Steal and Conceal: MATC Procurement Director Fraud

Today the Journal Sentinel ran a story about the fraud perpetrated on Milwaukee Area Technical College (and taxpayers) by Kristin Semits, the procurement director. Seimits is accused of stealing more than $259,000j over a 7 year period using her P-card (purchasing card – like a company credit card).

The report produced by Titus, the company that investigated the fraud, can be seen here. A graph on page 2 shows how the theft started out small (a few thousand dollars each year) and built up to $86,000 in 2011 alone. MATC’s budget is $260 million, so it’s easy to see how a theft of $50,000 or $80,000 in one year might have flown under the radar.

How was the fraud discovered? James Williams took over as vice president of finance in 2010, and began the process of hiring internal auditors. The school hadn’t had internal auditors since 2001, and Seimits allegedly ran the purchasing function with little to no oversight by anyone else in the organization.

I was quoted in the story:

The Journal Sentinel asked an independent forensic accountant and fraud investigator about who should have caught the fraud.Chief financial officers rarely detect it, though that doesn’t let management off the hook, said Tracy Coenen, of Sequence Inc. in Milwaukee and Chicago.

“When there’s fraud, there’s a deliberate circumvention of controls and a coverup,” Coenen said.

Often, fraud is uncovered and reported by a tipster, she said.

But, as the fraud investigation noted, MATC did not have a formal fraud policy or ethics hotline in place.

Seimits had total control over the credit card program, making it easy to “steal and conceal,” Coenen said.

It’s likely that auditors who do annual external audits told MATC that it did not have good controls in place, Coenen said.

But if Seimits was familiar with what auditors looked for, and dollar amounts they flagged, she could have hidden her purchases, Coenen said.

But this is the most troubling part of the situation at MATC: Management could have caught the fraud in 2009, saving the school at least $153,000 of the total theft. A handful of suspicious transactions were identified, and Seimits was asked about them. (See item H on page 13 of the report.) While Seimits provided some information about the items, it appears little to no follow-up was done.

Had management taken the time to look closer, they likely would have discovered the fraud then, and substantially reduced the total amount stolen. According to the article, management is focusing on moving forward. I would like to see more people held accountable.

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