Editor’s note: This op-ed is by Don Keelan, a certified public accountant who lives in Arlington.
The recent session of the Vermont Legislature had a rare opportunity to do something positive and constructive in the area of municipal embezzlement, but it didn’t. It failed to bring forth legislation on preventing fraud that had been promulgated by the Vermont State Auditor’s office.
Last fall in response to the significant increase in reported embezzlement cases in Vermont by municipal officials, Tom Salmon, the Vermont State Auditor, put together a 10-member Vermont Municipal Advisory committee to address the issue. The committee was comprised of town treasurers and city finance directors, two admitted embezzlers, and this writer as the committee’s CPA advisor.
After months of work the committee developed a two page multi-question internal control checklist that was intended to be sent to municipal officials who held responsibility over a town’s (or school district’s) cash resources. The committee also developed a program that would encourage town and school board officials (as well as finance officials) to obtain three to six hours of continuing education on internal controls over cash, on a biannual basis. This past March, several committee members provided testimony to the Governmental Operations Committee of the Vermont House of Representatives.
The proposed legislation never saw the light of day.
The legislators were presented with a list of recent embezzlement cases that had occurred throughout Vermont — this was not the complete list nor did it report the cases that have occurred in the nonprofit or commercial sector:
| Position | Amount Taken | Town |
|---|---|---|
| Child Services | $490,000 | Newport |
| Office Manager | $1,500,000 | Hardwick Electric |
| High School Coach | $1,700 | Bennington |
| Town Treasurer | $404,000 | Ira |
| Sheriff | $65,000 | Windsor |
| Town Clerk/Treasurer | $100,000 | Isle La Motte |
| Town Clerk | $200,000+ | Bakersfield |
| Probation Officer? | $??? | Burlington |
| Town Clerk | $18,000 | Woodbury |
| Village Treasurer | $110,000 | Old Bennington |
| Office Manager ODMC |
$290,000 | Burlington |
| Bookkeeper | $42,000 | Addison, NE Supervisory Union |
| Total Source in part: vtdigger.org |
$3,220,000 | (this amount does not include lost interest which is in the hundreds of thousands) |
Generally speaking, anyone who gives a lecture on embezzlement will most likely discuss the “fraud triangle”: opportunity, perceived pressure and rationalization. All three are present when an act of embezzlement occurs.
The first two are somewhat obvious — perceived pressure-meaning debts to be paid, drinking, gambling, drug addiction or just a desire to spend money (that does not belong to him/her). Opportunity is present, especially here in Vermont. Municipal governments are small in size and staff and so are the vast number of non profits and businesses — they don’t have the resources to implement and maintain an internal control system over cash resources. They rely on trust.
As a sidebar, Gary Snyder, Publisher of Non Profit Imperative noted in the 5/19/11 issue of the “Chronicle of Philanthropy”.
“A significant jump in charitable theft can best be illustrated in just the last two years. In 2009, we saw a 50-percent rise in the amount of money stolen over the previous year. In 2010, data showed that the trend line has not subsided, with an additional 25-percent increase to over $2-billion; and that represents only between 5-10 percent of all fraud…”
The two embezzlers on our committee made it quite clear to us (and to the Legislature) that they were able to rationalize their illegal activity largely because they had been trusted and could get away with it.
The Vermont Legislature’s failure to act on Tom Salmon’s bill has just added to the rationalization leg of the triangle — the Legislature was not interested. Does any of them know the message this sends to those who are continuing their illegal activity?
Vermont cannot afford the attitude towards embezzlement (and embezzlers) that goes somewhat like this:
- We are sorry you needed the money
- Maybe you can pay it back
- We won’t collect income taxes on your ill-gotten gains
- We will ask you to do community service
- Yours was not a crime of violence
The Legislature failed to recognize what it would mean if Vermonters were to lose trust and confidence in their elected officials charged with safeguarding the funds that are turned over to them.
I’ve been told by a Legislator that it may be possible for the Legislature to take up Tom Salmon’s bill next year — well for those who are still embezzling — town and school district funds you have another year’s free pass. For embezzlers know full well “trust is a feeling not an internal control.” It is too bad Montpelier doesn’t get the message.
