Professor Elam

More Education Audit Woes

San Antonio Charter Schools were found lacking by the US Education Dept. the Texas Education Agency, and a local CPA firm needed a year to complete what should have been a three month audit. 

If this was a private company would it still be in business?  Or would the Board be replaced?  Why do these things go for so long in Education before anyone seems to take action?

TigerGate

My wife is after me to write more on forensic accounting. And she is hot on the trail of what promises to be the latest in breaking news at shall we say the financial top. Yep, it's Tigergate. Here is what we know.

• Tiger Woods has earned over $100 M each year the last two years just in playing winnings, never mind the endorsements from Accenture, Nike, etc.
• He smashed his Cadillac SUV ( I thought he endorsed buicks???) at 2:25 AM outside his own house ($2.5 M not your or my house). Seems he hit a fire hydrant and then a tree.
• His wife said 'she used a golf club tosmash out a back window and help Woods from teh car.
• IN fact both rear passenger windows were broken out.
• Front page today, authorities to grill Tiger Woods today, inside, Troopers may question Woods and wife today, the last two days they were not available for comment

Now mix that with

• our forensic friends at the National Enquirer whoops 'was planning a piece that would have said  prior to the accident that Wools had  been seeing Rachel Uchitel, a New York nightclub hostess (hey that's what the SA paper says but it gets better)
• Rachel denies this and resents her reputation getting completely blasted in the media  Rachel was in Melbourne with clients

Car windows are tempered and layered with goop so that they do not shatter in a collision. This makes them, as my wife points out, near impossible to break out, but Woods wife managed it no matter how many golf clubs were destroyed, the latter another unknown

So inquiriing minds

Where was Woods headed at 2:25 AM?

Was his wife determined to get Woods out of the car or let herself in?

How did he hit so many things on his own lawn, could he have been dodging a pedestrian, who might that have been?

Will GM have Woods in a commercial extolling he crash protection features of the Escalade?

Meanwhile in California...

We reported on the student sit in at Berkeley, now read more about why. Yes California hired $600,000 per year UT Chancellor Mark Yudof who says when you have no choice, you have no choice, a $600K set of words if I ever heard any indeed!  Mark got my attention when he was at the helm of UT by remarking

The future of the UT system is nanotechnology, 

really he said that.....but I digress

The students are upset in CA that tuition alone will soon reach $10K for two semesters. Mark you will recall was instrumental in having UT Austin  set its own tuition so it would not ask the State of Texas for more money, tuition promptly increased from $2500 a semester to $4000, only a $600K per year administrator could think of an idea like that!  Lt Gov Dewhurst was reportedly shocked, well...

Just to be clear, CEOs are usually paid superior salaries for superior results. Yudof has a track record of commanding the highest salary of any higher ed official in the state. Yet he solution seems to be the same every time, raise tuition. Does that universal solution merit such a salary?

But these are mere details, read the real story about California in general and San Francisco in particular.

Bottom line, a museum in San Antonio, the NE School District in SA, San Francisco, you name it, municipalities are in trouble. 

NE ISD Declares Financial Emergency, Three Years too Late....

North East Ind School District has finally declared a financial emergency, after using up valuable General Fund Money for the last three. Look at the financial plan . Does anyone see any discrepancy in the third power point slide?  It shows a fund balance of $50 Million Dollars, I doubt that...I will give them a call tomorrow.

As I have said in the weekly column, the next emergency will be municipalities, cities, schools, counties, hospital districts, you name it. If this is happening in a reasonably affluent part of San Antonio, I wonder what Philadelphia PA looks like?

The official statement is here for NEISD.

Now consider the museum two posts back, the general inability to face financial consequences noted by the NY Times article, and now this. And this is occurring wih the stock market at new highs for the year....Imagine what another melt dow will do.

Bottom Line, This is why we study accounting, as an accountng professional you will be called upon to sit on volunteer boards or perhaps run for local office. Trust me, you will be stunned and amazed at the inability to read a financial statement. And no one will seem to care or show much interest. Apparently the NE ISD thought the state legislature would ride to their rescue, wrong.

More Nick Cage

It turns out Nick Cage did hire a CPA, Sam Levine. Levine has countersued claiming he warned Cage it would cost $30 M  a year to maintain his lavish lifestyle. Castles, yachts, nine Rolls Royces (not even a very interesting car quite frankly), gee, not as bright as he appears to be in his movies I guess.

NIck Cage Owes the IRS

How did Nick Cage end up with a $6 M IRS Bill?  He is suing his manager. 

But, even stranger to me, why does he have to borrow the money from Johnny Depp?

The Star of National Treasure cannot borrow  a mere $6 M against future earnings?

A few years back Willie Nelson made headlines owing about $1.6 M which he did pay back. Seems there is a long history of stars with bad management. 

