P4-47B. (Learning Objective 3: Evaluate internal controls) Beaumont Independent SchoolDistrict (BISD) is a public school district in Beaumont, Texas. It has three high schools, sixmiddle schools, and 16 elementary schools, serving approximately 21,000 students. In February, 2015, Patricia Lambert, former BISD Assistant Superintendent, was indicted for theft connected with her position in the school district. Lambert allegedly defrauded the school districtfor more than $750,000. Lambert was sentenced for federal charges of theft in 2016 to 40months in prison and ordered to pay back $500,000 in restitution.The story of Lambert at BISD begins in 2002, when Lambert was hired by the district as ateacher. She would eventually be promoted several times, finally to assistant superintendent, aposition in which she remained until her retirement in 2014. During the course of her employment, she is charged with embezzling more than $750,000 from BISD. Here are descriptions ofthe schemes in which she participated/orchestrated:■ Booster Club funds: Lambert took control of the Booster Club from the parents whohad been running it. She gained full access to the booster club’s funds, which were notsubject to BISD oversight or audits. She began taking money from the booster club; shewrote checks for more than $24,381 payable to her children or herself from the boosterclub funds. Lambert also purchased clothing, clothing accessories, and electronics forher own personal use from the booster club funds.■ Student activity fees: During Lambert’s tenure at the school district, she also directedthat certain student activity fees be paid to the booster club where she had control of thefunds. For students to obtain copies of their official transcripts, they had to pay a smallfee, usually less than $5. Those transcript fees were directed to the booster club accountby Lambert where she had access, without audit or supervision, to the funds.■ Booster club reimbursement for travel: Lambert also wrote checks out of the boosterclub account to reimburse herself for school district travel, even though she had alreadybeen reimbursed by BISD for the travel.■ Cash fund: Students in the district would have to pay a $10 fine when found with a cellphone in class or when they lost their student ID. These fines went into a cash fund. In addition, there was a snack area set up near the cafeteria where students could purchase candyand chips. The inventory of candy and chips was paid for by the booster club. A portion ofall of these cash fees and sales were deposited into Lambert’s personal bank account.As a side note, before she joined BISD in 2002 as a teacher, Lambert was convicted ofextortion in Louisiana after running a kickback scheme with teachers for whom she secured payraises and job promotions.Requirements1. For each of the four schemes allegedly run by Lambert, comment on what internal controlprinciples would likely have been violated.2. For each of the four schemes listed, describe controls that could have been put into place toprevent the type of fraud that Lambert is charged with committing
P4-47B. (Learning Objective 3: Evaluate internal controls) Beaumont Independent School
District (BISD) is a public school district in Beaumont, Texas. It has three high schools, six
middle schools, and 16 elementary schools, serving approximately 21,000 students. In February, 2015, Patricia Lambert, former BISD Assistant Superintendent, was indicted for theft connected with her position in the school district. Lambert allegedly defrauded the school district
for more than $750,000. Lambert was sentenced for federal charges of theft in 2016 to 40
months in prison and ordered to pay back $500,000 in restitution.
The story of Lambert at BISD begins in 2002, when Lambert was hired by the district as a
teacher. She would eventually be promoted several times, finally to assistant superintendent, a
position in which she remained until her retirement in 2014. During the course of her employment, she is charged with embezzling more than $750,000 from BISD. Here are descriptions of
the schemes in which she participated/orchestrated:
■ Booster Club funds: Lambert took control of the Booster Club from the parents who
had been running it. She gained full access to the booster club’s funds, which were not
subject to BISD oversight or audits. She began taking money from the booster club; she
wrote checks for more than $24,381 payable to her children or herself from the booster
club funds. Lambert also purchased clothing, clothing accessories, and electronics for
her own personal use from the booster club funds.
■ Student activity fees: During Lambert’s tenure at the school district, she also directed
that certain student activity fees be paid to the booster club where she had control of the
funds. For students to obtain copies of their official transcripts, they had to pay a small
fee, usually less than $5. Those transcript fees were directed to the booster club account
by Lambert where she had access, without audit or supervision, to the funds.
■ Booster club reimbursement for travel: Lambert also wrote checks out of the booster
club account to reimburse herself for school district travel, even though she had already
been reimbursed by BISD for the travel.
■ Cash fund: Students in the district would have to pay a $10 fine when found with a cell
phone in class or when they lost their student ID. These fines went into a cash fund. In addition, there was a snack area set up near the cafeteria where students could purchase candy
and chips. The inventory of candy and chips was paid for by the booster club. A portion of
all of these cash fees and sales were deposited into Lambert’s personal bank account.
As a side note, before she joined BISD in 2002 as a teacher, Lambert was convicted of
extortion in Louisiana after running a kickback scheme with teachers for whom she secured pay
raises and job promotions.
Requirements
1. For each of the four schemes allegedly run by Lambert, comment on what internal control
principles would likely have been violated.
2. For each of the four schemes listed, describe controls that could have been put into place to
prevent the type of fraud that Lambert is charged with committing
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