Rita Crundwell, comptroller and treasurer of Dixon, Illinois stole $53 million over a twenty-year period. The city of 16,000 residents held Crundwell in high esteem. One friend described her as “sweet as pie.” Another said: “You could not find a nicer person.”
So why did she steal? It appears Rita simply enjoyed the good life. She used the money to fund one of the top quarter horse ranches in the country, and she did it with style: Some of the funds were used to purchase over $300,000 of jewelry and a $2.1 million motor coach vehicle.
Her annual salary? $80,000.
The city’s annual budget? $6 to $8 million
Were annual audits performed? Yes.
Were budgets approved? Yes.
So how could this happen? Ms. Crundwell had won the trust of those around her—especially that of mayor and council. In April 2011, finance commissioner and veteran council member, Roy Bridgeman, praised Crundwell calling her “a big asset to the city as she looks after every tax dollar as if it were her own.”
It was a disturbing moment when Dixon Mayor James Burke presented the FBI with evidence of Crundwell’s fraud. Burke later recalled his emotions and words: “I literally became sick to my stomach, and I told him that I hoped my suspicions were all wrong.” Such a response is understandable given that Crundwell had worked for the city for decades. She had fooled everyone.
According to the mayor, the city’s annual audits raised no red flags, and the city’s main bank never reported anything suspicious. So how did she steal the money? In 1990, Crundwell opened a secret bank account in the name of the city (titled the RSDCA account: the initials stood for reserve sewer development construction account). Crundwell was the only authorized check signer for the account, and the RSDCA bank account was never set up on the city’s general ledger. No deposits to or disbursements from this account were recorded on the city’s records.
Crundwell would write and sign manual checks from a legitimate city capital project fund checking account, completing the check payee line with “Treasurer.” (Yes, Crundwell had the authority to issue checks with just her signature—even for legitimate city bank accounts.) She would then deposit the check into her secret account. From the bank’s perspective, a transfer had been made from one city bank account to another (from the capital projects fund to the reserve sewer development construction fund).
While the capital project fund disbursement was recorded on the city’s books, the RSDCA deposit was not. A capital project fund journal entry was made for each check debiting capital outlay expense and crediting cash. But no entry was made to the city’s records for the deposit to the RSDCA account. Once the money was in the RSDCA account, Crundwell wrote checks for personal expenses—and she did so for over twenty years.
To complete her deceit, Crundwell provided auditors with fictitious invoices from the Illinois Department of Transportation; these invoices included the following notation: Please make checks payable to Treasurer, State of Illinois. (So the canceled checks made out to Treasurer agreed with directions on the invoice, but the words State of Illinois were conveniently left off the check payee line.) Remember Crundwell was the treasurer of Dixon. Those invoices and the related checks were often for round dollar amounts (e.g., $250,000) and most were for more than $100,000. In one year alone, Crundwell embezzled over $5 million.
So how was she caught? While Rita was on an extended vacation for horse shows, the city hired a replacement for her. For some reason, Crundwell’s substitute requested all bank account statements from the city’s bank. As those statements were reviewed, the secret bank account was discovered, and soon thereafter the mayor contacted the FBI.
Why was Rita able to steal $53 million? Wait for it…a lack of segregation of duties (getting tired of my saying this?–sorry, but so many thefts are rooted in this weakness).
Rita could do the following:
- Write checks
- Approve payments
- Create and monitor the budget
- Key transactions into the accounting system
- Reconcile the bank statements
The accounting duties should be performed by different personnel, not just one person.
Accounting employees should be required to take at least a one-week vacation, and while they are gone, someone else should perform their duties. The vacation itself is not the key, the performance of the duties of the absent accountant is—doing so allows the replacement person to understand the work of the vacant employee and, more importantly, provides the temporary replacement the opportunity to see any unusual or fraudulent activity.
Periodically contact your organization’s bank and ask for a list of all bank accounts. Then compare the bank’s list to the accounts set up on the general ledger. If an account exists and is not set up on the general ledger, see why. Request a copy of the related signature card from the bank.
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