I suspect the large CPA firms all have a personal management section, why not hire them?

Were I in Nick's position, I would not have one person but a reliable CPA firm receiving all my tax correspondence, and filing the returns. 

In fact I was just thinking about that so I looked up an example, click here for Alexander Grant Wealth Service. When you get there click on the service matrix. Now that is about what I would have in mind were in the the league Nick Cage is in. It also makes the point that today's CPA firms are involved in a a very broad range of service activities. 

External Audit at SAPD

The Express News now supports an external audit of the Police Dept.   Please read the article, it is not about money but procedure. I put this one up to get you thinking that auditing is not necessarily about adding up strings of numbers to see if they total checks. These days it is about procedure, benchmarking the best procedure to assure top results. 

The article states that internal audits are too slow. My guess is that is not the problem with the internal audit, I suspect the internal audit lacks enough clout to effect real change. If the City spends a quarter of a million on an external audit, that will carry some weight, just guessing but that is my take.

Note that an accounting firm will be chosen to conduct a procedural audit of a large city police department. Accounting is a diverse and growing field. 

Come to think of it, here is an example of what I mean. Someone  got the staff over ruled and substituted another towing firm for a city contract. Now look at the results. It often takes an outright failure or an outside expensive source to overcome internal strife, in any organization.

Accounting Careers

Global Systems Audit Manager

Our client is a Fortune 100 company and they are seeking an IT Audit Manager. They are requiring 10+ years of experience in IT with direct hands on experience managing application development within an IT organization. 
- Strong SAP experience 
- At least one audit certification: CISA, CISSP, CCSA, CIA, CPE 

I spotted this ad via one of the e mail notices I get. I would draw your attention to it for several reasons.

• Auditing is in a transition stage. We have moved in my lifetime from a pencil and paper system to a computerized paperless system.  The problem is that audit systems lag that change. The perspective of most audit textbooks and courses is still grounded in the pen and pencil era. no wonder, the bicycle was invented when people rode horses. Hence the position of a person on a bicycle mimics the position on a horse. Modern recumbent designs are more efficient but we still cling to the original design based on another mode. 
• Note the world global, IBM has had more business overseas than in the US since the 70s yet we have yet to adopt intl accounting standards.  
• I posted yet another fraud at Baylor hospital on this blog last weekend, the thief worked in IT, he was not an accountant, hello! 
• Only one chapter of the audit text is devoted to auditing computer systems, no wonder the guy managed to steal the money, we of course never hear of the successful thieves that slip away or hte companies too embarassed to admit it.  
•   Take another look at the certifications desired, do you notice anything? Yep CPA is not one of htem!  The first three all have to do with computer systems not accounting systems, but wait, is there a difference?j
•  Gee Bob Dylan got it right, the times they are a changin
• See my post for July 25 about the theft at Baylor Hospital 

Hoboken New Jersey

The docks of Hoboken New Jersey were the scene of the Academy Award winning On the Waterfront in 1955. Gee nothing has changed.  I commented on this last semester  to my Wiley rep who is in Hoboken. She said it had changed, apparently not. 

FBI arrested local officials and yes rabbis in a scheme involving money laundering through Israeli charities. 

Frankly the story is a bit hard to follow, but no indictments yet just arrests so it may take a bit for the story to come out. 

Fraud, despite SARBOX et al, still with us. No wonder HBO put The Sopranos in Jersey....

Mother and Son Steal; $1.4 M from Baylor Hospital

Here we go again! 

Gary Stephens worked in the IT dept at Baylor Hospital in Dallas. This is a huge medical complex.

No doubt the budget runs to the hundreds of millions each year. Click for the story, it is a good one.

Gary created a fake company, submitted fake invoices, got the checks printed, picked them up and had his 59 yr old mother deposit them. So far so good. Take a relatively small amount over time, less than material in each billing, and perhaps you will not be noticed. 

So how did he get caught?  You gotta love it. Seems a Dallas County Commissioner  bought a Bentley Continental GT trading in his Aston Martin (hey this is Dallas). Seems there were problems with the title, and Gary had traded or sold the Bentley to the dealership. Whoops, someone got to checking and gee what is an IT employee at Baylor doing with a Bentley.  

A classic problem in any movie dealing with theft, is that some foolish crook wants to spend the money now. This of course is always a mistake and leads to suspicions. Had Gary and Mom quietly left for another country, preferably one without an extradition agreement, this might have worked. Although these days that is not enough money to live forever somewhere else.....

But would your audit program or internal controls have detected that invoice among the thousands that Baylor receives?  Clearly Internal Controls were at fault as one person was able to submit, get approval, and a signature on the check, and picked up the check, all violations of a proper IC procedure. 

The point is that inside crime is always perpetrated by someone who knows the system.  The fact that all the work is on the computer will make discovering such stunts more difficult in the future.