How to detect misuse of founds?

How to prevent or detect possible misuse of funds?

For many companies and organizations, it would be better to know the answer to that question earlier. It is crucial to implement solid preventive measures before the first damage occurs.

Who may regret not implementing better practices?

On Monday (16. Dec. 2019), the State Auditor’s Office released a fraud report detailing 6.9 million USD in misappropriated funds within the Pierce County Housing Authority (PCHA). It’s believed to be the largest misappropriation on record in the state of Washington, propagated by the authority’s former finance director.

The agency that provides affordable housing for over 4,000 low-income people each year. It’s a steward of state, federal and private dollars with an annual budget of roughly 34 million USD.

Where the money flew out?

It was Cova Campbell, PCHA’s former finance director, that was terminated in August after a routine audit uncovered several hundred thousand dollars in unauthorized wire transfers from the organization to her personal bank account. After a monthslong review, the report concluded that Campbell misappropriated a total of 6,948,277 USD in public funds between March 2016 and July 2019.

The authority filed a lawsuit against Campbell and her husband, Mark, in Pierce County Superior Court, accusing the couple of using those funds for personal purchases. Auditors discovered attempts by the Campbells to hide their activities, including falsifying accounts and invoices, according to court documents.

Further investigation will include involvement of Cova Campbell’s former boss, PCHA Executive Director Charlie Gray. As she testified he has been responsible for orchestrating the scheme.

Chances to recover the founds and structures

At this point, representatives were unable to establish how much of the loss can they recover. The scandal with no doubt will have some adverse impact on further operations of PCHA.

Misappropriation of funds – how to avoid it?

In the case of PCHA, it was a routine audit that revealed unauthorized money flow. It is questionable why such practice lasted for years unnoticed. How many people inside the organization could know but passed without alarming authorities, and why? How many people should notice something suspicious but remained blind? The investigation will aim to answer those among many other questions.

For the safety of public institutions as well as private companies, staff and board members should seek training to identify the red flags in situations like these. It is important to create a functional policy of oversight for people with ready access to all financial systems. It is not meant for aggressive authoritarian control but for a clear and efficient system.

- 17 December 2019 - EN