Review and Implementation Of Practice Internal Controls
Is there a fraudster in your practice? An embezzler or other workplace fraud perpetrator will often display certain telltale red flags. One of the many charts included in the "2008 Report to the Nation on Occupational Fraud & Abuse," published by the Association of Certified Fraud Examiners, includes the following listing of these behavioral indicators:
Behavioral Indicators Living beyond means (370 cases; 38.6% of 959 total cases in the study) Financial difficulties (327; 34.1%) Wheeler-dealer attitude (195; 20.3%) Control issues, unwillingness to share duties (179; 18.7%) Divorce/family problems (164; 17.1%) Unusually close association with vendor/customer (146; 15.2%)
Behavioral Indicators Irritability, suspiciousness, or defensiveness (130; 13.6%) Addiction problems (128; 13.3%) Past legal problems (83 cases; 8.7%) Past employment-related problems (76; 7.9%) Complaining about inadequate pay (70; 7.3%) Refusal to take vacations (65; 6.8%)
Behavioral Indicators Excessive pressure from within the organization (62; 6.5%) Instability in life circumstances (47; 4.9%) Excessive family/peer pressure for success (40; 4.2%) Complaining about lack of authority (35; 3.6%)
Basic Internal Controls You Must Have Division of Job Duties Mandatory Vacation Leave Employee Bonding Issue: Must File Police Report in Order to Collection on Insurance
Weak Spots Front Desk Billing/Collection Accounts Payable Management
The Front Desk
Front Desk Areas of Concern/How They Do It Stealing of Copayments Stealing at Time of Checkout Petty Cash Controls You Need Daily Reconciliation Review Missing Ticket Report (Accounting for All Charge Tickets) Have a Silent Monitor
Billing/Collection The Business Office
Billing/Collection Areas of Concern/How They Do It Stealing Insurance Payments Stealing Patient Payments Petty Cash Controls You Need Get a Lockbox Segregate Duties Reconcile Daily Postings to Daily Deposits No Charge Write offs Without Consent
Billing/Collection Controls You Need Compare F/S to Monthly Receipt Posting Can System Block a 100% Write Off? Data Mine for 100% Write Offs Monitor Contractual Adjustments Monitor Bad Debt Write Offs Keep Eye on Employee Lifestyle Changes Both Ways
Accounts Payable
Accounts Payable Areas of Concern/How They Do It Using Fake Vendors Writing Checks for Personal Use Unauthorized Credit Card Charges Paying Fake Overtime with Kickbacks Dummy Patient Refunds Disbursements with Explanation of Business Use Employees Clocking Each Other Out Working Through Lunch/After Hours
Accounts Payable Controls You Need Do Not Use a Signature Stamp Independent Preparation of Bank Rec. Independent Review of Bank Statement Limiting Check Signing Authority Periodic Review of Endorsements Compare Cancelled Check Payee to Disbursement Listing Matching Purchase Orders with Invoices Ongoing Review of General Ledger Monitoring of Practice Overhead Review Overtime Reports
Review of Sample Internal Control Checklist
An Actual Embezzlement Case Study
Practice Overview 5 Physician Surgery Practice Practice Conducted Monthly Management Meetings Administrator of Over 8 Years Accepts Another Job Position Administrator Handled All Business Aspects; Physicians Practiced Medicine New Administrator Hired New Administrator Embezzled Approx. Six Figures
Lessons Learned Take Your Time Interviewing Conduct Extensive Background Checks If Candidates Are Unacceptable, Wait to Hire!! Engage Interim Management Physician Quarterly Bonus Pool Dwindled to Nothing Was a Warning Sign Administrator s Explanations Were Not Challenged nor Investigated
Lessons Learned CPA Kept at Arms Length Information Not Flowing to CPA on a Timely Basis Administrator Questioning Why CPA Performed Certain Duties Administrator Tried to Replace CPA With His CPA The Real Lesson Here: Never ASS[U]ME!! Never Use a Signature Stamp in the Office
Lessons Learned Implement Better Controls Over The Office Disbursement System Independent Review of A/P Can Payee in Accounting System be Changed After a Disbursement is Made? Independent Review of Credit Card Statements Are Changes Being Made by New Administrator Making Sense?
The Biggest Lessons Learned Don t Delegate Too Much Authority to Administrator (Don t Concentrate Power) Physicians Have to Take the Ultimate Responsibility to Manage the practice It s Their Asset Keep a Watchful Eye
Questions Answers