Chapter 4, Problem 4.47BP

(Learning Objective 3: Evaluate internal controls) Beaumont Independent School 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 February, 2015, Patricia Lambert, former BISD Assistant Superintendent, was indicted for theft connected 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 employment, 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.
• 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 addition, 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.

Requirements

1. 1. For each of the four schemes allegedly run by Lambert, comment on what internal control principles would likely have been violated.
2. 2. For each of the four schemes listed, describe controls that could have been put into place to prevent the type of fraud that Lambert is charged with committing.