Embezzlement
Following is the continuation of the article published in August/September 2007 issue of the Articulator Magazine, authored by Debra S. Lane, CPA, MT, of Lane & Associates.
Involvement
Dentists spend their days practicing dentistry and frequently provide little or no oversight for staff members who manage their businesses. In this often-occurring situation, embezzlement can thrive. Controlling embezzlement requires your involvement. Watch for key indicators in your office.
- Is financial information timely? If not, why not?
- Are employees resistant to any change in the present accounting systems?
- Do you have large numbers of unexplained adjustments?
- Have your collections slowed?
- Have your cash deposits declined?
- Do you have employees who refuse to take vacations?
- Do you employ staff that resent your income or lifestyle?
- Do you have employees who always work late and/or take work home?
- Do you have employees who always seem to have cash on hand, and/or appear to live above their means?
- Do any of your employees treat office procedures as an annoyance?
Protect your company and personal documents
- Keep important company documents such as incorporation documents and employer identification numbers under lock and/or off-site
- Do not allow a signature stamp to be used in your office
- Personally sign all checks
- Print checks with a type font 12 points or larger
- Enforce mandatory vacation policies
- Check references on all new hires
- Conduct background checks on all new hires
- Bond employees
- Insist that all records remain on the premises of the practice
- Take an interest in the financial operations in your practice - be visible
Periodic examinations
Controlling embezzlement requires periodic examination on your part.
Daily
- Review your daysheet
- Compare route slips and/or appointment schedule to procedures posted
- Verify daily deposits with collections recorded
- Scan adjustments - know why they are being made
- Send a copy of the collections, charges and adjustments to your CPA for reconciliation
Weekly
- Review your audit trail reports for changes in procedures, receipts and adjustments
- Verify employee time records
Monthly
- Monitor accounts payable and purchasing functions
- Review bank statements and credit card statements thoroughly
- Randomly review EOBs, and trace treatment and payment through the patients' ledgers and charts
- Review financial statements with an accountant, and pay attention to trends outside the "norm," compared to other dental offices
Internal Controls
Improving your internal controls can greatly reduce your risks.
- Close the books and dental software system timely
- Review and authorize adjustments
- Endorse payments received immediately
- Never sign checks without supporting documentation
- Mark all invoices as paid so invoices cannot be submitted twice
- Have all bank statements mailed someplace other than your office, such as directly to your home or CPA
- Activate the audit trail function in both your accounting and dental software systems
- Use passwords and require employees to keep passwords confidential
- Conduct surprise audits
The best method for reducing the risk of embezzlement is properly separating financial tasks among your staff. Make a list of financial duties that need to be handled in your office. This list may include some of the following tasks:
- Opening mail
- Listing and copying checks
- Posting cash and check receipts
- Posting charges
- Posting adjustments
- Making deposits
- Preparing payables for payment
- Opening bank statements
- Reconciling bank statements
REPRINTED with permission by the Colorado Dental Association.
Debra Lane, CPA, MT, is the president of Lane and Associates. For more information, contact Debra at (303) 841-2602 or www.lanepccpa.com.
