Rita A. Crundwell was the appointed comptroller and treasurer of Dixon, Illinois from 1983 to 2012,...

Rita A. Crundwell was the appointed comptroller and treasurer of Dixon, Illinois from 1983 to 2012, and the admitted operator of what is believed to be the largest municipal fraud in U.S. history. She was fired in April 2012 after the discovery that she had embezzled $53.7 million from the city of Dixon for over twenty-two years to support her championship American Quarter Horse breeding operation. Crundwell pleaded guilty to her crimes and was sentenced to 19 and a half years in prison.

Rita Crundwell's story details how trusting your governmental officials to always act for the public good is not realistic. Tell us who you believe should have raised a red flag.

Homework Answers

Answer #1

In the given case of Rita A Crundwell, there seems to be a gross oversight of all the agencies involved which actually gives a recipe for trouble. Sometimes lack of financial literacy among elected officials and blind faith among communities is a big contribution to lack of internal controls.

Looking at the possible remedies to prevent such financial frauds/irregularities and how this whole eco system functions, we could say that

1 In most of the instances there is one individual who controls all aspects of finances who actually turns out to be the fraudster. This individual will pretend to be very kind and helpful while he would never want to let go of the control. This gives the individual the opportunity to commit frauds and do the cover up since there are no checks and balances

Remedial Action

Create Check points and separate the financial duties instead of concentrating all the functions with one individual. The writer of checks should not be allowed to perform bank reconciliation

2. Without a proper system in place these government departments create a good embezzlement opportunity for its most trusted employees. Unless there is transparency and accountability no system would work the way it should. The trust should always be of the system and not of the person.

3. These municipalities departments don’t take action to prevent fraud because they do not consider it to be a pressing issue. Over reliance on one person stems from lack of financial literacy.

With the above background it is but evident that the auditors of these municipalities clearly own the responsibility of raising red flags . Auditors are responsible to highlight significant deficiencies amd material weaknesses in controls. The auditor should also sound out if there is any suspected fraud or fraud that he identifies .If the audit does not raise red flags it gives the impression that the administration is being audited regularly and everything is fine. This practically creates a expectation gap between "what a auditor does and what he is expected to do".

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