Higher education

University of Iowa tightens financial controls in wake of fraud

Auditor: Former Clerk diverted thousands from health care spending accounts

The University of Iowa Admissions office at Calvin Hall is shown in Iowa City on Thursday, December 18, 2014. (Adam Wesl
The University of Iowa Admissions office at Calvin Hall is shown in Iowa City on Thursday, December 18, 2014. (Adam Wesley/The Gazette)

IOWA CITY — The University of Iowa has instituted new accounting safeguards after discovering evidence a former employee diverted thousands of dollars from other employees’ health care spending accounts.

UI officials discovered the alleged theft of $7,404 from six employee health care spending accounts during an internal investigation and reported it to the State Auditor’s Office during its annual audit for the budget year that ended June 30, 2014.

A report on that audit was made public Wednesday. It included allegations that bank account information for six employees during that year had been changed to an account owned by a UI human resources clerk.

That clerk was terminated in February and charged with forgery and second-degree fraudulent practice. The university, the State Auditor’s Office and the Johnson County attorney’s Office did not immediately release the employee’s name.

An internal investigation by UI human resources first raised suspicions of possible fraud after discovering six health spending account reimbursement request forms totaling $7,404 had been copied from legitimate requests and altered, according to the auditor’s report. The six forms had been changed to give the appearance of having been submitted by employees who had left the university.

Bank accounts listed for those six also had been changed to an account owned by a human resources clerk. Investigators found that account contained exactly $7,404 in deposits — each matching totals from the altered health care reimbursement requests.

“Their system caught this,” State Auditor Mary Mosiman told The Gazette on Wednesday. “They told us about it, and we went in and looked through what they had identified and verified that the system is working as it’s intended to work.”


The auditor’s office made some suggestions, which Mosiman said the university has implemented. Among those is a program that automatically flags any changes to employee bank accounts and generates reports based on those alerts.

UI officials then can verify account changes are instigated and approved by the appropriate employees, Mosiman said.

“There are procedures in place to make sure this doesn’t happen again,” she said.

Tom Moore, a UI spokesman, said no employees or former employees lost money as a result of the alleged fraud.

“This was a case of employee fraud that was detected by our benefits staff,” Moore said. “As a function of the audit review, additional controls have been put into place to further safeguard bank account changes, spending account claims, and other systems access by employees.”

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