If your practice has ever fallen victim to employee embezzlement, you understand the financial devastation it can leave behind. To help ensure you remain unscathed by fraud, have a forensic accountant conduct a fraud risk checkup.
According to a 2009 Medical Group Management Association survey, 83% of all medical practices have experienced some type of employee theft.
“If your practice’s finances aren’t adding up, it’s important to assess the root of the problem,” says Bill Acuff, CPA, CFF, CFE, Director of Forensic Accounting and Internal Audit Services at Decosimo. “The best way to uncover an embezzlement scheme is to conduct fraud checkups. Just like with preventive medicine, if you can prevent or catch embezzlement early, you can save your practice money, time, and, especially, emotional distress.”
Pay Attention to Popular Schemes
While a vast majority of embezzlement cases revolve around asset misappropriation, occupational fraud also encompasses financial statement fraud and corruption.
“Most of the cases I have been involved in include an employee taking advantage of his or her position,” says Sharon Hamrick, CPA, CFF, CFE, Senior Manager with Decosimo Advisory Services. “When one employee makes all monetary deposits and records them, for example, that individual has complete control over that portion of the practice's finances and a greater opportunity to misuse money.”
While handing over too much power to one employee can be dangerous, so too can rapid practice growth. According to Hamrick, as a practice expands staff and locations, its operational needs change. The increased volume of work and revenue can quickly outgrow the practice’s accounting system, making periodic monitoring of the revenue stream and expense patterns paramount to financial security.
“It’s easy to get lax about systems and controls, thinking the practice is still operating as it’s supposed to. But, you can reach a point where you’re just making that assumption because, at one time, it was,” says Hamrick. “You’re supposed to be practicing medicine, but it doesn’t hurt to understand what the revenue stream is supposed to be.”
Instances of fraud are highly prevalent in the health care industry. Most physicians believe fraud won’t happen to them or be committed by anyone on their practices’ trusted staffs. If you suspect fraud or want to safeguard your practice against embezzlement, contact Decosimo’s experienced forensic accountants at www.decosimo.com/forensic or 1-800-782-8382 for a confidential fraud risk assessment.
A Case Study in Embezzlement
After uncovering alarming cash flow discrepancies, a physician in East Tennessee hired Decosimo’s forensic accounting team to investigate potential practice embezzlement. Pinpointing the source of cash flow problems and unidentified electronic payments, the team was ultimately able to link the $100,000 embezzlement case to the physician’s estranged wife.
“Our team of forensic investigators was able to craft a concise legal report that helped this physician in his efforts to recoup his practice’s financial losses,” says Sharon Hamrick, CPA, CFF, CFE, Senior Manager with Decosimo Advisory Services. “Whether you lose $50,000 or $500,000, to recover none of it means that you have to absorb it somewhere, whether out of your pocket or elsewhere. Decosimo remains a key player in helping you avoid those expenses.”
(Read the full case study about this physician practice embezzlement)
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