Accountants, Erick Cutler and Jerry Murray, from the Dallas firm Goldin Peiser & Peiser, LLP spoke at the Arlington Dental Study Club November 17th. on the topic of fraud and embezzlement in dental practices. The purpose of the presentation was to raise dentists' awareness of fraud and provide information and ideas the attendees could take back to their practices. Contact Goldin Peiser & Peiser, LLP for more information or visit www.gppcpa.com.

1. Embezzlement:
What Dentists Need to Know
Presented by
Erick Cutler &
Jerry Murray

2. Objectives
The purpose of this presentation is to raise your fraud
awareness and provide information and ideas you can
take back to your practice. The content is based on
questions that the group has submitted, including:
• Percentage of staff embezzlement cases in dental offices
• What type of behaviors should doctors look for?
• How can doctors audit or minimize embezzlement in their
office?
• What are the best methods to "safe proof" the office
to prevent embezzlement?
• What is the best method to approach an employee if there
is a suspicion of embezzlement?
• Can and should a doctor legally pursue an employee if they
have evidence of embezzlement?

3. Fraud Risk Percentage
• A busy dental practice is the perfect
environment for fraud
• Studies have shown one out of three dental
practices:
Have already experienced fraud
Will experience fraud
Are experiencing fraud now and don’t
know it

4. Basic Definitions and Common Type
of Fraud
• Embezzlement: the theft of money or other property
from a business by an individual in whose custody it
has been placed.
• Fraud: wrongful or criminal deception intended to
result in financial or personal gain
• Most common type of embezzlement is the
misappropriation of the practice’s cash and checks
by business office team members who are
responsible for day-to-day accounting

5. The Fraud Triangle
• There are three common elements to
fraud and embezzlement:
Motive
Opportunity
Rationalization
• When motive meets opportunity….
rationalization is but a small step

6. Motive
• Issues with personal finances
• Greed
• Addictions (drug, alcohol, gambling, etc.)
• Health issues and related bills
• Divorce
• Jealousy
• “Keeping up with the Jones”

7. Opportunity
• Any time someone in the organization can initiate and execute
a financial transaction without any checks and balances
• If someone has both the possession and control over an asset
and also does the accounting for that asset
For example:
 Giving someone signature authorization on your checking
account.
 Allowing employees access to the office at times other than
normal working hours.
 Allowing employees to make deposits.
 Not reconciling bank statements timely and accurately.
 Not reviewing your 401K employee deferral transactions
Of the three elements of the fraud triangle, this is the only one you have
any control over!

8. Rationalization
(aka moral breakdown)
Once motivation and opportunity meet, the
rationalization for embezzling can take many
paths:
I’m not paid enough, I deserve this.
I’ll just borrow the money and pay it back.
No one will ever miss it.
Wow, wonder if I can get away with this – the
thrill of the challenge.
My child really needs a cell phone so his friends
won’t make fun of him/her.

9. OK, now what do I do?
Step One
Perform a risk assessment of your practice
 “Follow the dollar” - study your internal processes from
start to finish and ask yourself “what could go wrong”?
 Where can someone commit and conceal fraud and/or
convert assets?
 Identify where you have lack of internal controls such as
checks and balances, security, daily reconciliations (such
as scheduling to billings or deposits in bank to daily
receipts).
 Pre-employment criminal background checks for all
employees plus a credit check for anyone with a financial
role.
 Follow through with reference checks and get references
from the references.
 Obtain fidelity bond to help insure against loss.

10. OK, now what do I do?
Step Two
Establish a system of internal controls
 Establish the controls around the position….not the
person.
 You have protocols for dental procedures, why not
finance?
 Communicate your financial policies and procedures in
writing and establish a fraud policy as well as a written
anti-fraud program.
 Establish an effective control for the perceived risk.
 Determine other ways that can assets be stolen – credit
cards, office supplies, false vendors, employee expense
reports, payroll and time system (time and rate per
hour).
 Be sure systems are secured and backed-up daily where
only you can control access.

