Former New Mexico school district business manager accused of extortion
From Sunshine Review
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August 20, 2009 The New Mexico State Auditor Hector Balderas has accused Jemez Mountain Public Schools ex-business manager Kathy Borrego of extorting $3,378,701.27 over seven years from the district. [1]
[edit] Extortion
Borrego allegedly took the nearly $3.4 million from 10 district accounts between Jan. 8, 2002, and June 30, 2009. Now Borrego may face a long list of criminal charges.
The money she allegedly stole is equal to about $9,058.18 per student, based on the district’s 373 students enrolled last year.
“This is the largest case my office has ever seen in terms of a school embezzlement, and also in terms of how important this is to the community and to the state,” Balderas said.[1]
Because the school district is small, the impact is especially harmful. The district budgeted about $8 million for operations and instructors’ salaries for the fiscal year that ended June 30, 2008. It reported slightly more than $21 million in total assets, according to the district's independent audit they submitted to the state auditor March 23, 2009.[2]
[edit] Borrego's alleged crime
Allegedly, Borrego stole 538 blank checks from the district, issuing 535 of them to herself or other recipients. She issued them without authorized signatures, the district's report states, and they were cashed or deposited into personal bank accounts.
“For her to take money from our kids really pisses me off,” said Martha Jacquez, a parent of three Jemez Mountain students. “And I’m just really upset and hurt because one of my children is in special education, and that’s one of the first accounts (Borrego) started stealing from.”
The report says Borrego had accomplices, but Balderas said the unnamed individuals were not district employees.
“Most of the findings in the report were a gradual shock,” Superintendent Adan Delgado said. “Since we were closely collaborating with the investigation, we had seen it develop. But to see the final report and conclusions, it was shocking, disheartening and extremely disappointing.”
Delgado first reported suspicions of Borrego’s embezzlement to Balderas’ office and the state Education Department in June, triggering an investigation of two district accounts that initially showed $292,000 missing between July 1, 2008, and May 31, 2009.[1]
[edit] State auditor's probe
The probe revealed the following embezzled checks and missing money:[1]
| District bank accounts | Number of checks | Amount missing |
|---|---|---|
| Operational Fund | 74 checks | $446,178.36 |
| Payroll Account | 104 checks | $621,128.59 |
| Transportation Fund | 17 checks | $104,951.25 |
| Teacherage Fund | 16 checks | $74,872.99 |
| Cafeteria Fund | 5 checks | $25,916.79 |
| Federal Projects | 46 checks | $281,272.03 |
| SB-9 | 210 checks | $1,345,389.59 |
| Bond Fund | 41 checks | $285,408.31 |
| Debt Service | 24 checks | $187.433.36 |
| Activity Fund | 1 check | $6,150 |
[edit] Misleading
“We asked for things and she always provided them, and she was always available for exit audits,” Board chairman Randy Cordova said. “It’s hard to fathom how she took that much money.”
For years the Jemez Mountain School Board thought Borrego’s work was exemplary.
“Everyone always said she was the perfect business manager,” said Board member Mark Valdez, who served on the Board for 10 years. “I just went by what I got (from Borrego). We would ask questions and she always had an answer. But now, obviously, I really want to educate myself more on finances.”[1]
[edit] Special audit
Balderas began a full-fledged special audit, coinciding with investigations by the Rio Arriba County Sheriff's Department and the Española Police.
The district’s accounting system was altered over the last seven years, concealing the fraudulent checks, and “someone removed or destroyed most of the district’s bank account records,” according to the report.
Balderas said some alterations include manipulation of ledgers and computer accounting systems, oral misrepresentations of financial transactions and heavy transfer activity between district accounts.
The district has bank accounts at Valley National Bank and Wells Fargo dating back to Jan. 8, 2002 and the investigation follows these. It reveals suspicious activity in the 10 accounts from the chart above.
“There are definitely some lasting repercussions, like the lost SB-9 money,” Delgado said. “If that money was not lost, there could have been much more facilities maintenance, repair and upgrades.”
The amount taken from the SB-9 account would have been enough to keep the district’s Coyote Elementary open, which cost $235,024 to operate. It was closed in May because of financial reasons, according to district documents.
Delgado said the embezzlement should not impact the district’s finances this year.
“One positive thing about school budgets is they work year to year,” Delgado said.[1]
[edit] Land Grant
The report shows that Abiquiu Land Grant President Gilbert Ferran was questioned about a suspicious $27,509.24 check the Land Grant received from the district. Jerry Archuleta, Borrego’s husband, was treasurer for the Land Grant earlier this decade.
“The Land Grant has been identified as a high-risk entity, and we will probably be conducting procedures to engage them formally,” Balderas said.
