The town-funded auditor's fraud examination of the Middle School PTO bank account concludes that internal controls were such that there was an opportunity for fraud.
But the examination's results are inconclusive on whether fraud took place between December of 2009 and December of 2011. Ralph Watson, the former Middle School principal, was interviewed twice as part of the examination.
Findings listed in the report, which is attached to this post, include the following:
- The Middle School principal, Ralph Watson, was reimbursed $1,374.81 for which no supporting documentation was provided
- The Middle School principal, Ralph Watson, was reimbursed twice for the same expense totalling $218.57
- There is insufficient support for $34,399.17 of disbursements from the bank account
- There is a lack of internal controls over cash receipts and cash disbursements that provide an opportunity for fraud
- The Middle School principal's handling of the bank account and the related cash receipts and cash reimbursements was in direct violation of multiple municipal finance laws of the Commonwealth of Massachusetts
- Noncompliance with IRS and Massachusetts Department of Revenue rules and regulations
The auditor, Sullivan, Rogers & Company, began its investigation a little more than a year ago, Jan. 23, 2012.
Upon finishing it, the forensic accountants recommended that the town consider forwarding the report to police and the Attorney General's Office for their review.
The town did this. Authorities investigated but brought forth no criminal charges.
Patch obtained the auditor's report from Town Administrator Thomas Younger on Wednesday, after making a request for it late last year under the state's public record law. The forensic audit was funded by taxpayers, costing slightly more than $45,000.
An earlier request, prior to Younger's arrival in Swampscott, was denied because authorities were investigating the case at the time.
The report is inconclusive on whether fraud took place.
"Due to the lack of accounting records and documentation, the result of our fraud examination was inconclusive as to whether fraud occurred during the fraud examination period, " the auditors stated.
"However, we do conclude that the system of internal control over cash receipts and cash disbursements provides an opportunity for fraud to occur."
Assistant Town Administrator Dave Castellarin reported last year that internal controls had been designed, documented, and implemented to promote controls over cash receipts and disbursements related to school activities and student activity funds.
He also said at the time that the School Committee was in the process of formally closing all bank accounts that did not fall under the Town that were previously held at the individual schools. These funds were to be deposited with the town treasurer going forward and managed and accounted for in accordance with Massachusetts laws.