Employee theft and embezzlement

April 30, 2015

To prevent employee theft, an expert recommends closely monitoring cash for and financial records, beefing up internal controls and keeping an eye on employees facing unusual pressures.

Aspen, Colo. – When it comes to employee malfeasance, even the most innocent-looking staff members may have something to hide, said an expert at The Cosmetic Boot Camp, held here.

According to the Medical Group Management Association, 18% of employee theft involves losses of $100,000 or more that occur incrementally over time.1 "And recovering the money from the embezzler can be difficult and costly, as people will spend your money" before they can get caught, said Montclair, New Jersey-based dermatologist Jeanine Downie, M.D.

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Theft by staff members typically represents a confluence of motive and opportunity, she said. In the latter area, said Dr. Downie, preventing theft requires identifying the high-risk areas in one's practice and auditing for violations two or three times yearly.

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NEXT: Cashing in

 

Cashing in

"Handling cash is typically the root of the problem, and prevention strategies are important to minimize the risk of employee theft. Business insurance – even if you have it – doesn't cover the entire loss. Insurance people have proven time and again that they are not our advocates" when theft occurs.

Opportunities for theft can arise in the context of loose discipline and poor internal controls, said Dr. Downie. Therefore, "Have an employee handbook. Have everything written down," including how you will respond to infractions.

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Additionally, she recommended having security cameras in cash-handling areas, and reviewing the footage regularly, which she said many doctors fail to do. As an alternative, "Make employees think there are cameras above their head watching when they take the money" at the front desk.

Checks and balances are crucial, she said. "Embezzlers usually work alone, so divide financial duties." If one employee posts a check, for instance, have another one deposit it.

Similarly, she advised watching voided and refunded charges closely. "Many times, people are concealing the fact that they've stolen money by writing bills off the books and charging back credit cards. I look at all my charge-backs and take that very seriously."

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By the same token, Dr. Downie said, "Look at your own bank statements as well as your own payroll. I'm a bit on the paranoid side" in this regard.

Moreover, "If you as an employer uncover something – mistakes, falsifications or other problems – look it in the face. When we ignore it, it gets worse." Fostering open and honest communication with staff members encourages them to report violations they may witness or uncover, she added. "More often than not, one employee will see another doing something wrong. But if they don't think they can be open with you, they will not tell you."

NEXT: Feeling pressure

 

Feeling pressure

Regarding employee motives, said Dr. Downie, "Perpetrators of workplace crime do so because they're under pressure. So if you know that an employee's spouse recently got fired, you must look at them a little more closely. Sorry, but it's a fact." Other debts could stem from gambling or drug addictions.

Workplace scofflaws also tend to complain of being underappreciated, she said. "And some of them feel that management behavior is unethical or unfair." Hard feelings and complaints of favoritism can arise when a physician has a romantic relationship with a staff member, for example. In such situations, Dr. Downie said, other employees may steal to get what they believe they deserve. "And they absolutely rationalize their behavior."

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In terms of red flags, she said, beware employees who never take vacation days. In one such case, she said, a tech company employee who had paid herself one dollar extra for every pay period over decades wasn't discovered until she took time off to attend her daughter's wedding.

Likewise, Dr. Downie said that employees who are overly protective of their workspace should draw suspicion. "If somebody doesn't want you to sit in their chair, that's weird – you bought their chair." Also look out for employees who prefer to work after hours unsupervised, added Dr. Downie. "It's your practice – you should generally be one of the last people there every night, unless you have an event off-site." Unexplained debt, large purchases or sudden behavioral changes also could provide a tip-off, Dr. Downie said.

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Furthermore, Dr. Downie recommended thorough criminal and credit checks on prospective employees. During the past four years, doing such homework enabled her to learn that two applicants to her practice had identity-theft felony records. "They assumed I wouldn't do a background check because they looked so sweet. So screen and enforce a zero-tolerance policy for employee theft or fraud of any type. We all know are that we like some of our employees better than others. Be fair and consistent."

NEXT: References

 

Reference

1.     Medical Group Management Association. 2009 Medical Practice Employee Theft and Embezzlement Findings. http://www.mgma.com/WorkArea/DownloadAsset.aspx?id=40054.  Accessed June 25, 2014.

Dr. Downie reports no relevant financial interests.

For more information:

www.cosmeticboot.com