Hiring an Accountant to Keep All Your Worth

By Michael L. DeVries, CFP®, CHBC, EA

I received a call from a client for whom I was doing monthly accounting.  At that time, our services for the client consisted of compiling monthly financial statements, filing quarterly payroll tax returns, annual company returns, and assisting him with various practice management projects. The call I received from the doctor went like this.

“Mike, I’m calling to tell you that I am not going to need your professional services any longer.  My office manager has been doing a great job for me.  Together, we have decided that she could do my monthly accounting using Quickbooks.   We are going to be working with a CPA firm who will use this information to prepare the annual tax returns.  I really appreciate all the work that you have done for me in the past; you have helped me from the start of my practice, but going forward I have decided to use a different approach to my financial management.  I know you don’t agree with this process based upon previous conversations you have had with my office manager when she first approached you about this matter.  I respect your opinion, but I have decided to make this move and I request that you help make this an easy transition.”

I dislike these phone calls. I have had a few in the 30+ years of specializing in helping doctors with their business.  No matter what I try to say to keep the process the same in an attempt to help the doctor, my words fall on deaf ears.  His trusted office manager, who works with him daily, has convinced him that adding this duty to her responsibilities is best for him and will result in a cost savings.  Well … that is until things are assessed again about two years later.  That is when I received another from the doctor.

weasel“Mike, remember when we talked a couple of years ago, and you gave me all the reasons that I should consider keeping  your services rather than having my office manager do that work for me?  Well, I’m sure you do.  I’m calling because I know you would never say, ‘I told you so’ – so, I’m going to do it for you.  Mike, you told me so, and it cost me more money than I care to admit.  We are having an audit done in our office right now, and they figure that my office manager stole hundreds of thousands of dollars since I terminated my services with you.  I’m making this call, not for your benefit, but for the doctors for whom you work.  If any of them think so highly of their office manager that they think that they can replace you and your services, you can tell them my story.”

I dislike these phone calls too. It saddens me to hear of doctors who work so hard to get to this point of their career in medicine or dentistry only to become victims of embezzlement, fraud, waste or abuse from a trusted employee.   The work we do doesn’t guarantee that theft in the practice will not occur.  However, the monthly process that we recommend does make it increasingly more difficult and less likely to occur.

Several years ago I called a good friend who works for a software company that we use to benchmark dental offices.  I had a situation that called for a more detailed review of the possibility of fraud, and I needed someone who could work with me when we suspected fraud within a doctor’s office.  He introduced me to Bryant Truitt, whose passion for helping the client really struck a chord with me.  Bryant and I now partner together when the circumstances call for each other’s expertise.  In my discussions with Bryant, he and I both realized that not all accountants who say they specialize in working with dentists follow a good process for avoiding “fraudster weasels” from sneaking through the back doors of your office.  It is for this reason that I’m offering you my top five standards that doctors should consider when hiring an Accountant:

  1. Give consideration to the phone call I received from my doctor client. It’s a true story and unfortunately I have a few of them.  You need an accounting professional that specializes in serving your business.  Preferably, a person or a firm where working with healthcare professionals is the major part or the only part of their business.  A source for finding such professionals around the country is at the National Society of Healthcare Business Consultants (www.NSCBC.org).
  2. Create a written understanding with the professional you hire that he or she is working for you. The professional you hire will need to have communications with your staff – especially, your office manager.  It’s paramount to keep good relations with your advisors and your team, but ultimately the professional needs to be looking out for your best interest.  This should be done with a service engagement letter.  It troubles me when I receive a call from the office manager inquiring about the services we offer.  I realize doctors are busy – just don’t be too busy to care about this important aspect of your business.
  3. Whether your office is large or small, ask your accounting professional to provide you with an outline of accounting procedures to implement in your office. This would include:
    • Recommended client bookkeeping solutions.
    • Segregation of duties where the accounting professional and you are involved.
    • A process for the daily depositing of receipts and reconciliation of such to your practice management system.
    • Effective procedures for handling money in your practice including Petty Cash.
    • A listing of what information the accountant requires at the end of each month – if it is just your Quickbooks file and the bank statement, you know you don’t have the right professional.  They should also be looking at and spot checking other practice management reports and business records, such as charge and adjustment reports, the accounts receivable aging report, credit card statements, capital equipment purchases, and loan documents.
    • Ability to integrate your practice management system into the financial statements that are compiled on a monthly basis – don’t short-change yourself and business by doing this just quarterly or annually.
    • Options for regular communications regarding your business and the financial management of such.
  4. Look for a professional that provides business advice and not just financial statements and tax compliance. The person with whom you work should have the resources to be able to benchmark your practice to your peers in your specialty and be able to assist you solve a problem when a benchmark is out of line.  The person you hire should be experienced in running a business.
  5. Make sure that the professional with whom you work is well versed in Healthcare Compliance. If the professional you hire isn’t proactive in establishing a Business Associate Agreement with your office, chances are you may have the wrong professional.  HIPAA Privacy, HIPAA Security, OSHA, and Corporate Compliance regarding Fraud, Waste and Abuse can have a major impact on your business.

