Conflicts of interest —
Is your district protected?
Do your employees understand what conflict of interest is? Do you, as
a school finance professional, know how to protect your organization?
Jill Barragan
Executive Director of Business Services,
Avondale Elementary School District,
Avondale, Arizona
Editor's Note: This article originally
appeared in the April 2020 School
Business Affairs magazine and is
reprinted with permission of the Association
of School Business Officials
International (ASBO). The text herein
does not necessarily represent the views or
policies of ASBO International, and use
of this imprint does not imply any
endorsement or recognition by ASBO
International and its officers or affiliates."
“H
ow could one
woman steal $53
million without
anyone noticing?”
The movie “All the
Queen’s Horses” tells the tale of Rita
Crundwell, a Dixon, Illinois, city
comptroller who stole $53 million of
public funds over a 20-year period,
making her the architect of the largest
case of municipal fraud in American
history.
Crundwell used the stolen funds to
live a lavish lifestyle that included four
months of vacation annually, hundreds
of quarter horses, large farms, a
vacation home in Florida, million-dollar
RVs and more. While she
was enjoying her lavish lifestyle, the
city of Dixon, with an approximate
population of 16,000, endured
reduction in staffing, cuts to the
police budget, and neglect of public
infrastructure, such as roads and
parks.
While this case is unusual in its
20 June 2020 • Taking Care of Business • WASBO.com
magnitude and duration, many other
cases of occupational fraud— fraud
committed by an employee using his
or her role or employment for personal
gain—occur every day
throughout the country.
The Association of Certified Fraud
Examiners “Report to the Nations”
for 2018 revealed a typical organization
loses 5% of revenues to fraud
annually. The ACFE reviewed 2,690
cases of occupational fraud and determined
a total loss of more than $7
billion, or an average of $130,000 per
case. The report cited corruption,
which includes conflict of interest, as
the most common scheme.
School business offices can protect the
district and its employees from fraud
while maintaining the highest level of
integrity with the community by
ensuring proper internal controls are
in place to identify, monitor, and
address an employee conflict of
interest. Educating employees to recognize
fraud in its various forms is the
first step in controlling the potential
for fraud within the district.
Fraud and Corruption
Corruption, one of the most significant
fraud risks for organizations, has
several subcategories, including
bribery, illegal gratuities, extortion, and
conflict of interest, which includes
purchasing schemes and sales schemes.
Conflict of interest is a type of fraud
that can easily occur in an educational
setting. When a school district
employee, relative of an employee,
board member, or relative of a board
member has a substantial personal or
monetary interest in a matter that
could unduly influence his or her
professional decision making, a conflict
of interest has occurred.
Conflicts of interest do not necessarily
constitute legal violations, if
they are properly disclosed. In
addition, a conflict of interest can
exist even if no improper acts result
from it.
Conflicts of interest can be defined as
actual, perceived, or potential.
• An actual conflict of interest exists
when there is a direct conflict
between one’s private interests and
his or her professional duties.
• A perceived (or apparent) conflict of
interest exists when it could be
inferred that one’s private interests
improperly influence the performance
of one’s professional duties
and responsibilities.
• A potential conflict of interest exists
when one’s private interests could,
in the future, conflict with one’s
duties and responsibilities in serving
an employer. Potential conflicts
often develop into actual conflicts.
Disclosing a conflict of interest
removes or limits the possibility of an
employee’s personal investment in an
outcome. This doesn’t just apply to a
contract, sale, purchase, or service; it
applies to the decision making
process, too.
When does a conflict of interest exist?
1. If an employee, board member, or
relative has a substantial interest in