A former employee of the Phoenix Union High School District has been indicted on charges related to a years-long scheme that allowed her and her sister to avoid paying thousands of dollars in state and federal income taxes, according to the Arizona Office of the Auditor General.

State auditors allege Julie Kendall, a controller in the district for 20 years, used her access to payroll software to “falsely reduce” the reported incomes on her W-2 form and that of her sister, also a former Phoenix Union employee. Doing so allowed them to pay less in taxes.

A report released Tuesday by the Auditor General’s Office details Kendall’s scheme: False reduction’s to Kendall and her sister’s wages totaled more than $150,000 over a four-year span. The reductions resulted in nearly $20,000 in combined unpaid state and federal income taxes for the sisters.

The scheme took place between late 2012 and early 2016, according to auditors. Every year Kendall made unauthorized entries, the amounts in omitted wages increased.

How the scheme was discovered

In November 2015, when Kendall falsely reduced her income by $25,800 and her sister’s by $35,200, the amounts were “substantially larger” than previous adjustments, the auditor alleges.

That caused the Phoenix Union payroll software to deposit a combined $8,400 to the sisters’ bank accounts, officials said.

It was these bank deposits that first alerted district officials to “payroll-related anomalies” in December 2015. Officials launched an internal investigation shortly after and placed Kendall and her sister on administrative leave, according to the report.

Kendall unsuccessfully tried to conceal her unauthorized adjustments after the bank deposits, auditors found.

The sisters resigned from the Phoenix Union district in February 2016, according to the report. They paid back the district the $8,400 the following month.

How the district handled the scheme

State auditors found “district officials took prompt and appropriate actions” after finding out about the fraud scheme.

But, the report added, “prior to this discovery, officials had not provided adequate oversight or maintained effective internal controls to ensure W-2 form amounts were appropriately recorded and processed.”

The audit report noted that the school district has implemented improved protocols in the wake of the fraud scheme.

Kendall was indicted July 24 on 13 felony counts related to fraudulent schemes, theft, misuse of public monies, preparing a false tax document and computer tampering, officials added.


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