A former human resources specialist from Yuma Elementary School District One has been indicted with nine felony counts related to misuse of public funds, theft, fraud and forgery.
Mercedes Brena, also known as Mercedes Ruiz, is accused of embezzling $86,388 from November 2021 to October 2022. Brena’s alleged embezzlement schemes include three payroll fraud schemes and using district credit cards for personal expenses.
According to an October report from the Arizona Auditor General Lindsey Perry’s office, District One officials took appropriate action by reporting the alleged financial misconduct.
After District One reported the misconduct, state auditors investigated the situation and submitted their report to the Auditor General’s office. The Auditor General then presented the evidence to the State Grand Jury this August, resulting in Brena’s indictment.
In a response for comment, District One Communications and Community Engagement Coordinator Christine McCoy stated that while the district can’t comment on any specific case or individual, “the district condemns any misuse of public funds and takes all such matters seriously. The district prioritizes fiscal responsibility, and we remain committed to upholding the highest standards of accountability.”
Since Brena resigned from her position, the district has made changes to its internal controls over payroll.
“Through an independent risk assessment, we made improvements to internal processes and procedures, and continue to review and evaluate our systems,” McCoy said. “Our aim is not simply to avoid risk, but to proactively design processes that help prevent risk, detect issues early, and fix them rapidly. Our top priority remains the responsible management of all public funds so that every dollar is directed to the students and our educational mission.”
The Auditor General’s report corroborated this statement while outlining its specific recommendations to the district.
Background
In January 2021, the district hired Brena as an HR administrative secretary. A year later, she was promoted to HR specialist. Among her duties, Brena served as coordinator with Educational Services, Inc. (ESI), the district’s contracted provider for substitute staff.
During her tenure, Brena would assist the ESI hiring process, submit substitutes’ time sheets and review ESI invoices for errors before submitting them to the district’s finances department for payment. She resigned in October 2022 after the HR director questioned her about unauthorized purchasing card purchases.
Unauthorized Purchases and Payroll Fraud
From November 2021 through May 2022, Brena allegedly used a district purchasing card and the district’s Sam’s Club and Walmart credit cards for her personal purchases, totaling $12,319. These transactions included renewal of a personal Sam’s Club membership plus 65 gift and prepaid debit cards in increments of $100, $200 and $500.
Brena admitted to state auditors that she had purchased about $2,000 worth of those gift cards and used them for personal purposes.
Additionally, Brena is accused of three separate payroll fraud schemes.
The first amounted to a loss of $4,406 for the district, where she directed ESI to pay unauthorized amounts to a substitute teacher and kept the teacher’s repayment to the district for herself. After directing the teacher to submit the repayment in form of money order, she changed the payee from “Account[s] Payable Yuma” to her own name and deposited them into her personal checking account. This took place from January to August 2022.
The second scheme amounted to a loss of $24,318. Brena had 16 ESI time sheets falsely claim that a teacher had not been paid for 345 previously worked hours. She also claimed that the teacher should be paid for 101 hours to be worked in the future. ESI emailed Brena requesting confirmation that the hours be paid in advance, to which she confirmed yes.
The 16 time sheets included the teacher’s and Brena’s supervisor’s forged signatures. Brena admitted to state auditors that she submitted them knowing they were false.
“Before this unauthorized pay was directly deposited in the teacher’s personal bank account, Ms. Brena reportedly told the teacher that ESI was making payroll mistakes, and the money paid to her in error needed to be returned by cash or money order,” the Auditor General’s report stated. “As a result, the teacher provided Ms. Brena with $15,240 cash; however, Ms. Brena kept that money for herself.”
This incident took place from March through April 2022.
The final payroll scheme amounted to $45,345. Brena had directed ESI to pay unworked hours at unauthorized rates to a fake employee she created using her mother’s personal identifying information. Brena’s mother did not work for District One, but Brena admitted to state auditors that she completed time sheets for her mother and submitted them for processing.
Eight of the 12 time sheets she submitted included forged signatures and pay rates up to 330% higher than the authorized rates for those services. The $30,194 resultant pay was directly deposited into Brena’s personal checking account.
So What Went Wrong?
The Auditor General’s report concluded that District One officials had failed to maintain effective internal controls over ESI-related payroll. Brena was allowed to act as the primary point of contact between the district and ESI without independent oversight.
The report found that the district hadn’t properly overseen Brena’s use of a district p-card and credit cards. It also found that they failed to provide Brena with formal p-card and credit card training; did not ensure she signed card-user agreements; allowed her to make p-card purchases despite not being an authorized cardholder; and failed to adequately review her purchase receipts to ensure she made authorized purchases.
“For example, although District management questioned Ms. Brena about her December 2021 $1,010 Walmart prepaid debit card purchase and her $49 personal Sam’s Club membership renewal a few months later, the District failed to adequately follow up on the purchases and never restricted Ms. Brena’s credit card use,” the report stated.
Improvements Made, Improvements to be Made
The report confirmed District One’s statement that it made improvements to its internal controls since Brena’s resignation.
Specifically, it made the following changes:
- All ESI payroll-related email communications must now be copied to three district administrators.
- An electronic timekeeping system now tracks substitutes’ work hours, allowing real time supervisor approval for worked hours.
- Any corrections to substitutes’ work hours must have supervisor approval through the timekeeping system.
- The timekeeping system generates a detailed biweekly payroll report that is independently reviewed by three district administrators for appropriate pay rates and work hours.
- Gift card purchases are prohibited.
- Cardholders are required to review and sign monthly statements confirming all purchases are accurate and within district policy.
- Two district administrators are required to independently review and sign to indicate their approval on monthly statements.
The auditor general’s office made additional recommendations to further prevent fraud.
Since the report’s release last month, the district has issued two announcements related to financial oversight. It received a certificate of excellence in financial accounting and announced that Director of Budget and Finance Jamie Walden had been appointed to the Arizona Auditor General’s School Finance Advisory Committee. The committee collaborates with the Auditor General’s Office on statewide school finance practices.
To learn more about District One's financial reporting, visit their site here.
What’s Next
After the August indictment, Brena’s attorney entered a not guilty plea during her arraignment on Sept. 16 with the Maricopa County Superior Court. A future trial date’s been scheduled for Feb. 12 according to an Oct. 22 filing.
Whether the district will be able to recover the lost funds remains to be seen. However, if convicted, Brena will be required to make restitution to the district.
Reporting for this article is supported by a grant from the Arizona Local News Foundation.
