The Ridgefield School District’s former assistant business manager overpaid herself at least $806,644 during a 10-year span and manipulated and destroyed records to hide the misappropriation of public money, according to the state auditor’s office.
Peggy Kane, who was responsible for the district’s payroll processing, inflated her net pay by $1,000 to $10,000 per month for 111 months between July 1999 and April 2009,according to the Washington State Auditor’s Office report released Monday.
Kane, who could not be reached for comment, has not been arrested or charged with any crime.
Kane worked in the district’s finance department for 21 years, but the district only had financial records dating back to 1999, according to the auditor’s office. The auditor’s report does not name Kane, but office spokeswoman Mindy Chambers identified Kane as the employee being investigated.
Tip: you can interact with this map using your
fingerscursor (or two fingers on touch screens)cursor.
Map
The school district reported the potential loss of public money to the auditor’s office, as required by state law, on May 14, 2009. The district questioned Kane about the discrepancies and she allegedly admitted she overpaid herself and resigned May 13, 2009, according to the auditor’s report.
Ridgefield Superintendent Art Edgerly said the district was alerted to the alleged fraud when an outside organization requested an employment and salary verification for Kane. When district officials checked its records, they noticed the numbers didn’t add up and questioned Kane. The district then alerted its attorney, local and county law enforcement and the auditor’s office of the possible misappropriations, Edgerly said.
The Ridgefield Police Department began an investigation, which it later handed over to the Federal Bureau of Investigation. The auditor’s findings were submitted to the FBI. The case is being handled by the U.S. Attorney’s Office but no charges have been filed, said spokeswoman Emily Langlie said, who added that she can not comment on cases unless charges are filed.
Edgerly said the district took the situation seriously and acted swiftly to prevent future misdeeds, including reorganizing its finance department and implementing additional oversight.
“Our improved system of checks and balances, along with the commitment to improve our business practices through ongoing professional development and networking services with regional and state organizations, will help ensure similar transgressions do not occur,” Edgerly said.
The district has also filed a bond claim of about $811,000 — the amount of the misappropriated funds and the $11,843 price tag for the investigation — with its insurance company, Edgerly said. The claim has a $5,000 deductible.
As assistant business manager, Kane had full control over payroll processing and unrestricted access to the district’s computer system. She also had authority to transfer district money, according to the auditor’s office.
The auditor’s office found Kane manipulated the payroll system to increase her net pay during her monthly processing of district payroll. She allegedly recorded the misappropriated funds as several benefit expenses, blending the falsified transactions into normal payroll expenses. Kane also reduced her cumulative earnings in the accounting system so information on her year-to-date pay reflected her normal salary, according to the report. Kane made about $60,000 during her final year with the district.
The report said Kane also destroyed district payroll records. Kane ran preliminary payroll reports before entering the falsified transactions and final reports that included the alterations. She destroyed a majority of the final reports and replaced them with preliminary reports, according to the auditor’s office.
At the time of Kane’s employment, the district contracted with Educational Service District 112 for a part-time business manager who provided department oversight. Completed financial reports were sent to the ESD for review, as is the practice for many school districts, and were then forwarded to the state Treasury Department, Edgerly said. Despite the oversights in place, the misappropriations went unnoticed.
“This was a well thought-out process,” Edgerly said, adding that it took someone with a strong understanding of the system to commit the fraud unnoticed.
Before learning of the alleged fraudulent activity, the district had begun making personnel changes due to the district’s growth, Edgerly said. At the end of the 2007-08 school year, the district hired a full-time employee as the director of business services, who would serve as Kane’s supervisor, and discontinued the contract with ESD 112.During the 2008-09 school year, the district began changing personnel and payroll responsibilities, and after learning of the possible fraud, further reorganized those operations.
After learning of the alleged fraud last spring, the district eliminated Kane’s position and hired a payroll/accounting specialist. The district also separated job responsibilities within the department to create checks and balances. Two employees now review payments and records, with oversight by the director of business services. The reports still go to ESD 112 for review and are then forwarded to the state Treasury.
The district also recently converted its finance system to an updated system with greater controls, and all employees completed extensive professional development on the new system and sound business practices, Edgerly said.
