Jemez School District LogoA special audit by the State Auditor’s Office has found that $3.3 million, not the $300,000 as originally thought, was embezzled from the Jemez Mountain School District.

The audit concluded that the district’s former business manager, Kathy Borrego, embezzled $3,378,701.27 from the district’s bank accounts from January 8, 2002 through June 4, 2009, according to a news release today from State Auditor Hector Balderas.

The district, which is in Gallina near Abiquiu, fired Borrego June 18.

The special audit’s findings are staggering.

During the period examined by the special audit, Jan. 1, 2002 through June 30, 2009, at least 538 blank checks were taken from the district’s check stocks, according to executive summary of the special audit provided by the State Auditor’s Office. Those checks were made payable to Kathy Borrego and other persons, with the authorized signatures being forged, the executive summary indicates.

Five hundred and thirty five checks were cashed or deposited into personal accounts, according to the executive summary.

Also, the special audit found that data in the district’s accounting system was altered to conceal the unauthorized cash disbursements and expenditures.

“I am outraged that public money for kids ended up in personal accounts,” Balderas said in a press release.  “I have directed my auditors to assist with the criminal investigation and prosecution of these appalling acts.”

The Rio Arriba County Sheriff’s Department already has begun an investigation. According to a July 17 story in the Albuquerque Journal, investigators with the Rio Arriba County Sheriff’s Department confiscated computers, bank statements and financial documents while serving a search warrant at the Abiquiu homes of Borrego.

Balderas immediately ordered the special audit after the district’s superintendent, Adan Delgado, reported to the agency that Borrego appeared to have embezzled nearly $300,000 in funds from the school district.

Last week Balderas issued a risk advisory to school district school board members, superintendents and administrators statewide.  The advisory warned school districts that certain weaknesses in internal control structure and the failure to submit annual audits may create an environment in which fraud and embezzlement can easily occur.

“School districts should be keenly aware that that lack of segregation of duties and untimely audits place public funds in jeopardy,” Balderas added in that advisory.  “Without implementation of proper internal controls, New Mexico’s students will be victims of fiscal mismanagement and we can’t afford to let that happen.  We have a responsibility to ensure that taxpayer dollars are well-managed and protected from fraud and embezzlement.”