In the first part of this post, we wrote about the recent apology by the St. Louis parks director for the large-scale embezzlement that occurred there.
Of course, as with any apology, the party on the other side of the harm – in this case, the public — quite rightly wonders what steps are being taken to prevent such an incident from happening again.
To be sure, organizations should always be looking to make sure they have good internal controls in place to prevent embezzlement. As we will discuss in this part of the post, however, there is always a human factor involved in such cases. And so there are limits to how effective efforts to discourage and or immediately detect fraud can be.
In the St. Louis parks case, the two men involved were both high-ranking officials with considerable experience of how the procurement and vendor processes worked for the department.
For example, the guideline for contracts that must be opened up to competitive bidding is $60,000. But the two men were so experienced in the procurement process that they knew how to structure contracts to come in just under that amount.
They also had long-standing relationships with vendors and leveraged those relationships to get vendors to inflate certain invoices.
It is not that there were no checks and balances on how the parks system conducted its contracting process. But a state audit and reviews conducted by the St. Louis city controller failed to detect the embezzlement.
And so the St. Louis parks will be putting in additional safeguards, such as requiring a third party to verify that goods or services that were contracted for were indeed provided.
Source: St. Louis Public Radio, “St. Louis Parks Department Vows Changes After $465,000 Fraud,” Rachel Lippmann, Nov. 20, 2013