Question

LO 3 P4-47B. (Learning Objective 3: Evaluate internal controls) Beaumont Independent Sche District (BISD) is a public school district in Beaumont, Texas. It has three high schools, six middle schools, and 16 elementary schools, serving approximately 21,000 students. In Febnu ary, 2015, Patricia Lambert, former BISD Assistant Superintendent, was indicted for theft con nected with her position in the school district. Lambert allegedly defrauded the school district for more than $750,000. Lambert was sentenced for federal charges of theft in 2016 to 40 months in prison and ordered to pay back $500,000 in restitution The story of Lambert at BISD begins in 2002, when Lambert was hired by the district as a teacher. She would eventually be promoted several times, finally to assistant superintendent, a position in which she remained until her retirement in 2014. During the course of her employ! ment, she is charged with embezzling more than $750,000 from BISD. Here are descriptions of the schemes in which she participated/orchestrated: Booster Club funds: Lambert took control of the Booster Club from the parents who had been running it. She gained full access to the booster club's funds, which were not subject to BISD oversight or audits. She began taking money from the booster club; she wrote checks for more than $24,381 payable to her children or herself from the booster club funds. Lambert also purchased clothing, clothing accessories, and electronics for her own personal use from the booster club funds. Student activity fees: During Lambert's tenure at the school district, she also directed that certain student activity fees be paid to the booster club where she had control of the funds. For students to obtain copies of their official transcripts, they had to pay a small fee, usually less than $5. Those transcript fees were directed to the booster club account by Lambert where she had access, without audit or supervision to the funds. Booster club reimbursement for travel: Lambert also wrote checks out of the booster club account to reimburse herself for school district travel, even though she had already been reimbursed by BISD for the travel. Cash fund: Students in the district would have to pay a $10 fine when found with a cell phone in class or when they lost their student ID. These fines went into a cash fund. In addi- tion, there was a snack area set up near the cafeteria where students could purchase candy and chips. The inventory of candy and chips was paid for by the booster club. A portion of all of these cash fees and sales were deposited into Lambert's personal bank account. As a side note, before she joined BISD in 2002 as a teacher, Lambert was convicted of extortion in Louisiana after running a kickback scheme with teachers for whom she secured pay raises and job promotions.

Answer 1

The internal controls that Lambert has violated are as follows:

1. Separation of duties: there are no separate duties for club management and cash access and there is no dual custody role .

2.sensitivity of access: there are no strict internal controls restricting sharing of passwords and restricting nauthorised access to school assets

3. Irregular updating of account

4. Approval authority requirements : there are no approval authority requirements or controls , hence Lambert made her approval her self and it leads to misappropriation of cash and other assets.

5. It was given that Lambert was earlier lambert has been convicted of extortion, hence scholl should have considered this remark while accepting his candidature for the teacher job .

So the school should implent the following principle ls to avoid such violations

1.periodic reconciliations in accounting system

2. Daily or weekly trial balances

3.physical audit of assets.

4.separation if duties and strict restriction to unauthorized access to school assets

5. Regular intervals of audit

6. Taking appropriate action of internal auditors report. Etc..