David Kircher
Dear editor:
The following is letter to the Rainy River District School Board explaining our rationale for these questions regarding the missing funds from Fort Frances High School:
This, my third communication regarding your response to my presentation, will focus on your answer to my third question: “The missing funds reportedly occurred over a three-year period. How could this happen over such a period of time without detection?”
In your response, you indicated that “. . .. it was, in fact, the procedures that were in place that detected the missing funds. Generally, when dealing with cases of fraud, it is usually because someone has taken action so that the missing funds cannot be discovered.”
You have indicated that Procedure 8.25—Student Funds was in place to ensure management oversaw the policies for the administrators of school-generated funds. As previously identified, this procedure establishes that financial statements are to be prepared on a quarterly basis; that year-end financial statements (June 30) are to be prepared; that the books and records must be audited each year by an appointed audit committee; and that a copy of the audited financial statement is to be sent to the Superintendent of Business at the Education Centre.
At this point, I would like to quote from Det. Cst. Darren P. Hyatt’s overview of his investigation into the missing funds at Fort Frances High School.
On page 3 of the production order sworn before Justice of the Peace Pat Clysdale-Cornell on Oct. 24, 2007 at Fort Frances, Ont., he states “. . . the Superintendent of Business for the Rainy River District School Board approached Gord McCabe regarding a $175,000 deficit that Fort Frances High School had accumulated and asked him to investigate the matter.”
The document further identifies that the high school account had an annual budget of $300,000. That would have been an alarming amount for a deficit of a school.
On page 4 of the said document, Det. Cst. Hyatt further states: “Laura Mills and Gord McCabe then re-attended the Fort Frances High School and removed the Fort Frances High School’s bank account file and reviewed the returned cheques which had not been examined for several years. It was at this point they learned that . . . [someone] . . . had been writing pre-authorized blank cheques. . . .
“A cursory audit by Mills and McCabe of the cheques found that since the fall of 2005 to present . . . [someone] . . . has [taken] in excess of $249,000 of the Fort Frances High School’s money. McCabe then contacted the Fort Frances OPP. . . .”
It seems apparent that since such a hasty and brief inspection of the returned cheques revealed the fraud and that amount of money, if Procedure 8.25 would have been consistently applied throughout the period of time in question, it is likely that the fraud would have been detected in 12 months or less.
In reference to your second sentence in the quote above, the fraud on the high school account was detected immediately and substantially quantified before even the police were called. Therefore, it certainly does not appear that there were any actions taken by the perpetrator to mask the missing funds.
The board’s management is responsible for the financial statements of the board and the maintenance of a system of internal controls designed to provide reasonable assurance that assets are safeguarded, and that transactions are properly authorized and recorded and, as stated in the management report, these systems are monitored and evaluated by management.
The questions the board should have first and foremost considered on behalf of their constituents should have been the following:
1. Is it not reasonable to expect the signing authorities on a school account to not sign blank cheques?
2. In the event signing authorities on the school account for whatever reason need to sign blank cheques, is it not reasonable to expect that the signing officers would verify that the payee inserted in those cheques were the authorized recipients of the funds?
3. Is it not reasonable to expect that the signing authorities on the school account would require a corresponding invoice, voucher or “chit” signed by the authorizer?
4. Is it not reasonable to expect that one or even both of the authorized signers on the school account reconcile the bank statement or at least review same, if not on a monthly basis, certainly bi-monthly?
Not withstanding any policies and procedures implemented by the board, is it not reasonable to expect the above actions for any operating account? Further, as a significant portion of these funds were from fundraising efforts of students and parents, and entrusted to the school’s care, would it not be reasonable to expect that at minimum, the above actions would have taken place?
We—myself and the other 143 people who signed the petition presented to you—believe that the fraud perpetrated on the Fort Frances High School account went on far too long and in what appears to be a very obvious manner for there not to be more responsibility and accountability assessed in this matter.
Our concern is not just with the Fort Frances High School account but the fact that this board and management are responsible for a global budget of almost $40 million. All the policies and procedures are meaningless if they are not consistently applied and enforced.
Enforcement would include ramifications or disciplinary measures in the event of staff failure to apply the policies and procedures of the board.
What has this board done, aside from implementing the new policies and procedures and staff training, to determine any accessory responsibility for this fraud? What has this board done in terms of holding any of those identified accountable for their actions?
For we believe that more policies, procedures, and staff training, particularly for the issuance of cheques, has done nothing to reassure us that management has firm financial control of the funds the board employs them to manage. This is why we are requesting answers to these questions from this board.
Thank you,
David Kircher
Fort Frances, Ont.