I started this with a story of a doctor who put a lot of trust in his office manager.  Let me say in ending, that it is good to trust your team – but, it is also good to verify that trust.  Give consideration to these standards when hiring an accounting professional and you will gain an objective trusted business advisor.  An advisor who will work at keeping the “fraud weasels” from making an easy transition – from working for you to working you for all your worth.

We have developed a 5 Minute Fraud Buster checklist to help you identify the simple financial and accounting activities that will make a different in your practice.  Learn more and get your free copy at www.mikeldevries.com/fraudbuster.

 

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at www.vmde.com

 

 

 

Protect Your Practice from Team Member Embezzlement and Abuse with a Fidelity Bond

Protect your practice from dental weasels with a Fidelity BondFacts prove that 80% of business embezzlement, fraud and abuse happens internally by team members!

The Association of Certified Fraud Examiners states that team member dishonesty can range from tens of thousands to millions of dollars.  Our 20 years of investigating dental and medical practices and nonprofits across Canada and the United States have proven losses ranging from $3,000 to $2.1 million!  In 2016, losses of over $1 million was proven by Brytan & Associates professionals.

Is there protection against such losses – YES!  Fidelity Bonds, also called team member dishonesty coverage or crime coverage, are very available to dental and medical entities. It is customizable, inexpensive, and provides protection from $10,000 to $100,000.

Fidelity Bond Defined –

  • Great for dental and medical practices and nonprofits.
  • Fidelity bond is a straight forward insurance policy and does not accrue interest.
  • Can be a part of the practice property or malpractice insurance.
  • Can be purchased as a stand-alone policy or as an add-on or endorsement to another business policy. Ask your agent.
  • Can be issued for specific position(s) or individual(s). Where available, obtain coverage for the entire team as a group.
  • The coverage is for direct physical loss to practice personal property, including money and securities, which results from the dishonest acts committed by the team member(s).
  • Can cover fraud, theft, forgery, disappearance, destruction, alteration of practice documents, unauthorized electronic funds transfers, credit card fraud, computer fraud, money order fraud, counterfeit fraud, etc. It’s critical that you have a clear understanding of what is and is not covered.  Do not be shy about requesting a clear listing before signing on the dotted line!
  • Identity Theft and HIPAA breach coverage is now available from some carriers. Ask about them!
  • Typically, fidelity bonds do not cover accounting or math errors or omissions, government seizure (IRS taxes), vandalism, loss of income as a result of team member crime, fraud involving restatement of any type of profit and loss documents, or policyholder theft.
  • A fidelity bond can be purchased as additional coverage on most business policies.  Amounts will vary, some policies include $10,000 of coverage automatically with the option to increase to $25,000 and provide increases up to $100,000.
  • If unable to add this coverage to an existing business policy, it is possible to purchase a stand-alone fidelity bond.  Prices for this type of coverage vary by number of team members, amount of coverage, and type of dental/medical practice.  An application is usually needed to obtain a premium quote.
  • The cost for the coverage is minimal, usually less than $100/year depending on your business (dental/medical) location. Recently, a client obtained coverage of $25,000 for $92.00 yearly.

Notes on Filing a Claim –

  • If a claim is required, contact the issuing agent and request a claim form. The length is generally two pages and every carrier is different as to the amount of detail.
  • When asked by your agent and carrier as to the amount of loss, it is suggested a general answer be provided such as “the investigation is ongoing and I do not know the amount at this time.”
  • Filing of an initial law enforcement report is required to obtain a case number.  This is needed in most jurisdictions but the execution and handling can vary widely.  Another good reason to consider legal counsel guidance.  The case number establishes that the matter is “real and serious” with the insurance carrier and others.
  • A copy of the law enforcement report must be attached to the claim form.
  • The policyholder will be asked to provide documentation supporting the details of the loss and amount. It is suggested that the details and amount of loss are provided at the end of the investigation and carefully worded.  Clients have found it best to seek legal representative guidance.   Insurance carries do not make any money paying claims.  A copy of the investigation report should accompany the claim form along with the law enforcement report.
  • Make sure to copy everything submitted to the carrier for your records! Send only by “return receipt requested” and track delivery.  Ask your agent the very best way to handle submission to insure proper and timely processing.  Remember, it’s to your total benefit not theirs.

Next Steps – No Debate:

  • Schedule a required team meeting when you receive the policy!
  • Objective is for every team member to know that a fidelity bond is in place.
  • Ask your agent to come and explain to the team what a fidelity bond is, coverage, etc.
  • Do not tell the coverage amount – very important and there is no need to know.
  • Do not go into a detailed explanation about coverage types, e.g., fraud, embezzlement, abuse, etc.
  • Stress positives like document protection, ID theft, HIPAA breach, and others your agent should be able to provide.
  • Mention that law enforcement and the insurance carrier will investigate and determine claim handling. The stated objective:  you, as the policyholder, are really looking out for the team, patients, etc.
  • The principle that should be clearly stated is that others are now part of our team to help protect the practice, patients, team members and our future.
  • Anyone wishing to do the practice harm will very likely already know about fidelity bonds and guided accordingly.

