State auditor warns school districts to be on alert for scam

The Kansas Legislative Division of Post Audit is warning school superintendents of a scam directed at school districts and other local agencies in Kansas and across the nation.

Legislative Post Auditor Justin Stowe said he has already heard of a couple of school districts in other states that have been victimized by the fraud.

Under the scam, a fraudster will get a copy of a state or local agency’s direct deposit, or automated clearing house (ACH) change request form. They then will pretend to be the employee or an agency vendor and send the deposit request form to the payroll or accounting department. After the change request is processed, the funds will be sent to the scammer, who will then move the money before the employee or vendor can raise an alarm.

Stowe said the Kansas Department of Administration recommends two steps to prevent this from happening:

1. Do not post direct deposit/ACH change request forms on a public website. Instead make the form available only to employees or vendors via a secured intranet site or by request, either in person or via e-mail. Please note that prior to sending the form via e- mail, the sender should verify the authenticity of the request by calling a known phone number listed in the system for that employee or vendor due to the ease in which fraudster can make an e-mail appear to be coming from a person/vendor/e-mail address known to an organization.

2. Require payroll and accounting departments to confirm all requested banking or routing changes. Confirmation should be via the phone number listed in their system for that employee or vendor. Do not call the phone number listed on the change form or in the e-mail to which the form was attached to verify.

In October, KASB warned districts of this particular scam, which is usually initiated through email. School districts are urged to have processes in place to ward off such attacks. Districts that are victimized by such a scam should check with their property and casualty insurance carrier to see if such a loss is covered.

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