INTRODUCTION There was large actual deficit of 12.1$ found in Violet Bay. A special grand jury investigation then uncovered numerous internal control problems that contributed to the deficit. In this memorandum, I will discuss Violet Bay School District’s control systems. I will evaluate the control system using the framework in COSO framework and identify control mechanisms. I will also address the components of the fraud triangle that were present at VBSD.

EVALUATION OF CONTROL SYSTEM VBSD does not create a good control environment with commitment and ethical values well demonstrated. Otherwise, Spigot, the superintendent, acts as having a “dictatorial management style” Although, there is reporting structure established, however, neither Robertson nor Spigot conformed to it. Spigot executes the contract before the City Office’s proposal. For the Risk Assessment, VBSD has unrealistic assumptions used in preparation of the operating budget. Instead of identifying and analyzing risks, the CFO tried to ignore the risks. Furthermore, VBSD lacks control activities and communication systems. To be exact, firstly, there is no effective way to track budget and payroll expenditures. Also, VBSD needs more strict policies and procedures to execute proposal such as the large transfers. For the communication, the current reporting system is not so effective. The deficit information was not conveyed to the School Board as soon as possible. Nearly all the communication process between the reporting and controlling entity does not work quite effectively. The poor relationship and lacking communication between the School Board, School administration and the city further intensify the problem. Lastly, VBSD does not conduct separate evaluations. The function of Internal and External Audit to monitor should be strengthened.