Don't be a victim of staff embezzlement

August 1, 2007

Auditors estimate that two out of every three physicians will experience embezzlement during their careers. With the inordinate amount of cash circulating in their practices, dermatologists and cosmetic surgeons top the list of potential targets.

Avoid getting snowed by an unscrupulous employee by following several steps:

Perform background checks on all new hires and check references thoroughly. It's a favorite trick of embezzlers to change names and ask friends to serve as "references." Be especially cautious whenever the background check reveals inconsistencies with the candidate's story - or when you get only cell phone numbers for the references provided. Bond any employee you hire for a position that has access to your money.

Require reconciliation of all encounter forms provided to patients manually or electronically. Instruct employees to batch the encounter forms and total the amounts of charges and payments. Ask for a daily written reconciliation of those forms to the billing system's daily activity report. Immediately stamp checks with a restrictive endorsement - that is, one restricting the check to be paid only to the practice's account.

Consider also subscribing to an on-site remote deposit service through your bank. Keep all cash in a secure safe, and make daily deposits to avoid keeping cash on site over night or on weekends. Require that the petty cash drawer is balanced every day, and never tolerate staff being off by money here and there.

Unfortunately, many physicians are victimized by a trusted employee. Keep a watchful eye on any employee who refuses to take vacation, starts working odd hours, or appears edgy when asked to share job responsibilities. Be especially vigilant about internal controls if you learn of an employee's excessive personal spending or costly addictions (e.g., gambling). Most importantly, don't ignore your gut feelings. Most physicians who have been victimized by embezzlers admit they had an inkling that something was wrong, but didn't want to believe what was happening.

Signature stamps are an easy and effective target for internal thieves. Most banks think nothing of cashing a check that has your "signature" on the back. It's best to get rid of all signature stamps, but if you still need them, severely restrict and monitor access to them.

It's hard for a corporation or other business to avoid using some plastic these days, but that's all the more reason to carefully monitor corporate credit cards. Embezzlers will try to slip in their personal charges. Look over credit card invoices each month. Investigate anything fishy; many embezzlers have learned that they can charge personal home improvements or purchases at business stores on the corporate credit card and the physician will think it was normal maintenance or a routine purchase for the practice.

Another favorite tactic of embezzlers is to set up a sham company with a name that sounds like vendor from which the practice would buy services. Those services could be anything from a temporary staffing agency to a medical supply company. The consistent link is that the company is owned by the embezzler or a family member or friend. Either way, the guilty party gains by each transaction. Route all bank and credit card statements to your home address or accountant to ensure first-hand scrutiny.