just received a call from your CPA and your suspicions
have been confirmed. Based upon her audit, she
has told you that you are the victim of embezzlement.
Now your must decide what action to take.
The first step is to contact your attorney. He
advises you that substantial proof must be established
by the following criteria:
- There was a trust relationship between the
accused and yourself
- The money came into the possession of the
accused through employment
- The accused dealt with the money by way of
a fraudulent conversion to his/her own use
- The accused had intent to deprive the owner
of the money
Making the decision to prosecute or not is a
difficult one. Many decide not to prosecute due
to fear of a counter suite for false accusation.
Embarrassment over how others will view the way
you administer your practice, concern for the
employee and/or employee’s family (especially
when there has been a long term relationship with
you), believing that this problem was of short
term duration, and the expense and time involved
are other considerations.
You must then let the attorney advise you on
how to proceed and if you should contact law enforcement
authorities. In addition, if the employee is bonded,
ask the attorney if you should contact the bonding
If you are more concerned with restitution than
prosecution, you may be advised to do the following.
In secrecy, prepare the proof, have either your
attorney or CPA on hand, and then confront the
perpetrator. Do not make an accusation; just show
the employee the proof in silence. When you do
speak, begin by saying that you are not going
to ask the employee if he/she did this, only say
that you know he/she did it. You should then ask
how the employee intends to make reparations to
you. Once the employee offers re-payment terms,
guilt is admitted tacitly and then clearly stated
when the terms are written down and signed.
If this plan does not produce the desired results,
then a decision must be made as to whether it
is worth the time and expense to prosecute. After
advice from professionals, you will be the one
to make the final decision.
On the prevention side, you should create a system
of checks and balances that encompass the following:
- Background checks on new hires
- Bond employees who handle practice funds
- Put cash handling procedures in writing
- Compare deposits to daily reports, daily!
- The person who prepares the deposit must
not be the person who makes the deposit
- Reconcile or review bank statement reconciliations
- Require that all write-offs and adjustments
be reviewed by you
- Sign all checks, including payroll checks
- Don’t have the same person prepare
payroll and hand it out
- Examine all bills that are being paid
- Don’t leave blank checks in the office
- Review your monthly financial statements
- Pay attention - watch for changes in behavior
on the part of staff members
Be careful! Embezzlement affects thousands of
businesses daily. Embezzlers continue to get smarter
about their crimes. Keep your eyes open, don’t
be too trusting, and take the time to monitor
cash systems within your practice.