A physician's guide to avoiding embezzlement

It is estimated that approximately one in six physicians will be victims of embezzlement at least once during their lifetime. This may be due to the trusting nature of physicians, a lack of business training about separating duties in transactions involving money, or employees’ feeling overworked, underpaid, and/or underappreciated.
The U.S. Chamber of Commerce estimates that 30 percent of business failures are directly related to employee theft, and embezzlement may be the hardest event any business owner can face. Sympathy abounds when a business suffers a fire, natural disaster or the death of a partner. But being taken advantage of by someone you’ve trusted leaves you feeling betrayed and gullible. Victims of embezzlement often say things such as “But we trusted him completely” or “She was like a family member.”
The best protection is prevention
The U.S. Department of Justice reports that one in every 32 adults has a criminal record. A recent report from ADP Screening and Selection Services found that 44 percent of applicants lied about their work histories, 41 percent lied about their education and 23 percent falsified credentials or licenses. Likewise, ResumeDoctor.com found that 42.7 percent of résumés have significant inaccuracies.
This is why it’s so important to perform a background check on all potential employees, which includes a credit check and a criminal-record check on all employees who will handle money.
It’s also important that you value your employees and make sure they know it. Be sure your employees are paid at competitive wage levels. To get an idea of what the current pay standards are, survey local offices yearly or refer to the ophthalmic practice payroll benchmarks.
Provide usual and customary benefits for your locale. Employees who have pay and perks comparable to area norms may be less likely to feel they deserve more than they’re getting and will be less like to “help themselves.” Be familiar with your state’s labor laws regarding exempt versus non-exempt employees, and pay overtime in accordance with your state law.
Show appreciation with sincere compliments, surprise treats, or schedule parties or team-building events that include both physicians and staff.
Transparency
Every practice should develop written personnel procedures and policies. Clearly written policies and codes of conduct help imprint behavior requirements in the minds of employees. These rules should clearly state that stealing from the company is grounds for termination.
Discuss your practice’s overhead expenses in general terms and how they continue to increase. Staff who only see revenue coming in may have no concept of the cost of doing business and thus have an inflated idea of how much a physician actually takes home.
Accounting control
Many physicians do not learn the basic principles of accounting control. As a result, it is too easy for staff to take money. Do not expect your CPA to catch embezzlement unless you have specifically requested that office systems be set up to prevent it. It’s really your responsibility since it’s you who will suffer.
Most embezzlement in medical practices is carried out by someone working alone, so the two key principles are:

1. No one person should have control over the entire cash transaction process.
2. Duties involving money should be distributed to two or more people. That way, collusion would be required for embezzlement to occur, which is less likely.

For example, the same staff person should not open the mail, record the checks, balance out at the end of the day, post the payment, make the bank deposit and reconcile the bank statement. Even in a small office, these tasks can be given to two or more staff members.
Other precautions you can take include:

• Have the bank statement go to your house, or if it comes to the practice, require it to be placed on your desk unopened.
• Have an outside bookkeeper, CPA or someone else reconcile the bank statement and double check the payroll.
• Review electronic transfers carefully, and do not let anyone have access to online banking except a physician partner so that staff cannot transfer funds to a personal account. 
• Perform unannounced random spot checks by matching the daily scheduled patients against posting and deposit slips.
• Monitor the level of cash co-payments; if it drops dramatically, this may be a warning sign.
• Checks should be stamped “For deposit only.” You may want to have a physician make deposits, have the bank pick them up and/or use a lock box for checks that go directly to the bank.
• Accounts payable is another area of risk. The manager or bookkeeper should present all checks for payment along with the corresponding vendor invoice, and the physician should verify that the vendor is authentic. Review cancelled checks and credit card statements the same way.
• Do not allow staff to charge items to the company credit card.

Consider prosecuting
Too many embezzlers hop from practice to practice because no one prosecutes. Don’t let the crime go unpunished. If you do, to add insult to injury, the practice may have to report the stolen money as “phantom income” and pay taxes on it.
Contact an attorney who, after determining that there is concrete evidence, will assist you in confronting the embezzler and will prepare a confession and a restitution agreement. If the thief is remorseful, a repayment plan can be worked out or you may be able to repossess assets or garnish wages. But don’t hesitate to send an embezzler to jail if it comes to that.