An investigation by the Rio Grande Sun of Land Grant documents showed there was over $50,000 missing from two bank accounts. The Sun reported that Land Grant officials could not readily explain any of these issues.
Balderas' office will also launch an investigation of the Northwest Regional Educational Cooperative #2. Borrego served there as business manager.
[edit] Post-report reaction
Because of the report's findings, state Education Secretary Veronica Garcia has taken over the School Board’s authority to act as the district’s Board of Finance. She cited that there was a failure to meet the statutory responsibility to oversee the district’s finances.
“Essentially it means they’ve taken our checkbook,” Delgado said. “The district still has control of curriculum and instruction, but every single financial transaction will be overseen and approved by the Public Education Department.”
The state will remain in financial power of the district for an indefinite period of time. But Delgado and the Board have “always been committed to providing complete transparency.”
“I have seen school boards that are much more aggressive in exercising oversight of the approval of purchases,” Balderas said. “I would maybe encourage them to look at increasing that authority.”
Balderas mentioned hopes this extortion case will convince lawmakers to pass a bill that would fine school districts that are late submitting their audits. He hopes there could be a bill that would encourage districts to invest more heavily in certified financial officers.
“I think it’s at crisis level for small districts to attract and retain competent certified staff,” Balderas said. “Right now, (Delgado) is getting people who used to work at Lottaburger to apply for these (financial oversight) positions which are just as important as the superintendent position.”[1]
[edit] Former superintendents' comments
Borrego served under two other superintendents while she was a business manager: Robert Archuleta, who recently resigned as superintendent of the Mesa Vista School District, and Pancho Guardiola, who is currently the superintendent of the Santa Fe Indian School.
Robert Archuleta declined to comment, but he expressed surprise at the allegations against Borrego.
Guardiola said Borrego was hired into a system with a shabby accounting system and he credits her with reforming it.
“When she first got there, the district’s finances were in disarray,” Guardiola said. “(Borrego) was able to turn that around in four or five months.”
Guardiola said Borrego was commended for her work and no one on the Board had reason to suspect Borrego anything wrong.
“There’s checks that go through the computer system, if you will, then checks that are done manually,” Guardiola said. “That’s where the potential glitch may have been. There’s an expectation of honesty.”
The First District Attorney Spence Pacheco has not filed charges against Borrego, yet. Pacheco's office is waiting for the Sheriff’s Department and the state of Taxation and Revenue Department to complete the investigations.
“(The state auditor’s report) kind of set up a road map for us,” Pacheco said. “But just because charges have not been filed doesn’t mean charges aren’t forthcoming.”[1]
[edit] Parents' reaction
Parents in the Jemez Mountains School District are asking questions about how Borrego was able to pull off the massive theft for so long.
“I get sick to my stomach just thinking about it,” said Amy Martinez, whose daughter is a senior at Coronado High School. “It’s amazing that it went on this long and makes you want to point fingers, but it’s my opinion as a parent that she couldn’t have done this on her own.”
Other parents, like Martinez, are wondering why Borrego has not been charged with a crime yet.
“It strikes me that she hasn’t been charged with anything yet and is free to live her life just like I live mine,” Martinez said. “I can’t imagine being short five bucks (at my job). You’ve gotta count down to the last penny. So it’s very discouraging that (Borrego) is out and about and just going about things casually.”
Pacheco is in charge of filing charges against people involved in the investigation and insists “paper cases” take time.
“These types of cases are very detail-oriented, and it takes a lot of time,” Pacheco said.[1]
[edit] Education system issues
On August 4, Balderas’ office issued a “Risk Advisory Regarding Internal Controls." This cites two specific problems: “the lack of segregation of duties” and “the lack of timely reconciliations that are reviewed by management." The advisory says these that might allow a case like Borrego’s to happen again.
According to Balderas, Borrego had access to the district’s coffers while overseeing the district’s financial records, allowing her to funnel district money into her own accounts and then cover her tracks in reports she provided to the superintendent and the Board.
For most of the last six years, the district has been behind on its audits. The district did not submit an audit from fiscal year 2003 until August 2007, and audits from 2004 through 2006 were not submitted until July 2008.
Delgado says his review of those reports helped him start the investigation into Borrego.
There are 13 school districts throughout New Mexico that have not submitted current audits through fiscal year 2008, including the Española, Dulce and Cuba school districts.[1]
[edit] External links
- New Mexico State Auditor website
- Jemez Mountain Public Schools website
- New Mexico Independent news about Kathy Borrego
[edit] References
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 "$3.3 Million Swindle: State Auditor Accuses Kathy Borrego of Stealing Millions from Jemez Mountain Schools," Rio Grande Sun, August 20, 2009
- ↑ "Audit: Woman stole $292k from schools," KRQE, June 24, 2009
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