Special Investigation
Yuma Union High
School District No. 70
Misuse of Public Monies
Special Investigative Unit
Debra K. Davenport
Auditor General
February • 2012
A REPORT
TO THE
ARIZONA LEGISLATURE
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Holly Graham, Manager and Contact Person
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You may request them by contacting us at:
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www.azauditor.gov
Senator Rick Murphy, Vice Chair
Representative Eric Meyer
Representative Justin Olson
Representative David Stevens
Representative Anna Tovar
Representative Andy Tobin (ex officio)
Representative Carl Seel, Chair
Senator Andy Biggs
Senator Olivia Cajero Bedford
Senator Rich Crandall
Senator David Lujan
Senator Steve Pierce (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
February 16, 2012
Members of the Arizona Legislature
Governing Board
Yuma Union High School District No. 70
The Honorable Tom Horne
Attorney General
The Honorable John Huppenthal
State Superintendent of Public Instruction
The Office of the Auditor General has conducted a special investigation of the Yuma Union High
School District No. 70 for the period of January 2002 through September 2007. The investigation
was performed to determine the amount of public monies misused, if any, during that period and
the extent to which those monies were misused.
The investigation consisted primarily of inquiries and examination of selected financial records and
other documentation. Therefore, the investigation was substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards. Accordingly, the Office
does not express an opinion on the adequacy of the financial records or the internal controls of
Yuma Union High School District No. 70. The Office also does not ensure that all matters involving
the District’s internal controls, which might be material weaknesses under standards established
by the American Institute of Certified Public Accountants or other conditions that may require
correction or improvement, have been disclosed.
The accompanying Investigative Report describes the Office’s findings and recommendations as a
result of this special investigation.
After this report is distributed to the members of the Arizona State Legislature, the Attorney
General, and the State Superintendent of Public Instruction, it becomes public record.
Debbie Davenport
Auditor General
Enclosure
In September 2007, the Yuma Union High School District (District) requested that the
Office of the Auditor General investigate allegations of financial misconduct by Mr.
Mark Rau, former Yuma High School (YHS) marketing teacher and Distributive
Education Clubs of America (DECA) student club sponsor. As a result of our
investigation, we determined that Mr. Rau misused public monies
and falsified public records. The Arizona Attorney General’s Office
has taken criminal action against Mr. Rau, resulting in his indictment
on felony charges (see Conclusion on page 17 of this report).
Our investigation revealed that from January 2002 through
September 2007, Mr. Rau may have violated state laws related to
misuse of public money and forgery while misusing at least
$86,276 of public monies. These monies were earned by and/or
intended for the benefit of YHS and students involved in the DECA
program. However, Mr. Rau used some of these monies for his own
benefit, including paying for his personal debt and expenses.
Mr. Rau diverted into his personal bank and credit union accounts money received
from sales at the YHS student store, deposits for DECA trips, royalty checks, and
extracurricular tax credit donations intended for the YHS DECA program. Mr. Rau
used this money for his personal debt and expenses and also for circumventing
district purchasing policies. In addition, Mr. Rau falsified public documents when he
prepared or authorized at least 25 instances of false information related to his
mismanagement of the YHS DECA student club and student store.
Lastly, district officials failed to safeguard and control district money. Specifically, they
did not adequately monitor YHS student store activity or ensure the associated
receipts were properly accounted for and deposited and expenditures were properly
controlled. As a result of the District’s lack of oversight, the complete amount of
public money misused or stolen cannot be determined.
Investigation Highlights
Former Yuma High School Teacher
Mark Rau:
• Misused $86,276 of public monies
by depositing it into his personal
bank and credit union accounts.
• Falsified at least 25 public
documents.
