On September 5, 2018 the Santa Clara County Sheriff’s Office arrested former City of Cupertino employee Jennifer “Yuen-Cheng” Chang, Senior Accountant, for her alleged role in the embezzlement of public funds. It is believed that Ms. Chang issued and cashed numerous fraudulent checks between 2000 and 2014 for a total of $791,494.

The Santa Clara County Sheriff’s Office submitted its case to the Santa Clara County District Attorney’s Office for the issuance of a warrant for Ms. Chang. The Santa Clara County District Attorney’s Office has brought forward 68 criminal charges against Ms. Chang. The City of Cupertino will seek full restitution from Ms. Chang through upcoming criminal and civil proceedings.

The alleged scheme ended in September 2014 right before the implementation of an upgraded financial system in December 2014 that tightened internal controls. Ms. Chang, who was hired by the City in 1997, retired in July 2015.

The checks were uncovered earlier this year by staff during a multi-year, detailed review of several accounts—including payroll, bank reconciliations, and deposits—which began after the implementation of the new financial system. The checks were found debited against a liability account and deemed suspicious due to their nature, size, and lack of supporting documentation.

This page will be updated periodically with information and documents pertaining to the fraud.

Documents:

City of Cupertino - Former City Employee Arrested on Embezzlement Charges

 SCC Sheriffs Office Media Release

 City Manager Letter to Employees Regarding Embezzlement

 
Frequently Asked Questions:

Does the City perform audits?
The City of Cupertino engages in certified, external audits every year. This includes the years the alleged embezzlements took place.

An audit involves the examination of evidence of the City’s financial statements. These independent auditors express opinions on whether the financial statements are presented fairly, in all material respects, to the City’s financial position. The auditor’s opinions are derived by obtaining reasonable assurance about whether the financial statements are free from material misstatement.

Why did it take so long to discover the alleged embezzlement?
Since the implementation in 2014 of New World, a financial management software, staff has worked deliberately through all data transferred from the old system starting with the most high-risk areas such as payroll, bank reconciliation, cash, and fixed assets. This liability account was the last area to be reviewed.

City staff performed an in-depth review of the liability account, as it had done with all other areas of the new system. This review included an examination of all transaction data from City storage. The lack of documentation related to these vendors is what ultimately uncovered the scheme.

What has the City done to prevent this from happening again?
The City implemented New World in December 2014, which increased the magnitude and volume of internal controls by establishing multi-layer approvals within the system.  

In conjunction with the system upgrade in 2014, the City incorporated a decentralized accounting structure to enhance segregation of duties.
In addition, the City holds quarterly Audit Committee meetings for purposes of:
1. Reviewing annual audit report and management letter
2. Recommending appointment of auditors
3. Reviewing quarterly treasurer’s report
4. Recommending budget format
5. Reviewing City investment policies and internal controls of such policies

The Audit Committee consists of five members serving four-year terms. Two individuals are members of City Council, and three are members of the public at-large. The Audit Committee is recruited and appointed like City commissions.

Additional information on the Audit Committee can be found at www.cupertino.org/our-city/commissions/audit-committee.

Will the City be able to recoup all funds?
The City is confident that it will be able to recoup the stolen funds through the legal process.

Will the former employee still receive her pension?
According to the California Public Employee’s Retirement System (CalPERS): “Under the California Employees’ Pension Reform Act of 2013, if you are convicted of a felony by a state or federal court in connection with your official job duties, you will forfeit all of your accrued rights and benefits from the commission of the felony forward and you will no longer be eligible to accrue further benefits with CalPERS, effective on the date of conviction (Government Code sections 7522.72 and 7522.74).”

Have any other employees been linked to the alleged crime?
No current or former employees have been implicated in the alleged scheme. In addition, current management were relatively new and/or not in their current roles during the time of the alleged embezzlement. It was current management that encouraged and sought implementation of the new system for the primary purpose of enhancing of internal controls.