Suspecting fraud in a school district is one of the most difficult situations a school official can face. The moment often arrives without warning. A transaction that does not make sense, a pattern that feels off, a tip from a concerned employee, or a question raised during an audit. While the impulse may be to act immediately or, conversely, to hope the issue resolves itself, neither response serves the district well. What matters most in the early stages is a measured, thoughtful approach that protects public funds, preserves evidence, and respects employee rights.

The first step is to pause long enough to document what triggered the concern. For example, there are unusual journal entries, unexplained cash shortfalls, vendor or payroll irregularities, missing documentation, or information from a whistleblower. At this point, it is critical not to jump to conclusions.

• Don’t: Confront the suspect, discuss suspicions broadly, or conduct informal “side investigations” that could alert a potential wrongdoer, compromise evidence, and expose the district to unnecessary risk. The objective is not to prove fraud, but to capture facts as they exist.

Once concerns are documented, many districts benefit from a limited preliminary internal assessment. This is a short, focused review designed to determine whether the issue is likely due to an error, a misinterpretation, or something more serious that warrants escalation. Ideally, this review is conducted by someone at a level above the suspect within the organization. For example, if an accountant or an operations manager is suspected, it is likely that the Superintendent, the Chief Business Official (CBO), internal audit staff (if available), and/or an external professional working under the direction of legal counsel would be involved.

• Do: Assess whether there is a reasonable basis to take further action and whether there is a risk of continued loss if access to systems or records remains unchanged. The purpose is not to confirm fraud at this stage.

If that preliminary assessment suggests potential fraud, the district’s focus should shift immediately to preserving evidence. This step cannot be overstated. Financial records, electronic data, and physical documents can be altered or destroyed—sometimes unintentionally—if safeguards are not implemented promptly. Districts may need to restrict access to financial systems, preserve email accounts and shared drives, district-owned computers or devices, and secure paper files, contracts, check stock, and vendor records. Even records that appear incorrect or poorly organized should not be modified or “cleaned up.” Preservation, not perfection, is the priority.

• Do: Early on, the district must consider whether it is appropriate to place the suspected employee(s) on paid administrative leave. This decision should always be coordinated with human resources and legal counsel and handled professionally and neutrally. Administrative leave is not a presumption of guilt; it is a protective measure.

A single individual should never handle fraud investigations. Once a matter has escalated, assembling the right investigation team is critical. In most cases, this includes legal counsel to establish the attorney-client privilege; a forensic auditor to trace funds, determine the fraud scheme, and analyze transactions; human resources to manage employee processes; and one or two key district administrators, often including the superintendent or CBO. The CBO typically plays a central role by providing institutional knowledge and facilitating access to records.

• Do: Define roles early, particularly around communication, evidence handling, and staff interaction—to help avoid confusion and missteps later.

If a forensic audit substantiates fraud, the district must then work with counsel to determine next steps, which often include referral to law enforcement and the county district attorney. At this stage, it is essential to:

• Preserve all original evidence
• Avoid conducting parallel or informal investigations
• Limit public statements.
• Notify insurance carriers if fidelity or crime coverage may apply.

It is important to recognize that the district’s role is to ensure governance, accountability, and recovery of public funds, while law enforcement’s role is to determine criminal liability. These processes are related but distinct, and coordination through counsel is key.

Other important investigation tips:

• Confidentiality is paramount. Discussions should be limited to those with a legitimate need to know, and boards should be briefed carefully, often in closed session. Email speculation or casual conversations can quickly undermine an investigation. Clear documentation and disciplined communication protect both staff and governance.
• Whistleblower protections are another critical consideration. Retaliation is prohibited even if allegations ultimately prove unfounded.

Ultimately, responding to suspected fraud is more than uncovering wrongdoing. It is about safeguarding public resources, respecting due process, and maintaining public trust. A careful, methodical response limits financial loss, preserves evidence, reduces legal exposure, and demonstrates responsible stewardship of taxpayer funds. When fraud is suspected, the best course of action is to pause, document, preserve, and bring in the right expertise early.

For those looking to deepen their understanding and strengthen their district’s fraud prevention practices, CASBO’s workshop Legal Aspects & Hands-On Accounting for Student Body (ASB) Organizations offers an ideal next step as ASBs are a high fraud risk area. Facilitated by Christy White, Inc., this practical, interactive session builds on the principles outlined above by focusing specifically on student body funds, including legal responsibilities, internal controls, and real-world accounting scenarios. Participants walk away with greater confidence in overseeing student body organizations, reducing risk, and ensuring compliance while supporting students and staff with sound, defensible financial practices.