supes_hart park

County of Kern Administrative Center on Truxtun Avenue

Felix Adamo

A staggering $19 million was stolen from clearing accounts owned by the Kern Community College District and the Kern County Superintendent of Schools office, Kern County Treasurer-Tax Collector Jordan Kaufman announced Tuesday.

The news revealed the shocking magnitude of the fraud discovered and made public last month. Previously, Kaufman said the loss was in the "seven figures," leading reporters to characterize it as "at least $1 million."

The loss, it turns out, was in the eight figures.

Most of that money, $16.4 million, was stolen from the college district account, Kaufman reported. He said $2.6 million was stolen from the KCSOS account.

So far, his office said, $10.4 million of the KCCD money and $1.6 million of the Superintendent of Schools cash has been recovered through Wells Fargo Bank.

Kaufman said Tuesday the seven-figure estimate of the loss was an initial tally based on data his office had three days after the fraud was discovered.

“I was intentionally vague because we honestly didn’t know,” he said.

RECOUPING THE MONEY

Over the last few weeks, Kaufman said, the two districts have poured over hundreds of pages of bank statements identifying every fraudulent transaction.

“We just did the final tally. We confirmed we could share that information and I did,” he said.

Kaufman said he checked with the Kern County District Attorney's office and the federal law enforcement agents investigating the criminal portion of the fraud to make sure telling the public about the size of the theft of taxpayer dollars would not compromise efforts to catch the thieves.

Kaufman has previously said that the bank has a 60-day recovery guarantee that would help retrieve a large portion of the losses in the accounts — most of which took place in the past three to five months.

John Von Flue, assistant superintendent for administration, finance and accountability for the Superintendent of Schools office, has said much of that work was done by reversing charges.

Kaufman said the cash that was easy to recover has been pulled in.

“More money is coming in every day. We are being really aggressive about going after every penny. We will be recovering the overwhelming majority of these funds,” he said.

But the work is getting harder.

“We are beginning to recover that more difficult money. The rest of the recovery process could be longer,” Kaufman said. “It will take several months.”

NO RECONCILIATION

The fraud, which was discovered in early February, rocked the county treasury system and the two school districts.

According to previous statements by Kaufman, the money was stolen over the course of two to three years.

A Californian investigation revealed the accounts the money was stolen from — "clearing" accounts held for the Superintendent of Schools and KCCD in the county treasury — had not been "reconciled" for years.

No one from the Treasurer-Tax Collector's office or either school district was looking at the individual transactions from the accounts to make sure all the payments being made were valid.

A total of $19 million in payments weren’t valid.

The Californian learned that neither the Superintendent of Schools or the KCCD had access to the account statements needed to reconcile the clearing accounts that were targeted by thieves.

But the Kern County Auditor’s office had clearly explained to both districts that they needed to reconcile those accounts.

Those details are likely to become important after the districts and the county learn how much of the $19 million loss cannot be recovered.

Von Flue has previously said that because the loss came from accounts in the county treasury, the county would be on the hook for it.

Kaufman said the money is the school districts' and the loss is clearly theirs to be absorbed.

THE FOCUS NOW

Now the three jurisdictions are working together to diagnose in detail what went wrong.

“We are in the process right now of negotiating with an external auditor to take a look at this and find out what happened,” said KCCD spokesman Joe Grubbs.

He said efforts to collect more of the lost money are ongoing and the KCCD, the Superintendent of Schools office, the Treasurer-Tax Collector's office and Wells Fargo meet weekly to keep on top of the situation.

Kern County Superintendent of Schools spokesman Robert Meszaros said the loss is definitely large and “not what we want to see.”

“We’re definitely hopeful that more will be recovered,” he said.

But right now, the Superintendent of Schools is focused on the joint investigation of how the money was stolen.

“We’re going full bore on a forensic audit,” Meszaros said, that will find out “what went wrong and make sure it doesn’t happen again.”

