Internal Controls and Ethics Training: Critical to Preventing Organization Abuses

Recently, a window installation contractor, pleaded guilty and was sentenced to 24 months in prison for over billing the Paterson, NJ school district $750,000.00 and providing concealed benefits to school district officials.

Carl Babb, formally of Olympic Window Installers, Inc., admitted that he gave concealed payments and benefits (cash, Caribbean sea cruise vacations and home improvement projects at the school officials private residences) to Louis Malone, the former district Director of Maintenance and James M. Cummings, the former district Director of Facilities. Milone has been sentenced and Cummings has pleaded guilty.

Babb admitted that he submitted purchase orders to the school district which overstated the cost or for work partially completed.

An internal school control policy requiring regular inspection by the school district, normally a standard requisite for payment, was disregarded which facilitated the abuse.

Fraud detection procedures as well as auditing by an independent, objective expert protects an organization; adding efficiency, effectiveness and control to the operation through evaluation, critical to risk management. These procedures should include numerous levels of signing off to ensure open communication and to minimize collusion. Codes of conduct signed by employees and continually enhanced by training which emphasize ethics are also paramount to any organization.

Read the United States Attorney, District of NJ Press Release: http://www.usdoj.gov/usao/nj/press/files/babb0824_r.htm