11. OK, now what do I do?
Step Three
Monitor and Maintain
• Open your mail.
• Take the deposit to the bank.
• Daily review of revenue and deposit reports and
reconciliations to scheduling to billings, agree the
posting of receipts to accounts receivable detail and
bank deposits.
• Approve all accounts write-offs or adjustments.
• Review the system audit trail for changes to prior
periods or other unusual activity.
• Change your routine by arriving earlier than normal or
staying later than normal.
• Require mandatory vacations of all employees with
someone filling in for them for at least a week.

12. What to do about Suspected
Embezzlement/Fraud
If you suspect fraud, contact your attorney
immediately.
You do NOT want to make a rash decision/false
accusation. Avoid the temptation to dismiss
immediately, as that may open you up to
wrongful termination claims.
Do not confront the employee (as it may provide
them an opportunity to destroy evidence), but
work through the attorney to gather evidence
and preserve documentation. This may include
the need for a fraud investigator or forensic IT
professional.
Act quickly but not rashly.

13. What to do about Suspected
Embezzlement/Fraud
Once you do have proof, you should have your
attorney quarterback and coach you through the
issue every step of the way:
If you find proof and have to let an employee go,
you must show them some evidence to justify your
decision, but NOT all the evidence. This should be
done in the presence of a witness.
After this, with the guidance of your attorney,
determine next steps (i.e. what kind of remedies are
you looking for and what do you want to get out of
this).
Consider hiring a compliance consultant or creating
compliance manuals that the staff are aware of.

14. Specific Considerations for
Billing Fraud
• If the fraud is on the billing side, and it
participates in Medicare/Medicaid, then the legal
ramifications are much more complex.
Liability includes potential personal financial
loss, suspension or revocation of provider
number, and recoupment of payment from
services provided.
• This requires extremely quick action and self-
disclosure You, the doctor, must come forward
to explain specifically what has happened,
including the exact dollar amount compromised.

15. Summing It Up
 Percentage of staff embezzlement cases in
dental offices
 What type of behaviors should doctors look
for?
 How can doctors audit or minimize
embezzlement in their office?
 What are the best methods to "safe proof" the
office to prevent embezzlement?
 What is the best method to approach an
employee if there is a suspicion of
embezzlement?
 Can and should a doctor legally pursue an
employee if they have evidence of
embezzlement?

16. The Final View
Perform a risk assessment of your
practice
Establish a system of internal controls
Monitor and Maintain

17. Summing It Up
The Fraud Triangle = Motivation + Opportunity + Rationalization
 Don’t give your employees a reason to steal from you. Folks are less
likely to steal from people they respect.
 However, don’t get too close on a personal level as it could cloud
your skepticism radar.
 Maintain the perception of detection.
 Design your controls around the position not the person.
 Clearly communicate expectations to all personnel in writing as well
as verbally.
 Ethics training.
 Be sure your systems are secured and backed-up daily where only
you can control access.
 Be proactive and unpredictable.
 Be aware of changes in employee habits or circumstances.
 Fidelity bond insurance.

18. If you have any questions please feel free
to contact Jerry or Erick at:
Jerry: 214-635-2519
jmurray@gppcpa.com
Erick: (214) 635-2541
ecutler@gppcpa.com
A special thanks to Daniel Tatum, Attorney at
from Friedman & Feiger:
dtatum@fflawoffice.com

19. References
Doherty, Hugh. (2010). Embezzlement Prevention—To Catch a Thief! Dentistry
Today. Retrieved from http://www.dentistrytoday.com/practice-management-
articles/1645
Salzman, Mindy. (2013) The Topic No Dentist Wants To Talk About:
Embezzlement. Dentistry Today. Retrieved from
http://www.dentistrytoday.com/articles/practice-management/management-
tips/9609-the-topic-no-dentist-wants-to-talk-about-embezzlement
Dawson, Steve. (2015). Fraud Prevention and Detection. [Lecture]. Fort Worth
CPA’s Free CPE Day.