Kaufman said the rest of the county treasury is secure and efforts are being made to make sure systems are in place to prevent anything like the loss in the future.

"As soon as the fraud was discovered, immediate action was taken to secure the accounts from any additional fraudulent activity," Kaufman stated in a press release Tuesday. "As a proactive measure, we have reached out to every district and department with bank accounts in our treasury to review with them their current bank account setup and discuss various fraud prevention options they should consider.

"I want to assure the public that we are doing everything in our power to ensure that all accounts are protected from the potential for additional fraudulent activity."

(12) comments

jfrancais

But...the computer did it...

Grancer

This is an amazing story. Auditing practices for preventing theft and fraud are older than the hills. The scenario presented with this theft surely required more than one operator asleep at the switch. Whoever stole the money should go to jail and those allowing the opportunity due to incompetence should be fired.

Holding the bag

Funny how the Kern County Superintendent of schools responds to the fraud allegations , yet the Kern Community College District (KCCD) says nothing... not to mention they just got millions for measure J and they still have money from measure G they haven't used! Should ask their new Chancellor, who was their Chief finanancial officer before becoming the Chancellor! I guess we will never know, because it will be defused with double talk.check your tax bill and see all the bonds that we pay for and never know where all the money is earmarked for.WAKE-UP Bakersfield

amtfor attorneys

Teachers use there own money for school supplies while the district rips off the money thats how Bakersfield rolls clothes top people stealing the money out of children mouth there is no respect then u have attorneys ripping there customers then there are judges who are to busy to really care wake up Bakersfield we need to change the rules they play buy they should be held accountable with a time clock and a city citizen group should monitor there charges and excuses why they are not ready if attorneys are not ready they don't get paid and cant bill the customer also they jay walk to the court house in front of police cars that drive by the cops know the attorny no ticket are given but u try it in front of a cop see what happens

lmarty

Please update this story with an indication of how many people will be or have been fired for their roles not only in committing fraud, but in failing to prevent it, too.

lowell1

obviously with all the furor over other issues, no one was watching the cash register. The Kern County admin thinks that the East Kern area of Ridgecrest doesn't need police or fire -- but they can sit and watch millions disappear in Bakersfield?

Jpb1055

Our school district's are no more able to handle money than they are the education of children. When you put California liberals in charge of anything, you can hear the huge sucking sound of taxpayer money going down the drain. This time the pocket just had a gaping hole in it. It's no wonder Mrs Frazier left abruptly.

Nevermind

Right.....liberals. You mean the 9th economic power in the world is handling money badly? How about this is thievery perpetrated by people who give a rat"s pattoonie about political affiliations. Yeah, the "conservatism" of the Bush years worked so well economically, that you've doubled down on that stupidity by electing the biggest lying narcissist in American political history.

Pitbullll

News Flash #1: The "biggest lying narcissist in American political history" just left office. Thank, God.

News Flash #2: President Trump created 298,000 jobs last month, the highest in nearly three years, since April 2014. It is also the third-highest jobs growth number recorded since the beginning of the economic recovery in 2008.

Pitbullll

According to the state of California's public pension and healthcare systems:

CalSTRS Pension is $80.4 billion underfunded
State Retiree Health Care is $63.8 billion underfunded
State Employees’ Pension is $48.6 billion underfunded
UC Healthcare Pension is $25.0 billion underfunded

Moody’s credit rating service estimates CalSTRS is currently underfunded by as much as $300 billion.

Yes, in fact, the California liberal Democrats who have been in charge of this state for decades really do know how to mishandle other people's money. And they're very good at it.

Pitbullll

Who will be held responsible for this outrageous loss of taxpayer dollars? Clearing accounts were not reconciled for year!! This rank incompetence and gross negligence by government employees should be punishable with criminal prosecution.

Bill Palmer

Clearing accounts not reconciled in years! Open door for fraud.

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