Embezzlement

Samantha had worked with Dr. X since he had purchased the practice from Dr. Y four years ago. He had inherited her from the previous practice. She had been a loyal employee, even forgoing her vacation for the past couple of years.

Samantha had been diagnosed with a medical condition three years ago and, unknown to her employer, had developed an addiction which exceeded her $60,000 a year salary.

She had had a rough couple of years, but had successfully masked her prescription drug addiction – or so she thought.

The doctor hadn’t noticed anything wrong, other than Samantha never seemed to get caught up on the bookkeeping. A change in Chartered Accountant revealed the truth…

Fraud can occur in so many different ways. Did you pick up any hints that Samantha was up to something? The hints that the employer could have noticed include:

  1. Consistently foregoing vacations may mean that an employee is trying to hide something and is reluctant to pass off his/her duties to someone else, even for a short time, for fear of being caught.
  2. When an employee is suddenly unable to catch up on bookkeeping, or other similar tasks, this may be another sign that the employee may be trying to hide something.

Other red flag actions may include:

  1. Paying the same invoice twice to conceal money taken from petty cash
  2. Failing or “forgetting” to stamp invoices as PAID
  3. Asking you to sign blank cheques
  4. One employee taking charge of all financial and accounting processes in the office
  5. Cheques paid to unusual suppliers or unknown persons

In this case, Samantha had access to cash payments from patients. Patient accounts were marked as “paid” but payments were “backdated” in the dentist’s software, so nothing appeared abnormal at first glance in the patient’s account.

The fraud started out small, “I’ll just borrow the money and repay it later” Samantha resolved, but it only got worse.

There are many ways to avoid employee fraud and embezzlement. Below are just a few areas of consideration for monitoring outgoing and incoming funds:

Disbursements

  1. Invoices should be stamped as PAID, and the payment method recorded to avoid duplicate payments.
  2. Cheques: do not allow the use of signature stamps in your office, and do not sign blank cheques. Manage cheques systematically by keeping them in a secure location. Ensure they are numbered and account for where each cheque has gone. Also, keep void cheques but ensure that you have removed the signature area.
  3. Review expenditures frequently and look out for payments to unknown suppliers and for supplies you did not receive.
  4. Do not keep large sums of cash on hand. Instead, institute a petty cash system that is reviewed and reconciled frequently and before replenishment.

Patient Payments

  1. Reconciling: ensure that you are reconciling daily deposits on at least a weekly basis, cash balancing sheets should be spot-checked frequently, and bank accounts should be reconciled monthly.
  2. Patient Accounts: all credits and write-offs should be reviewed on at least a weekly basis, all cheques received from patients need to be immediately marked as FOR DEPOSIT ONLY to prevent unauthorized cashing. Deposit all payments on a daily basis to prevent a buildup of excess cash in the office.
  3. Employee Access: do not leave one person in charge of all finances – for example, one employee should be responsible for receiving, handling and recording transactions while another trusted employee is responsible for reconciling bank statements. Also, ensure that your billing software is password protected and only one or two trusted employees have access. Ensure that refunds and other payouts cannot be made without proper authorization.

There are so many other ways that fraud can occur, so if you would like more information or advice on this topic, do not hesitate to contact us!

Let Us Know Your Thoughts

Your email address will not be published. Required fields are marked *