SUMMARY
page i
Office of the Auditor General
page ii
State of Arizona
TABLE OF CONTENTS
1
3
9
13
15
17
3
13
5
7
9
11
12
Introduction & Background
Finding 1: Former teacher misused public monies
Finding 2: Former teacher falsified public records
Finding 3: District officials failed to safeguard and
control district money
Recommendations
Conclusion
Charts:
1 Sources of $86,276 YHS Money Unlawfully Used by Mr. Rau
January 2002 to September 2007
2 YHS Cell Block District Deposits by Fiscal Year
July 1997 to June 2007
Tables:
1 Checks for YHS Unlawfully Cashed or Deposited by Mr. Rau
March 2005 to March 2007
2 Royalty Checks Unlawfully Cashed or Deposited by Mr. Rau
July 2003 to July 2007
3 Forged Documents
September 2004 to September 2007
4 False Invoices
September 2004 to July 2007
5 Vendor Overpayments
Fiscal Years 2005 to 2008
page iii
Office of the Auditor General
page iv
State of Arizona
INTRODUCTION
& BACKGROUND
Yuma Union High School District No. 70 (District) is located in the southwestern
corner of Arizona, encompassing the cities of Yuma, Somerton, and San Luis with
a total of six high schools. The District is accountable to taxpayers for the $91.8
million it received in fiscal year 2010 to educate approximately 11,000 students.
The District has five publicly elected Governing Board members who are
responsible for establishing all district policies and are the final authority over all
school district business.
Mr. Rau’s employment with District
Mr. Mark Rau began his employment with the District in August 1996 as a business
teacher at Yuma High School (YHS). Beginning with the 1997-98 school year and
continuing until September 2007, Mr. Rau was the YHS Distributive Education
Clubs of America (DECA) student club sponsor.
Accordingly, Mr. Rau was responsible for safeguarding
fundraising proceeds, depositing the money timely
using a properly completed cash collection form,
preparing requisitions and purchase order forms prior to
purchases, and maintaining records of deposits,
withdrawals, and cash balances, which were to be
reconciled to the bookstore and district office records on
a monthly basis.
As the DECA student club sponsor, Mr. Rau was
responsible for the YHS “Cell Block” student store, which
sold food and water as well as merchandise promoting
the school “Criminals” mascot. This moniker was
memorialized by a drawing of a man’s head, termed the
“Crimhead” and in June 1993, YHS trademarked this
caricature with the Arizona Secretary of State. Although Mr. Rau’s company, Rutom
Distributing, later registered with the Arizona Secretary of State various trade
names associated with the Criminals mascot, neither Mr. Rau, nor his company,
had any authority to use YHS’ trademark.
Mr. Rau agreed to:
• Safeguard fundraising proceeds
• Deposit money timely
• Properly complete cash collection forms
• Prepare requisitions and purchase order forms
prior to any purchase
• Maintain records of deposits, withdrawals, and
cash balances
• Ensure records are reconciled monthly to the
bookstore and district office records
page 1
Office of the Auditor General
In September 2007, the YHS principal placed Mr. Rau on administrative reassignment
after questioning him about discrepancies with the Cell Block deposits. Mr. Rau
answered that the deposits were “not factual accountings.” An employment hearing
was held in March 2008 at which Mr. Rau declined to testify. After reviewing the
hearing officer’s report, the Governing Board terminated Mr. Rau’s employment on
April 14, 2008.
page 2
State of Arizona
page3
FINDING 1
Former teacher misused public monies
From January 2002 to September 2007, Mr. Rau, former Yuma High School (YHS)
teacher, misused at least $86,276 of public monies by improperly depositing it into
his personal credit union and bank accounts. This money belonged to the Yuma
Union High School District (District) and YHS students, and it should have been
deposited in the appropriate district accounts. According to Arizona Revised
Statutes §35-301, “Duties and liabilities of custodian of public monies,” it is a felony
to appropriate public monies for personal use or for use by others, or without legal
authority to deposit public monies in a bank. Mr. Rau further misused $38,372 of
this money by circumventing district purchasing policies and directly paying
Distributive Education Clubs of America (DECA) student club and Cell Block
student store vendors.
Mr. Rau took money that was earned by and/or for the benefit of YHS students and
commingled it with his own personal monies held at banks and a credit union.
