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OPINION | JOYCE O. AJAYI: Curb temptation

Bad rules seduce even good people by JOYCE O. AJAYI SPECIAL TO THE DEMOCRAT-GAZETTE | July 16, 2021 at 2:59 a.m.

You may have heard stories of seemingly good individuals who came into public service but ended up with a trail of corruption scandals.

Such stories leave us wondering what went wrong. In his book "Principles of Fraud Examination," Joseph Wells, the founder and chairman of the Association of Certified Fraud Examiners (ACFE), points out that generally, employees don't set out to be corrupt from the outset.

However, when employees experience financial pressure with weak organizational controls or rules, it is easy for them to develop rationalizations for fraud.

A reputation for being a "good person" is not good enough in public-sector leadership. When public offices are set up with weak internal controls or public oversight, opportunities are created for greed and corruption.

Lack of transparency and weak fiscal controls may even tempt "good" and honest employees. Consider April Michelle Poor, a Marvell-Elaine School District bookkeeper, who embezzled $471,665.

Her embezzlement caused teacher and counselor layoffs and nearly shut down the district. Interestingly, some community members described Poor as a good lady who volunteered in the community and sang in the choir. She was the last person in their small community anyone believed would commit fraud.

Yet Poor committed fraud by issuing 92 checks to herself from July 1, 2014, to Dec. 31, 2018. She hid the payments in the district's accounting system by making false entries indicating she used them to pay utilities, and altering bank statements.

Her employment was terminated on Jan. 17, 2019. She was sentenced to four years in federal prison last year.

In this case, too much power was vested in just one person. Poor was the bookkeeper; she issued checks, and she also made entries in the accounting system. One individual should not have control over more than one aspect of the accounting system. Her ability to circumvent procedures and alter bank statements made the fraud possible. There was also an overall lack of oversight.

This kind of situation is more common than one might think. A review of data obtained from the latest Prosecuting Attorney Disposition Report shows that 294 matters across Arkansas were referred to prosecuting attorneys in 2019. Many of the cases were transactions reflecting weak or bad rules such as conflict of financial interest, poor record-keeping, lack of separation of powers, unauthorized disbursements of funds, disbursements to fictitious companies, and general abuse of public property by a public official or employee.

In the 2018 version of the report, examples of cases reflecting such bad rules were also recorded. For example, the West Memphis School District made a transaction of $107,790 for various roof repairs, without school board members passing a resolution, with a business where an employee had a financial interest.

Another example of weak internal controls occurred at the Westside School District in Cleburne County, where the district's treasurer pleaded guilty to five counts of felony theft of property and improper transactions totaling $178,391, including payments to personal or fictitious vendors.

Employers can easily prevent fictitious vendor schemes if they maintain and regularly update an approved vendor list, and independently verify all vendors before payment.

In "Arkansas Policy Recommendations: Procurement Transparency," recently released by the Arkansas Center for Research in Economics, Dr. Mavuto Kalulu and I made recommendations for how local governments like counties and school districts could reduce corruption by improving transparency and adhering to generally accepted accounting principles. For example, checks and balances, separation of powers, and public oversight are important tools.

The cost of corruption goes beyond the loss of public funds. It can shut down or cripple an entire system, like in the Marvell-Elaine School District. Poor's embezzlement meant layoffs, which meant children in the community could not be effectively served that school year.

According to the Arkansas Department of Education (ADE) Data Center, 99.7 percent of students in the district are from low-income families. Students in the district already make less academic progress than their peers at other schools in the state (the ADE Data Center describes academic progress as the combination of the school's average score in reading, math, and science tests). The nearly $500,000 Poor stole from the district could have gone toward improving academic outcomes.

To prevent corruption, governments should create more systems that provide for checks and balances. When public officers are aware that their actions are being watched closely, it will undoubtedly improve their behavior.

Joyce O. Ajayi is a policy analyst at the Arkansas Center for Research in Economics at the University of Central Arkansas in Conway and co-author of "Access Arkansas: County Web Transparency." The views expressed here are those of the author and do not necessarily reflect those of the University of Central Arkansas.

Print Headline: Curb temptation


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