State Auditor Seeks New Fraud Laws

MONTPELIER – In its 2011 report on embezzlement, which was released this last January, Marquet International named Vermont first in the nation for Embezzlement Propensity Factor. The report states that Vermont topped the list of states with highest risk for loss due to embezzlement in 2011. Vermont was followed by Connecticut, Pennsylvania, Montana, Virginia, Iowa and Idaho.The most common embezzlement scheme in 2011 involved the forgery or unauthorized issuance of company checks nearly three-quarters of the incidents in 2011 were committed by employees who held finance and accounting positions.During a recent interview, Vermont State Auditor Tom Salmon cited three reasons: Pressure, opportunity and rationalization. Salmon believes the state has been too trusting and people have been giving too much of the opportunity.Salmon’s office is asking the Government House Committee to approve a bill that would allow for a checklist, a three-hour class for fraud prevention training and a reporting requirement of any entity that has a confirmed embezzlement. A 10-member working group formed by Salmon’s office in 2010 recognized the need for such legislation. “We really don’t have a strong culture of oversight in Vermont,” said Salmon. “This is some legislation that’s more of a wake up call than a mandate.”The group made the request last year but missed the crossover deadline for legislation. “This year we got invited to come over early on,” said Salmon.The purpose of the legislation is to discourage anyone from even considering embezzlement. A situation report conducted by Salmon’s office highlighted that 25 frauds were committed in the last 11 years in schools. Sixteen of the 25 cases were reported to law enforcement, two were reported to the department of education and none were reported to the auditor’s office.“How do we fight fraud if we don’t know where, why and how this is occurring?” asked Salmon. “We're asking the legislature to let everybody know there is a simple form at the auditor’s office. If you have a confirmed fraud, then you need to report it to the state.”Salmon said his office can’t inform the legislature or the press about fraud statistics if there is no mandated reporting.“Vermont is such a trusting state that we forget there is a connection between the funders and the spenders,” said Salmon. “These tools we are asking the legislature for are very low cost, low impact.”The head of an organization would be responsible for reporting fraud cases. In schools, it would be the superintendent and the business manager. For municipalities, it would be the select board. For non-profits, it would be the governing board.The bill is with House Government Operations who has heard testimony from the Vermont League of Cities and Towns, Steve Dale from the Vermont School Boards Association, and Rep. Duncan Kilmartin of Newport.“If the legislature doesn’t want to do something serious right now, then we certainly have a culture that is going to stay weak on oversight,” said Salmon.If the the legislation passes, then the legislature is saying fraud is a priority. If not, Salmon won't stop doing what he does.“We can still fight fraud the way we fight it, but we would have lost the ability for the legislature to communicate with the rest of the state,” said Salmon. He said the state funds billions of dollars with few strings attached. “Too little strings attached, in my estimation.”