Newport-Mesa Installs Theft Safeguards

In reaction to the recent theft of millions of dollars from its accounts, the Newport-Mesa Unified School District has begun implementing internal controls to protect against embezzlement, school officials said Wednesday.

The new measures are being put into place three months after the district’s former finance director, Stephen A. Wagner, pleaded guilty to embezzling about $3.9 million from the district over a nine-year period.

“This is a good opportunity to reassure the community that we are taking care of things and are tightening things up,” Supt. Tom Godley said.

School officials advanced a series of recommendations to the district’s board at a special meeting Tuesday night. The board did not have to vote on the proposals.

Among the 45 new controls are requirements for two authorized signatures on district checks instead of one, keeping inventories of unused checks, locking up computer disks that contain financial information and rerouting mail to an administrative secretary for inspection.

Those safeguards were absent during the years that Wagner was siphoning off funds and falsifying documents, officials said.

“That was how Wagner was able to do the things he did,” said Forrest Werner, a school board member. “He was the guy who interfaced with the people at the bank and personally took care of those internal checks himself.”

After the embezzlement scandal broke in October, the district leadership came under heavy criticism from parents, teachers and the community for failing to notice that the money was missing. Under pressure, longtime Supt. John W. Nicoll announced his retirement in December, citing poor health.

School officials then asked the district’s auditors, Vavrinek, Trine, Day & Co., to track down all the missing funds and conduct a top-to-bottom review of the way district employees handle money. The two-month audit included extensive interviews with each official who deals with district funds.

Many of the proposed changes call for a system to double-check accounting procedures and improve record-keeping for receipts, deposit slips and money transfers. The changes, which officials acknowledge can be cumbersome, will help the beleaguered district recover from the scandal. Godley said the recommendations should be completely implemented by June.

“When you get burned, you get sensitive to heat,” Werner said. “We may be guilty of overmanaging for a while until the point where we can drop back to a comfort zone where we trust people.”