Specifically, as shown in Chart 1, the money came from several sources, including
apparent receipts from Cell Block sales, DECA fundraising activities, DECA
program extracurricular tax credit donations, deposits for DECA trips, and royalty
payments from sales of merchandise bearing YHS’ trademarked Crimhead.
$79,620cashfrom
CellBlocksales,DECA
fundraisers,and
DECAtrippayments
$4,878royalty
paymentchecksfrom
salesoftrademarked
YHSmerchandise
$1,778checksfrom
CellBlocksales,DECA
extracurriculartax
creditdonations,and
DECAtrippayments
Chart 1: Sources of $86,276 YHS Money Unlawfully Used by Mr. Rau
January 2002 to September 2007
Source: Auditor General staff analysis of district, bank, credit union, and Rutom Distributing
records, and parent, teacher, and student statements.
Office of the Auditor General
DECA Program Monies
From January 2002 through September 2007, Mr. Rau took at least $79,620 cash
and $1,778 checks from the DECA program and deposited it in his own personal
accounts at a local credit union and at two banks.
Cash Deposited in Personal Accounts
During this nearly 7-year time frame, Mr. Rau made at least 153 deposits in his
personal accounts with cash that belonged to the DECA program and should have
been deposited in district accounts. This cash, totaling $79,620, was earned by
students who managed sales at the Cell Block student store, conducted fundraisers
for the YHS DECA student club, and made deposits for DECA trips.
In interviews with Auditor General staff, Mr. Rau initially denied he put Cell Block cash
in his personal accounts. However, when later presented with copies of specific
deposit records, he admitted that he made deposits in his accounts with DECA
student club and Cell Block money. Mr. Rau further acknowledged that he should not
have put cash that belonged to the Cell Block student store in his
personal accounts.
Many of these cash deposits were made when his account balance was
insufficient to cover his personal expenditures, as illustrated by the
following examples:
• After school on September 27, 2004, when his checking account balance was
$22.81, Mr. Rau deposited public monies totaling $725 in cash. This deposit
allowed his credit card payment of $700 to clear the next day.
• After school on September 6, 2005, when his credit card payment and a credit
union insufficient funds fee had brought his checking account balance to a
negative $97.76, Mr. Rau deposited public monies totaling $760 in cash. This
brought his account balance out of the negative and allowed his $630 rent
check to clear the next day.
• After school on February 5, 2007, when his checking account balance was
negative $274.81 because of a cash withdrawal at a casino and credit union fee
for insufficient funds, Mr. Rau deposited public monies totaling $300 in cash,
thus bringing his balance out of the negative. The next day, Mr. Rau deposited
more public monies totaling $700 in cash that allowed his $630 rent check to
clear later that same day.
After his initial denial, Mr. Rau admitted he
put DECA and Cell Block money in his
personal accounts.
page 4
State of Arizona
For all of the checks listed in Table 1, the memo section either described the intention
as related to a YHS purpose, and/or the individual payer confirmed to Auditor General
staff that the intent was for YHS and not for Mr. Rau’s personal use.
Check Date Intended Purpose Amount
03/12/05
05/24/05
05/19/05
02/08/06
04/26/06
04/27/06
11/06/06
01/12/07
01/19/07
03/23/07
DECA tax credit
DECA trip
DECA trip
DECA trip
DECA trip
DECA trip
Cell Block
DECA tax credit
DECA trip
DECA trip
200.00
150.00
400.00
180.00
150.00
50.00
25.00
200.00
322.50
100.00
Total $1,777.50
Table 1: Checks for YHS Unlawfully Cashed or
Deposited by Mr. Rau
March 2005 to March 2007
Source: Auditor General staff analysis of credit union records and parent,
teacher, and student statements.
In contrast, Mr. Rau made very few cash deposits to his accounts after September
2007, when he was placed on administrative reassignment and his access to the YHS
campus was restricted. In fact, no cash deposits were made in his accounts for the 5
months between December 2007 and April 2008, whereas historically he averaged
approximately $7,500 in cash deposits for those 5-month time periods in previous
years.
