Busting embezzlement: Part 2—A false sense of security

Read part 1 of this article, Busting embezzlement: The problem.

A dentist's story: does it sound familiar?

Sheila is the best office manager I’ve ever had. But recently a couple of staff members came to me with their concerns about her and now I’m worried. She always arrives early for work, is incredibly organized, and the patients love her. She even housesits for me when I leave town. It seems like she’s been with me forever, at least 15 years, and she’s like family. Never have I had a reason to distrust her, but I feel obligated to explore their concerns.

The comments from my employees made me think of a few things that I had noticed about Sheila and simply shrugged off. For instance, she is unusually protective of her workspace, to the point where no one, not even me, is welcome in her office. Last year when I mentioned hiring a consultant, she was not just adamantly opposed, she said she would quit if I hired someone. That surprised me. Also, it seems she always has some reason not to take a vacation, even when I insist. In fact, she never misses work.

One of my employees told me that Sheila takes the deposit to the bank every day even though I’ve asked everyone to alternate this duty. Sheila says the bank is on her way home. I’ve also asked her a number of times to train the front desk person on how to enter insurance payments and electronic fund transfers (EFT). She says she will do this but never has. Another employee told me that my current accountant, who Sheila recommended about three years ago, is Sheila’s cousin, something I did not know.

After hearing their concerns and recalling what I’d seen, I decided it would be wise to dig a little deeper. I felt like my finances were safe because I look at my collections and deposits report every day. But based on my employees' concerns, I decided to ask our alarm company for a report. I was surprised to see there were office entries logged for several hours on numerous weekends. Some were for as long as four hours.

I knew it couldn’t be the cleaning service because they don’t work on the weekends and they would never take four hours to clean. Since all my employees and cleaning crew share the same security passcode and have for the past 10 years, I couldn’t tell who was coming and going on the weekends. Our building has video surveillance, so I called the building manager. Video revealed it was Sheila. She had never mentioned to me that she was coming in, nor was I paying her for the extra hours.

I first I thought there must be a logical explanation. Sheila is so conscientious that perhaps she needed more time to get her work done and she felt guilty about submitting extra hours. I simply needed to talk to her about it. But what about the other concerns? What was going on? As with most questions, I turned to the internet for help. After a bit of research, it became clear that it was important not to confront Sheila or raise her awareness about my concerns.

Who is Sheila?

Allow us introduce you to your embezzling adversary—hard-working, dependable, never misses work, goes the extra mile, protective of his or her work area, won’t share knowledge, and feels like family. He or she is experienced with your software, understanding its processes and systems better than you. This allows him or her to find gaps and opportunities you know nothing about. This person also knows what you check and what you don’t.

Besides profiling your adversary, our other goal in this article is to illustrate a common way in which employers are shaken out of their cloud of trust into an area of questioning and observing. This often occurs after tips from other employees.

The dentist in this example felt confident that her finances were safe and in order because she reviewed her collections and bank deposit reports each day, and her accountant never mentioned inconsistencies. Unfortunately, this is a common belief among practice owners, and it’s a false belief.

According to an analysis of embezzlement data from an American Dental Association study by Prosperident, only 19% of embezzlement is revealed by intentional internal processes. The other 81% comes from chance occurrences, such as employee whistleblowers, questions from patients about their bills, or concerns from practice consultants and coaches.

It is important to correctly understand this figure. Yes, detection from internal sources is only 19%, but it is not because there is little evidence in financial and operational data. On the contrary, that is where it can be detected. But most practice owners do not know where, how, or when to look for it.

In our upcoming articles, we will work toward changing those statistics, and we know they can change if practice owners understand and follow specific processes. Of course, some detection will always come from chance events, but increasing the ability of dentists to detect embezzlement from the financial information already available to them could save the profession tens of millions of dollars every year.

Additionally, we will present some practical and time-efficient processes to help you detect not only embezzlement activities, but errors, omissions, and inconsistencies. These processes will help you see through the blinding cloud of trust that is so carefully created by your embezzling adversaries and enable you to find their illicit activities as early as possible. Who knows how long Sheila has been doing her “creative” accounting—five, 10, 15 years? We hope you never have to place a “Sheila call” with us, but if you do, we want to help you figure out how to detect the embezzlement before you’re robbed of your entire retirement.

Updated regularly.