Pamela Johnson, a low-level accounts assistant, had a hidden gambling problem and the trust of the Tompkins Consolidated Area Transit. Here's how she exploited her employer's confidence and how the external auditors actually discovered the devastating three-year fraud.
The Tompkins Consolidated Area Transit (TCAT) controller sat at his desk looking at the document request for JTD Enterprises from an external independent auditor. "I didn't know we had a vendor named JTD Enterprises," he said to himself. This was the beginning of many difficult days when TCAT learned that nearly a quarter of a million dollars was missing from its coffers.
TCAT is a private, not-for-profit organization that provides public transportation for Ithaca and Tompkins County, New York. Three primary funders — the City of Ithaca, the County of Tompkins and Cornell University — support TCAT. Three representatives of each entity comprise the nine-member board of directors. The 2015 operating budget was approximately $13.5 million. TCAT has about 120 employees.
In March of 2014, that inquisitive external independent auditor discovered a TCAT accounts assistant, Pamela Johnson, a TCAT employee since 2009, had diverted nearly $250,000 in cash out of TCAT accounts from 2010 through 2013 via a fraudulent check scheme. Because of a lack of adequate safeguards in the internal control system, she was able to create a fictitious vendor — JTD Enterprises — within the accounts payable system without prior approval.
During the three-year period, she submitted approximately 65 fictitious invoices in the JTD name for payment. Management later determined that she used the TCAT general manager's signature stamp to sign all the checks. She deposited those checks to a bank account in her husband's business name, Johnson Tool Design, which she had access to and controlled.
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