Checks Diverted
As shown in Table 1, from March 2005 through March 2007, Mr. Rau improperly cashed
or deposited in one of his personal accounts at least ten checks totaling $1,778 that
were meant for YHS. These checks were payments made by teachers, parents, and
students for their Cell Block purchases, DECA program extracurricular tax credit
contributions, and DECA trip deposits and should have been deposited in district
accounts.
page 5
Office of the Auditor General
The three checks from 2005 totaling $750 were improperly spent on Cell Block
vendors (see page 8, Mr. Rau circumvented district policies). Mr. Rau used the
remaining checks totaling $1,027.50 by cashing the check, withdrawing cash at a
casino, and paying for his personal debt and expenses such as restaurant meals
and health supplements.
Royalty Payments
From July 2003 through July 2007, Mr. Rau improperly cashed or deposited in his
own accounts at least 21 checks totaling $4,878 for royalties from sales of YHS-trademarked
Crimheads caricature merchandise. These checks should
have been deposited in district accounts.
Specifically, without authority, Mr. Rau improperly entered into written
agreements with two out-of-state companies allowing them to use the
YHS trademark on their merchandise. In return, Mr. Rau’s company,
Rutom Distributing, and after the company dissolved, Mr. Rau himself, received
payments representing a percentage of the out-of-state companies’ sales, as shown
in Table 2, page 7.
Mr. Rau improperly used the YHS trademark
and negotiated sales agreements for his
personal benefit, receiving $4,878 in
unauthorized royalty payments.
page 6
State of Arizona
As described in the Introduction & Background section of this report (see page 1), Mr.
Rau does not own the trademark for the YHS Crimhead caricature and therefore had
no right to grant its use to others or to personally benefit from such arrangements.
Moreover, although Mr. Rau reportedly told students that the DECA student club was
receiving this money, he deposited only one check in a district account—$224.94 in
September 2006 from a California clothing distributor.
Check Date Issuing Company Payee Amount
07/08/03
07/21/03
09/25/03
01/29/04
02/19/04
03/15/04
06/07/04
07/22/04
08/19/04
10/14/04
11/04/04
02/07/05
03/31/06
11/13/06
12/11/06
01/11/07
02/16/07
03/15/07
05/15/07
06/12/07
07/13/07
Cap distributor—Oklahoma
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Cap distributor—Oklahoma
Cap distributor—Oklahoma
Cap distributor—Oklahoma
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Clothing distributor—California
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Rutom
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
Mr. Rau
821.38
466.90
207.98
232.20
41.06
968.38
116.64
66.24
118.12
55.80
113.40
148.18
74.09
415.96
118.77
118.77
148.93
148.05
122.69
236.58
138.24
Total $4,878.36
Table 2: Royalty Checks Unlawfully Cashed or Deposited by Mr. Rau
July 2003 to July 2007
Source: Auditor General staff analysis of district, bank, and credit union records.
page 7
Office of the Auditor General
In an interview with Auditor General staff, Mr. Rau acknowledged that the money
should have gone to YHS. In fact, district officials warned Mr. Rau in January 2005
that he had no authority to personally use the YHS Crimhead. Nonetheless, Mr. Rau
claimed these checks as his own income from 2003 to 2007, and used the money
for withdrawing cash and paying for his personal debt and expenses.
Mr. Rau circumvented district policies
From at least March 2002 through August 2007, Mr. Rau circumvented district
purchasing policies by paying DECA and Cell Block vendors a total of $38,372 with
district money he deposited in his personal account. There is no documentation of
what merchandise was purchased or where it was delivered, except for one California
clothing vendor who provided invoices for $4,670 of the payments. However, this
vendor was overpaid $10,769 (see Finding 2, Table 5, “Vendor #2” on page 12). To
help ensure the propriety and control of purchases with public monies, district
policies require all requested purchases to be independently approved and
processed through district accounting procedures. Consequently, Mr. Rau’s
avoidance of these procedures by inappropriately using his own personal accounts
may have resulted in improper purchases and inflated costs borne by the District.
page 8
State of Arizona
Former teacher falsified public records
From at least September 2004 through September 2007, Mr. Rau was responsible
for 25 instances of presenting to Yuma Union High School District (District)
officials various documents that contained false information. Specifically, as
shown in Table 3, he submitted, or caused to be submitted, false cash collection
reports, false invoices, and false price quotations with a total value of $148,496.
