After scammers hit Livingston schools for $2 million, audit urges tighter controls on money

Feb. 13—The Livingston Parish school system lost $2 million to a phishing scam last year, though it was eventually able to recover most of the lost money, the state legislative auditor reported.

The findings were disclosed in a recent audit reviewing the district's finances between the summers of 2021 and 2022.

The school board received scam emails requesting changes in electronic funds transfer payment information for two vendors in January 2022, according to the auditor. Staff made the changes to the payment details without calling the vendors to verify the request, so the fraudulent activity was not initially detected.

As a result, a total of $2,251,861 was issued between January and February to fraudulent bank accounts, the report says. Then, in early February, one of the legitimate vendors contacted the school board to follow up on a payment, leading officials to discover the electronic fund transfer information had been changed.

When officials realized what had happened, they reached out to law enforcement and an investigation was launched. The school board was also able to cancel or retract a recent payment that had just been issued with the help of law enforcement and federal assistance, the audit says.

"I would like to point out that at no time during the investigation was an employee of LPPS accused of any fraudulent activity," said Superintendent Alan "Joe" Murphy in a statement this week. "This was a matter of electronic fraud and not mismanagement of existing funds. This incident is not unlike incidents many of us have experienced with our own banking/savings accounts."

Ultimately, the board was able to recover $1,907,894, leaving $343,967 still unaccounted for. Officials filed an insurance claim and the investigation into the incident remains ongoing, with the scammer or scammers yet to be identified.

Murphy, the superintendent, said the Town of Livingston police department, the FBI and other law enforcement agencies worked with his staff to retrieve the funds.

In the report, the auditor expressed concern with the breakdown in procedure allowing the scam to go undetected.

"The deficiency in internal control exposes the entity to risks including, but not limited to, misappropriate of assets and inaccurate and fraudulent financial reporting," the audit says.

The auditor recommended the school board follow their own procedures when it comes to editing vendor payment information and suggested the board strengthen that protocol to include an actual document to be filled out when a change is requested.

Livingston Parish Schools concurred with the auditor's recommendation and planned "to stress the importance to employees that policies and procedures are followed at all times," the report says.

"The School Board plans to strengthen policies and procedures to ensure that vendor changes are verified according to adopted policies and procedures," the management response says. "The School Board plans to continue to monitor its internal controls to ensure the safeguarding of public funds."

Murphy said in his statement that the district has since modified its procedures and now requires that any change to electronic fund transfers requires written and verbal verification from the vendor.

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