Congratulations, you are the proud owner of great benefits and the lowest cost insurance per thousand you can purchase that I know of.  Just think, it provides the very best for everyone:  reduces stress, provides greater peace of mind, and quietly helps you retire in the manner earned.

 

 

Spotting a Weasel: The Personality of a Dental Embezzler – Part II

By Bryant Truitt, MBA, CCS, CFE and Barbara Freet, PHR

The following is the second part of our six part series on Spotting a Weasel – the Personality of a Dental Embezzler. The common thread in this group of three RED FLAGS are the outside influences that may motivate a team member to steal from the dental practice.

weaselAny age, gender, nationality or relationship

This category of RED flags encompasses the demographics of the dental perpetrator. And, in fact, it demonstrates that there is no commonality among these weasels – they can be any age, either gender, any nationality or any relationship to the dentist and/or team.

Gender: Dental weasels are predominantly female, although not exclusively.

Age: Age has very little to do with who will become a dental perpetrator. Instead, their commonality has more to do with the outside pressures that lead them to make the decision to steal from the dental practice.

Nationality: Dental weasels come from all nationalities. Our experience is that nationality is regionalized to a particular area of the country. And, we often see one family member getting a job in a practice and then bringing in extended family members – sometimes undocumented family members. It’s best to have the guidance of a strong Human Resources entity to counsel you on all hiring, termination and benefits decisions. HR laws, regulations and rules are changing at an accelerated rate as a result of city, county, state and federal entities becoming highly politically motivated to control their current and future interest for the better good as they perceive it.

Relation: It is very common in the dental industry for small practices to employ family members. A dentist cannot feel safe just because a team member is handling delicate financial or patient care matters. Relationships range from children, to wives, to daughters- or sons-in-law – being a relative is not a guarantee that the team member will not steal from your practice.

We’d like to note here that it is critical your dental practice maintains complete personnel files. Those personnel files should be kept in a locked cabinet in the dentist’s office.  All hiring, termination and other HR decisions MUST be the sole responsibility of the owner doctor with appropriate advice from HR & legal professionals.  They should follow a well-defined process including starting with a complete job description, filling out an application and all paperwork such as tax forms, an I-9, etc.

Has family turmoil, crises, etc.

The number of reasons why weasels make their homes in dental practices is as diverse as the weasels themselves. External factors create the need to support a variety of personal circumstances ranging from:

  • In one of our cases, we had the daughter of the dentist stealing money from the practice to fund her boyfriend’s drug habit.
  • A case in Michigan involved an office manager whose husband was a medically retired postal worker. The office manager was stealing money to pay for her husband’s prescription drugs. She also stole to purchase two snowmobiles and a boat.
  • In Texas we found a dental weasel stealing money to help pay for the mortgage on a second home.
  • Another scheme we see on the rise involves illegal enterprises who are approaching dental employees to steal patient data. The team member is either blackmailed into complying or paid to provide the data.

Lifestyle – high maintenance, addictive

Similar to the family turmoil and crisis category, team members who have a high maintenance lifestyle and/or addictive personality are under the type of pressure that can result in a decision to steal from the practice to support their habits. There is cause for concern when you encounter a team member who:

  • Just bought a new house or car or other expensive item but the spouse is out of work
  • Has a gambling problem or drug / alcohol addiction
  • Seems to always have new and expensive toys from expensive jewelry or handbags to electronics like new iPhones or iPads

A real Weasel from our files:

The weasel was working full-time in a California practice with an annual salary of $40,000. She was on public assistance and had a housing allowance and food stamps. Yet, according to her Facebook page, she was taking trips to Hawaii and led a high maintenance lifestyle. Conversely, the doctor had to cash in his 401(k) and take a second mortgage on his house to keep the practice running. In all, this weasel stole $135,000 from the practice over four years.

If you’re concerned you may have a weasel in your practice, we encourage you to call us for a free, no obligation 30 minute consultation at 210.241.6329.

Educating dentists on identifying embezzlers or fraudsters hiding out in their practices is our expertise. Contact us to speak at your next dental meeting or study club by sending an email to bryant@brytanassociates.com or calling us at 210.241.6329.

 

Contributing author, Barbara Freet, PHR, is the President of Human Resource Advisors, a Human Resource consulting firm in Lafayette, CA. For more information, contact Barbara by calling 925.310.4824 or barbara@hradvisors.net or visit her website at www.humanresourceadvisors.com.

How CFO’s Can Protect Against Fraud & Embezzlement

CFO’s can minimize the risk to fraud, embezzlement, waste, and abuse in their organization. Total prevention of fraud and embezzlement is impossible because the crooks think and act smarter each time they are caught. They change venue and continue to take other people’s money. Many times they think they deserve the money or that it’s not their fault — the organization should have been more vigilant and diligent. They will continue until they are jailed but won’t necessarily stop when released. Success through criminal activity is a hard habit to break.The outcome can be devastating. Learn what to look for and what to do to keep your revenue out of the wrong hands.

This was part of an original presentation for clients of Abila MIP software, sponsored by TeamNFP Software Solutions.
Fraud Webinar Slides 2-18-2014