These improper actions allowed Mr. Rau to personally benefit from the lack of
control over public monies and caused two vendors to be overpaid by the total
amount of $12,443. Additionally, because of Mr. Rau’s actions, the District may
not have received the best value for the monies it expended.
False cash collection reports
From at least August 2006 through September 2007, Mr. Rau was responsible
for the submission of 12 false cash collection reports totaling $21,545.70 used
for depositing the receipts of Cell Block student store sales with the YHS
bookstore. However, these reports omitted money from Cell Block sales that
should have been deposited and did not accurately describe the items sold. In
FINDING 2
Time Frame Description Amount
August 2006 — September 2007
September 2004 —July 2007
September 2004 —July 2007
12 false cash collection reports
5 false invoices
8 false price quotations
$21,545.70
45,900.00
81,050.00
Total $148,495.70
Source: Auditor General staff analysis of district, Yuma, and California clothing vendors’ records,
and Mr. Rau’s and vendors’ statements.
Table 3: Forged Documents
September 2004 to September 2007
page 9
Office of the Auditor General
his classroom file cabinet, Mr. Rau improperly held in reserve district and student
money from Cell Block sales and the Distributive Education Clubs of America
(DECA) student club fundraisers, terming this the “file cabinet money.” He then used
this money to make deposits in his personal accounts and to pay Cell Block vendors
with cash. Mr. Rau directed students to prepare cash collection reports for a portion
of the “file cabinet monies” by estimating the “big sellers.” As a result of Mr. Rau’s
instructions, the actual items sold were not listed and the total amount of monies
received was not deposited with the District.
Preparing accurate and complete cash collection reports should have been easily
accomplished because the students were already making daily tallies of sales. Every
day, the students counted the Cell Block sales for food, water, and merchandise;
recorded these amounts on three separate pieces of paper; and brought the papers
and the money to Mr. Rau’s classroom file cabinet. However, under the
guidance of Mr. Rau, these papers were discarded and therefore not
available for preparing the cash collection reports.
This loose system of recording, storing, spending, and depositing cash
allowed Mr. Rau to have uncontrolled access to public money for his own
purposes without any accountability or oversight. Accordingly, district officials had no
knowledge of Mr. Rau’s actions; however, at least one student was aware Mr. Rau
was taking “file cabinet money” to his credit union once or twice a week. This student
believed that “file cabinet money” was used for stocking the Cell Block store and that
the purpose of Mr. Rau’s weekly trips to his credit union was to change out bill
denominations so that Cell Block vendors would not be paid with single dollar bills.
Likewise, the lack of records and frequency of paying Cell Block vendors with “file
cabinet money” allowed Mr. Rau to generalize and obscure events when students
questioned him about their beliefs that money was missing from the deposits with
the District. Mr. Rau would reportedly remind them that he had taken “file cabinet
money” out for their lunches, water purchases, or something else for the store, thus
discounting their concerns.
False invoices
As shown in Table 4, page 11, from September 2004 through July 2007, Mr. Rau
submitted at least five false vendor invoices totaling $45,900 to the district business
office.
Mr. Rau deposited DECA and Cell Block
cash at his credit union once or twice a
week instead of depositing it with the
District.
page 10
State of Arizona
At the request of Mr. Rau, vendor #2 prepared these false invoices1 and Mr. Rau
authorized them to be paid even though no items had been received by the school.
