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The Lucrative Library Fraud​

Auditors uncover a city employee’s 12-year scam to buy, steal, and resell printer toner for profit.

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This is a very surprising allegation,” said the library manager during an interview with auditors. When the Office of the City Auditor in Austin, Texas, initially looked into an accusation that a staff member of the Austin Public Library was buying printer toner with the library’s credit card and reselling it out of his garage, library staff reported that nothing appeared to be particularly out of place. The auditors were repeatedly told that Randall Whited, the accounting associate who, according to auditors, allegedly stole at least $1.3 million in printer toner while employed with the library, was very well liked. 

The Office of the City Auditor received an anonymous tip in March 2019 with few details. The City Auditor’s Integrity Unit had a name, a job title, and knowledge that Whited had access to a city credit card. The investigation began by sifting through purchase records, which allegedly revealed that Whited spent hundreds of thousands of dollars on one particular brand of printer toner. The auditors wondered if this was too much toner or an appropriate amount for a library with more than 20 locations, so they set out to learn more about the library’s purchasing system and the amount of toner used by staff. 

Library employees told the auditors their branches used just a few cartridges a year. However, the public-facing printers, which received the bulk of use, used a different brand of toner than Whited’s purchases. Auditors took the printer’s usage history from each printer’s memory and combined it with manufacturer printer cartridge capacity data to estimate how much toner was needed. It appeared that Whited was overbuying hundreds of boxes of toner every year. So where were the extra boxes going? 

Despite his 8 a.m. start time and instructions from his supervisor to arrive no more than 30 minutes early, camera footage allegedly revealed that Whited often came in as early as 6:30 a.m. and would take boxes of toner from the library and hide them in his vehicle. 

Once the auditors had evidence that Whited was stealing toner, the focus shifted to determining how much he may have stolen during his employment. The initial review of purchase transactions was expanded to encompass Whited’s entire tenure with the library starting in 2007. The analysis uncovered more than $1.5 million in printer toner purchases dating back to 2010. Through printer usage data, auditors estimated that the library would have needed about 15% — roughly $200,000 — of that amount, at most. 

The expanded review also found other ways that Whited allegedly was defrauding the city, including dozens of purchases totaling at least $18,000 that were reportedly shipped to Whited’s home address or to Amazon lockers located outside of Austin. The auditors were able to find backup documentation for these purchases — ranging from video games to drones to robotic vacuums — which clearly indicated some of the items were never sent to the library. Additionally, some of the documents lacked detail, only including descriptions such as “supplies,” which made it nearly impossible for the people responsible for approving Whited’s purchases to know what they were signing off on. Library managers trusted him, so they never questioned him on the purchases or why they were being shipped to his home. To make matters worse, the approvers had no idea how much toner was appropriate to buy, so Whited’s daily purchases of toner did not raise any concerns. Nor did the fact that the library overspent its budget for office supplies by roughly 400% for several years in a row. As long as the library was under its total allocated budget, management did not look into details.

According to auditors, a lack of segregation of duties also contributed to Whited’s alleged fraud. He reportedly received most of the items he ordered, so he controlled both ends of the process for the library. He also was assigned multiple roles in the purchase tracking system, so he could more easily redirect questions about the purchasing process or his purchases.

After evidence allegedly confirmed the audit findings, auditors wanted to know what Whited was doing with the goods he appeared to be purchasing using city credit cards. The answers starting trickling in through social media. Auditors found Whited allegedly was using online marketplaces to sell some of the items he stole from the library. Auditors also found evidence that suggested Whited was selling toner to online grey market websites that specialized in selling pre-owned toner. 

Ultimately, the City Auditor’s report in October 2020 detailed Whited’s alleged enormous fraud, as well as the waste that the City of Austin incurred as a result of the purchases and management’s failure to catch on sooner. Whited resigned in August 2019, before the conclusion of the investigation. He was arrested in September 2020 and is awaiting trial. 

​LESSONS LEARNED
  • Segregation of duties works for a reason. The same person should not be allowed to order and receive items. Just as importantly, employees should not be able to approve their own purchases. When investigating, auditors should look for individuals who hold dual roles like these that could be exploited.
  • Empower reviewers. Purchase approvers or reviewers in an organization should know they are more than just a rubber stamp. They should be trained on the importance of their role and their ability to say “yes” or “no” in the purchase approval process. Additionally, auditors should make sure these individuals have appropriate operational knowledge about the area of the organization for which they approve purchases so they understand what needs are real. When investigating, auditors should listen for witnesses who say they “just trust” someone to take care of things.
  • Don’t rely solely on witness testimony. In this investigation, like many, witnesses were interviewed to learn more about library operations before auditors knew what records or other evidence might be useful. The initial witnesses shot down the idea that Whited might be defrauding the City. He was a “great employee” who had been in the job for years and knew what the library needed. Had auditors stopped the investigation after witnesses contradicted the allegation, the fraud might still be occurring today.
  • Keep an open mind about evidence. Auditors never know what they are going to find during an investigation or where evidence will come from. When this investigation started, no one on the audit team knew much about printers or printer usage. They worked with IT staff to review printer manufacturer information and learned that most printers have enough memory to keep a record of everything they ever printed. By combining the printed page records with manufacturer toner data, they were able to calculate how much toner the library needed over a given time period. That was a huge step in the investigation and allowed auditors to determine how much excess toner Whited allegedly was buying and stealing.

Michael Yamma
Brian Molloy
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About the Authors

 

 

Michael YammaMichael Yamma<p>​Michael Yamma, CFE, is a senior investigator in the Office of the City Auditor for Austin, Texas. <br></p>https://iaonline.theiia.org/authors/Pages/Michael-Yamma.aspx

 

 

Brian MolloyBrian Molloy<p>​Brian Molloy, JD, CIA, CGAP, CFE, is chief of investigations in the Office of the City Auditor for Austin, Texas.<br></p>https://iaonline.theiia.org/authors/Pages/Brian-Molloy.aspx

 

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