WCS nearly loses $335K in phishing scheme

Washington County Schools nearly lost more than $335,000 to a phishing scheme that exploited a district security system renovation project, state officials said. The fraud took place in January when a district official forwarded a message originating from a fraudulent email address that had been inserted into an existing correspondence thread between himself and project leaders, according to the county's annual comprehensive financial report released recently by Tennessee Comptroller Jason Mumpower. State and school officials said Washington County officials processed a wire transfer of $335,215.10 on Jan. 13, based on the altered banking details that appeared at first to be legitimate. The payment covered work completed in October, November and December 2024 on a $1.5 million security system renovation project. Washington County Schools Superintendent Jerry Boyd said the "criminal act was identified upon payment by the County." Officials discovered the scheme three days after this when they contacted contractors for receipt confirmation and learned the payment wasn't received. Luckily, Boyd said the FBI led recovery efforts together with bank and county officials, ultimately retrieving $334,786.22 of the stolen funds. County commissioners voted to liquidate the remaining $428.88 shortage in May. The audit classified the incident as a material weakness in internal controls, noting that the county lacked policies to verify payment method changes and wire transfers before processing disbursements. Director of Accounts and Budgets Mitch Meredith said in the state report's corrective action plan that the county has implemented new verification requirements since the scheme. "County policy now requires that any change to prior payment methods or new electronic payment addresses must be verbally verified and documented by staff," Meredith said. "Verification must be made by contacting the vendor at telephone numbers maintained by the Purchasing Department." Boyd said the school system aims to ensure more regular and effective communication with county leaders regarding the use of county education capital funds. Staff are also participating in cybersecurity training. "We have met with County officials to fully review all rules and procedures in accessing and utilizing Washington County Education Capital Funds," he wrote in a Tuesday email. "We will strictly adhere to all steps in the process and will ensure that our single point of contact will verify and clarify any and all requests for payments for all projects approved by the County Commission." In addition to the phishing scheme, the state report identified accounting deficiencies in school system financial operations. The report said bookkeeping problems in payment accounts remained largely unresolved since 2019, and the school cafeteria fund showed a $66,480 discrepancy as of June 30, 2025. Auditors also found $223,664 in Child Nutrition Program reimbursements that were not properly recorded as revenue, according to the state's report. Boyd said the district's accounting office is now working closely with the Washington County Trustee's Office and other advisors "to improve internal processes" in light of the findings. "Based on the fact that the audit finding was due to a variance in the way the amount was recorded on the accounting side, modifications have been made concerning recording revenues and accruals to the monthly recording processes to the [cafeteria fund]," he said. "Additional resources are currently being devoted to reconciliation of the account balances in all accounting processes." Despite the fraud incident and accounting concerns, the county's overall audit received a clean opinion and was classified as low-risk by state auditors. No problems were found with federal grant spending for the fiscal year ending June 30, 2025, according to the report's findings.