Instead, the District’s payments of the false invoices functioned as a deposit for items
that Mr. Rau would order later. This process allowed Mr. Rau to bypass the district
restriction of limiting Cell Block purchases to $12,000 per year. He used an
uncontrolled arrangement of ordering items, deducting invoice amounts from the
prepaid deposit, and paying additional monies from other sources, such as the “file
cabinet monies” and DECA donations. Mr. Rau was thereby able to stock the Cell
Block store with additional merchandise to increase sales, perpetuating his loose
system of storing, spending, and depositing cash without any oversight from district
officials.
Moreover, as a result of these poor business practices, at least two vendors were
overpaid a total of $12,443. As shown in Table 5, page 12, the District received a
refund payment from one vendor after Mr. Rau was placed on administrative leave,
resulting in a net overpayment of $8,887 to these two vendors.
1 Vendor #1 acknowledged he prepared the false invoice, but could not recall why.
Date Vendor False Description Amount
09/17/04
09/20/04
07/12/05
08/08/06
07/12/07
Vendor #1
Vendor #2
Vendor #2
Vendor #2
Vendor #2
244 sweatpants and sweatshirts, 800 T-shirts
1,250 T-shirts
1,000 T-shirts, 500 sweatshirts, 50 visors
1,400 T-shirts, 500 sweatshirts
1,000 T-shirts, 700 sweatshirts
$7,000.00
5,000.00
9,900.00
12,000.00
12,000.00
Total $45,900.00
Table 4: False Invoices
September 2004 to July 2007
Source: Auditor General staff analysis of district, Yuma, and California clothing vendors’ records,
and Mr. Rau’s and vendors’ statements.
page 11
Office of the Auditor General
False Price Quotations
From September 2004 through July 2007, Mr. Rau submitted at least eight false price
quotations to the district business office in order to award Cell Block business to Mr.
Rau’s favored vendors described above, who provided false invoices. The Uniform
System of Financial Records for Arizona School Districts and district policy required a
minimum of three oral price quotations for purchases costing at least $5,000 but less
than $15,000 and three written price quotations for purchases costing at least
$15,000 but less than the sealed bid threshold, which was not higher than $33,689
during this time frame.
In an interview with Auditor General staff, Mr. Rau admitted the price quotations
were not accurate, stating they were “ballpark figures” and that one quoted
vendor was “already by that time defunct.” In fact, Mr. Rau further stated that even
today he would “still make it so that (vendor #2) would have gotten, you know, all
the work.”
Fiscal Year Vendor
Amount
Paid*
Actual
Invoice
Amounts
Amount
Overpaid
2005
2006
2007
2008
#1
#2
#2
#2
$7,000.00
22,506.00
27,138.00
12,000.00
$5,325.12
20,018.00
21,813.50
9,044.00
$1,674.88
2,488.00
5,324.50
2,956.00
Total overpayment 12,443.38
Less vendor #2 refund payment to District
Net overpayment
(3,556.00)
$8,887.38
Table 5: Vendor Overpayments
Fiscal Years 2005 to 2008
* Amount paid includes all payments to the vendor such as cash, Mr. Rau’s personal checks,
money paid by a local business as a DECA donation, and money the District paid directly.
Source: Auditor General staff analysis of district, Yuma, and California clothing vendors’
records, and Mr. Rau’s and vendors’ statements.
By falsifying documents, Mr. Rau
was able to divert district
purchases to his favored vendors.
page 12
State of Arizona
District officials failed to safeguard and control
district money
Yuma Union High School District (District) officials did not adequately monitor Cell
Block student store activity or ensure the associated receipts were properly
recorded and deposited and expenditures were appropriately controlled.
Specifically, district officials did not investigate or otherwise inquire when deposits
in the district account for Cell Block sales decreased dramatically. As illustrated in
Chart 2, deposits decreased 69 percent from Mr. Rau’s first year overseeing the
Cell Block to his last full school year, 2007.
Mr. Rau stated that for the first 2 years—1998 and 1999—when deposits were
their highest, he had a parent volunteer who “actually ran the store for me.” When
this volunteer was no longer involved with the Cell Block and district deposits
decreased, no one from the high school or the district business office examined
Cell Block business practices.
