write. Investigation Appendix C Project No. , ,. Equipment Transactions Property Reference Number Description Number Price Notes - - .- -- . . . Microcomputer $3,080 (A) Dell OPTIPLEX 5100IXM - . -0 * 3 Microcomputer , & ' a Dell OPTlPLEX 5100IXM ; . .d.l ., Microcomputer Dell Latitude LM M166MMX HP DeskJet 820 CSE Total Less Recoveries Dell OPTIPLEX 5100lXM HP DeskJet 820 CSE Adjusted Total Notes: (A) Equipment was recovered by 'olice during their search of residence. (B) Printer was purchased using Low Value Purchase procedures. Accordingly, it was not placed into inventory but instead expensed. ; Investigation Appendix D Project No ' Supply Purchases - i Vendor Amount Comments No Documentation It Notes Defalcation I1 No Documentation It 11 I1 tI I1 i ! Total f t 1 t , !. j Notes: i 1. Documentation supporting the validity of these i purchases could not be located. The University has decided to treat these purchases as not being valid. I ! 2. This was a purchase of computer hardware to upgrade i the stolen Dell OPTIPLEX Computer recovered by the I1 -,, Police during the search of ;, ., I s residence. 3. Documentation for this purchase was recovered by the - - Police during the search of s residence. This was a purchase of computer software that later returned for credit; However, our review of s G/L could not locate the credit. Investigation Appendix E Project No. Cost Reimbursements Reimbursement LYrre AImulIt Notes American Assoc. for the Advancement of Science Conference Costs $4,120 1 Travel Expenses 1,831 2 $5,951 Notes: 1 ! diverted AAAS's $4,120 payment by inappropriately completing the Payer's Request for Taxpayer Identification Number and Certification. listed her sister a I . ., as payee instead of the University. 2 A search of , I -41 s bank records disclosed the deposit of the $1,831 University check. The check had been endorsed over t~ h- r by Director I However, Director - stated that he had never endorsed any check over to .Investigation Project No. Appendix F Travel Payments - Traveler Total Amount of avel Voucher Amount of Airfare Claimed Note: 1 ; airline tickets for both these trips were purchased through . The cost of the tickets were charged to IState Department of Education account at . .1. : should not have claim reimbursement for airfare since she did not incur any airfare costs. OFFICE OF THE SENIOR VICE PRESIDENT- OFFICE OF THE PRESIDENT BUSINESS AND FINANCE February 26, 1998 Grants and Agreements Off~cer National Science Foundation 4201 Wilson Blvd. Arlington, VA 22230 Subject: Internal Audit of Cooperative Agreement No -. . On July 17, 1997, we informed you that we had discovered an employee theft involving the subject agreement. At that time, we promised to provide you a report when our investigation was completed. As promised, enclosed is a copy of the internal audit. The investigation was conducted with the assistance of Special Agents and from the NSF Office of Inspector General. Appendix A provides a summary of fraudulent transactions for the period of October 1995 through July 1997. Total losses to the NSF Cooperative Agreement amounted to $52,111. Of this amount, $5,077 was recovered in computer supplies and equipment, or replaced with comparable equipment provided by the University. The remaining loss was replaced with University resources. The 'olice Department has requested that the County District Attorney's 0 k c e prosecute the individual involved in the theft. Our investigation did not find evidence of involvement in the theft by other University employees, and we terminated the involved employee in July 1997. 1 , , ,. February 26, 1998 Page 2 of 2 The University department housing the )reject has since undergone extensive review, including internal audits of processes and procedures. System controls were strengthened in an effort to prevent any fbture losses resulting from fiaudulent activity. Should you have any questions, please feel free to contact me at (510) 987-9838. Director Research Administration Office Enclosure (1) cc: Director --------., ,u/ enc.) Special Agent. (w/ enc.) Provos - Auditor Director - Director . Director (
Published by the National Science Foundation, Office of Inspector General on 1997-10-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)