Deep Background

Accountant Due Diligence: Proper Diligence on the Accountant Would Have Prevented the Problem

            One lesson of the scandal at a downtown public-improvement agency in Texas is a basic one:  It’s a good idea to perform a background check before hiring an employee.  It seems a particularly good idea when the organization is hiring a staff accountant to handle all its finances.

            The downtown public-improvement district, which collects property taxes to sweep streets, remove graffiti and the like, fired its office manager and accountant, after concluding that she had allegedly embezzled hundreds of thousands of dollars from the nonprofit group, according to news accounts.

No due-diligence review

            The former accountant had been hired three years before, in 2014, first as a worker from a temp agency and later as a permanent employee.  But on neither occasion did her superiors perform a due-diligence review or a criminal background check on the former accountant, the local news stories said.

            If they had checked, they would have discovered the former accountant’s troubled past. In 1997, she pleaded guilty to felony bank fraud, and was ordered to pay $133,614 in restitution, local news articles said.   She had been charged twice with theft by check in the 1980s. She declared bankruptcy twice, in 2013 and in spring 2017, citing debts up to $500,000.

Fake email accounts

Her job was to prepare monthly invoices the nonprofit submitted to the city for repayment of expenses including employee pay and sidewalk cleaning. But news articles said she routinely turned in invoices months late, often with errors. This delayed reimbursements, causing a financial crisis at the partnership and an internal review.

            Once partnership officials realized she allegedly had been stealing funds, they discovered that she apparently used fake email accounts and web domains to cloak her activities, according to an account in the San Antonio Express-News.  

The organization’s bank accounts had been audited over the years by an outside auditing firm, with whom she maintained contact as the organization’s designee.  She allegedly fabricated another audit by the firm and recruited her ex-husband to impersonate one of its employees. 

Board members were puzzled

Several months before her activities were exposed, the organization’s audit and finance committee had expected a visit from the outside auditors. When the auditors didn’t show up, an official asked the staff accountant to contact the firm and ask why.  A news article said that the staff accountant “told the board that the auditor couldn’t get in the building due to a bomb threat. That left board members puzzled…Why could they get in, but not the auditor?”  That was a key moment in the unmasking of the staff accountant.

Subscribe to our Newsletter