INSTRUCTIONS: Fraud Case (15 points) Read the fraud case below and at the end type three internal controls that would have prevented this type of fraud from occurring. Next, post your answers in the Assignment Folder label QuickBooks Fraud Case.

Rita Crundwell a trusted employee work for the City until she was moved into the City Manager position. On December 8, 1990, Crundwell opened a secret bank account named the Reserve Sewer Capital Development Account (RSCDA), making it appear to be a city account. She was the only person who signed all checks for the city. FRAUD EMBEZZLEMENT Crundwell would have money deposited into another account called the Capital Development Fund, create false state invoices, and then write checks from the fund payable to "Treasurer," which she would deposit into the fake account she had setup, the RSCDA account. According to federal investigators, this relatively uncomplicated scheme continued for 22 years. On average, Crundwell stole nearly $2.5 million per year from the city. In 1991, she stole $181,000, while in 2008 alone she managed to embezzle $5.8 million from a city with only an annual budget of $89 million. Crundwell used the money not only to finance her Quarter Horse operation, but also to support a lifestyle well beyond her $80,000 city salary, purchasing several cars, a second house and a million-dollar motorhome. Crundwell covered up her embezzlement by claiming that the City's frequent budget shortfalls were due to the state being late in paying its share of tax revenue. She forced city departments to make drastic service cuts in order to keep the budget within reason. As a result, employees went two years or more without raises and the police department could not afford new radios. The most visible effect, however, was on street maintenance; the city was forced to lay off three of its nine street repair workers and cut the rate of maintenance. In the decade prior to Crundwell's arrest, only 65 blocks of road were repaired or replaced. For most of Crundwell's tenure, residents assumed either that she inherited her wealth and/or that her horse breeding business was profitable in its own right. However, by the onset of the Great Recession, some grew suspicious that Crundwell was stealing money. Nevertheless, the city's outside auditors, and local accountant Samuel Card presumed that Crundwell was honest and signed off on her annual financial statements without concern. For small U.S. cities similar to Dixon, lack of sufficient outside audits was a recurring problem, as third-party auditors could give at best limited attention. Crundwell had nearly complete control over the city's accounts, while few city employees had access to the city's financial statements. ARRESTED In the fall of 2011, while Crundwell was on an extended vacation, city clerk and acting comptroller Kathe Swanson discovered the RSCDA account with 179 deposits and associated checking activity. Crundwell arrived for work on April 17, 2012, to find FBI agents waiting for her. She was arrested later that day and was indicted and found guilty for embezzling $30 million in city money over the previous six years.