FINDING 3
57,492 58,286
36,965
27,080 22,831 18,068
26,053 25,840
19,305 18,017
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Deposits
Source: Auditor General staff analysis of district records.
Chart 2: YHS Cell Block District Deposits by Fiscal Year
July 1997 to June 2007
page 13
Office of the Auditor General
In fact, poor controls over cash receipts were allowed to continue for several years
without any oversight. In particular, cash was placed in a file cabinet rather than
secured in a safe; all records of sales activity were destroyed; and no reconciliation
of deposits with the District to sales was prepared. As a result of the District’s poor
controls and recordkeeping for the Cell Block student store, the total amount of
public monies embezzled and misused cannot be determined.
Moreover, district officials approved purchasing documents that were aberrant and
atypical from prior years. For instance, in fiscal years 2000 through 2002, district
officials approved itemized purchasing documents for the Cell Block that listed 50
different items from 9 vendors. However, in fiscal years 2006 through 2008, district
officials approved unsuitable purchasing documents that listed only 4 different items
from just 2 vendors. For example, although the Cell Block sold food and water every
day, district officials did not make any inquiries as to why no food or water purchases
were requested for 2 years. Rather, officials erroneously accepted without question
that the Cell Block’s entire budget was expended on 2,400 T-shirts and 1,200
sweatshirts. District officials have a responsibility to review and evaluate the propriety
of expenditures of public monies before authorizing their approval.
Finally, district officials did not request or review any student store physical inventory
records. Because the District did not properly oversee the management of the Cell
Block student store and essentially allowed Mr. Rau to have control over all aspects
of its operations, he was able to misuse monies earned by and/or for the students
for at least 5 years.
page 14
State of Arizona
Public officials with oversight authority are responsible for managing the administration
of money and property entrusted to them. Likewise, public officials should ensure that
sufficient internal controls are designed and implemented to protect those assets and
ensure that monies are used only as statute authorizes. Specifically, the District should
ensure that the following actions are taken:
1. Separate cash-handling and recordkeeping responsibilities among employees so
that no one person has the ability to initiate and complete a transaction without
independent review.
2. Issue prenumbered and numerically controlled cash receipt forms or cash register
receipts for all cash and checks received. Retain copies of the issued receipt
forms or cash register tapes.
3. Prepare daily sales reports of student store operations to provide reconciliations
between recorded sales and actual cash and checks collected. Investigate and
resolve any discrepancies between sales and cash collections.
4. Store cash and checks in a secured safe prior to deposit.
5. Submit daily sales reports and high school student store receipts intact daily, when
significant, or at least weekly to the bookstore for deposit into the appropriate
district bank account or directly with the County Treasurer.
6. Manage and account for all public monies in the appropriate district funds.
Specifically, Distributive Education Clubs of America (DECA) student club monies
should be recorded in the Student Activities Fund. Student store monies should
be recorded in the Auxiliary Operations Fund unless the store is exclusively
operated as a DECA student club activity. The District can record extracurricular
tax credit donations in either the Extracurricular Activities Tax Credit Fund or the
Auxiliary Operations Fund.
7. Ensure an employee independent of the receipting process reconciles high
school student store receipt forms, cash register tapes, and sales reports monthly
to deposits made with the bookstore.
Recommendations
page 15
Office of the Auditor General
8. Scrutinize all documents submitted for requested purchases, including price
quotations, for propriety. Unusual aspects should be documented, researched,
and resolved before purchases are approved.
9. Take a physical inventory of student store merchandise at least yearly. An
employee independent of the student store activities should review this
inventory, along with receipt and expenditure records.
page 16
State of Arizona
On January 30, 2012, the Arizona Attorney General’s Office presented evidence of Mr.
Rau’s crimes to the State Grand Jury. This action resulted in the indictment of Mr. Rau
on 5 felony counts of misuse of public money and tampering with a public record.
Conclusion
page 17
Office of the Auditor General
State of Arizona
