Embed Size (px)
Citation preview
Embezzlement: What Dentists Need to
Know
Presented by
Erick Cutler &Jerry Murray
ObjectivesThe purpose of this presentation is to raise your fraud awareness and provide information and ideas you can take back to your practice. The content is based on questions that the group has submitted, including:
• Percentage of staff embezzlement cases in dental offices• What type of behaviors should doctors look for?• How can doctors audit or minimize embezzlement in their
office? • What are the best methods to "safe proof" the office
to prevent embezzlement?• What is the best method to approach an employee if there is
a suspicion of embezzlement?• Can and should a doctor legally pursue an employee if they
have evidence of embezzlement?
Fraud Risk Percentage• A busy dental practice is the perfect
environment for fraud• Studies have shown one out of three
dental practices:Have already experienced fraudWill experience fraudAre experiencing fraud now and don’t
know it
Basic Definitions and Common Type of Fraud
• Embezzlement: the theft of money or other property from a business by an individual in whose custody it has been placed.
• Fraud: wrongful or criminal deception intended to result in financial or personal gain
• Most common type of embezzlement is the misappropriation of the practice’s cash and checks by business office team members who are responsible for day-to-day accounting
The Fraud Triangle• There are three common
elements to fraud and embezzlement:MotiveOpportunityRationalization
• When motive meets opportunity…. rationalization is but a small step
Motive• Issues with personal finances• Greed• Addictions (drug, alcohol, gambling,
etc.)• Health issues and related bills• Divorce• Jealousy• “Keeping up with the Jones”
Opportunity• Any time someone in the organization can initiate and
execute a financial transaction without any checks and balances
• If someone has both the possession and control over an asset and also does the accounting for that asset
For example: Giving someone signature authorization on your
checking account. Allowing employees access to the office at times other
than normal working hours. Allowing employees to make deposits. Not reconciling bank statements timely and accurately. Not reviewing your 401K employee deferral transactions
Of the three elements of the fraud triangle, this is the only one you have any control over!
Rationalization (aka moral breakdown)
Once motivation and opportunity meet, the rationalization for embezzling can take many paths:
I’m not paid enough, I deserve this. I’ll just borrow the money and pay it back.No one will ever miss it.Wow, wonder if I can get away with this –
the thrill of the challenge.My child really needs a cell phone so his
friends won’t make fun of him/her.
OK, now what do I do? Step One
Perform a risk assessment of your practice “Follow the dollar” - study your internal processes from start
to finish and ask yourself “what could go wrong”? Where can someone commit and conceal fraud and/or
convert assets? Identify where you have lack of internal controls such as
checks and balances, security, daily reconciliations (such as scheduling to billings or deposits in bank to daily receipts).
Pre-employment criminal background checks for all employees plus a credit check for anyone with a financial role.
Follow through with reference checks and get references from the references.
Obtain fidelity bond to help insure against loss.
OK, now what do I do? Step Two
Establish a system of internal controls Establish the controls around the position….not the
person. You have protocols for dental procedures, why not finance? Communicate your financial policies and procedures in
writing and establish a fraud policy as well as a written anti-fraud program.
Establish an effective control for the perceived risk. Determine other ways that can assets be stolen – credit
cards, office supplies, false vendors, employee expense reports, payroll and time system (time and rate per hour).
Be sure systems are secured and backed-up daily where only you can control access.
OK, now what do I do? Step Three
Monitor and Maintain • Open your mail.• Take the deposit to the bank.• Daily review of revenue and deposit reports and
reconciliations to scheduling to billings, agree the posting of receipts to accounts receivable detail and bank deposits.
• Approve all accounts write-offs or adjustments.• Review the system audit trail for changes to prior periods
or other unusual activity.• Change your routine by arriving earlier than normal or
staying later than normal.• Require mandatory vacations of all employees with
someone filling in for them for at least a week.
What to do about Suspected Embezzlement/Fraud
If you suspect fraud, contact your attorney immediately.
You do NOT want to make a rash decision/false accusation. Avoid the temptation to dismiss immediately, as that may open you up to wrongful termination claims.
Do not confront the employee (as it may provide them an opportunity to destroy evidence), but work through the attorney to gather evidence and preserve documentation. This may include the need for a fraud investigator or forensic IT professional.
Act quickly but not rashly.
What to do about Suspected Embezzlement/Fraud
Once you do have proof, you should have your attorney quarterback and coach you through the issue every step of the way:
If you find proof and have to let an employee go, you must show them some evidence to justify your decision, but NOT all the evidence. This should be done in the presence of a witness.
After this, with the guidance of your attorney, determine next steps (i.e. what kind of remedies are you looking for and what do you want to get out of this).
Consider hiring a compliance consultant or creating compliance manuals that the staff are aware of.
Specific Considerations for Billing Fraud
• If the fraud is on the billing side, and it participates in Medicare/Medicaid, then the legal ramifications are much more complex.
Liability includes potential personal financial loss, suspension or revocation of provider number, and recoupment of payment from services provided.
• This requires extremely quick action and self-disclosure You, the doctor, must come forward to explain specifically what has happened, including the exact dollar amount compromised.
Summing It Up Percentage of staff embezzlement cases in dental
offices What type of behaviors should doctors look for? How can doctors audit or minimize embezzlement
in their office? What are the best methods to "safe proof" the
office to prevent embezzlement? What is the best method to approach an
employee if there is a suspicion of embezzlement? Can and should a doctor legally pursue an
employee if they have evidence of embezzlement?
The Final View
Perform a risk assessment of your practice
Establish a system of internal controls
Monitor and Maintain
Summing It UpThe Fraud Triangle = Motivation + Opportunity + Rationalization Don’t give your employees a reason to steal from you. Folks are less likely to
steal from people they respect. However, don’t get too close on a personal level as it could cloud your
skepticism radar. Maintain the perception of detection. Design your controls around the position not the person. Clearly communicate expectations to all personnel in writing as well as
verbally. Ethics training. Be sure your systems are secured and backed-up daily where only you can
control access. Be proactive and unpredictable. Be aware of changes in employee habits or circumstances. Fidelity bond insurance.
If you have any questions please feel free to contact Jerry or Erick at:
Jerry: [email protected]: (214) [email protected]
A special thanks to Daniel Tatum, Attorney at Law from Friedman &
Feiger:[email protected]
References
Doherty, Hugh. (2010). Embezzlement Prevention—To Catch a Thief! Dentistry Today. Retrieved from http://www.dentistrytoday.com/practice-management-articles/1645
Salzman, Mindy. (2013) The Topic No Dentist Wants To Talk About: Embezzlement. Dentistry Today. Retrieved from http://www.dentistrytoday.com/articles/practice-management/management-tips/9609-the-topic-no-dentist-wants-to-talk-about-embezzlement
Dawson, Steve. (2015). Fraud Prevention and Detection. [Lecture]. Fort Worth CPA’s Free CPE Day.
