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How to prevent fraud in your practice

1 June 2018

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Unfortunately there are too many examples of practice managers who have abused their position of trust and committed acts of fraud. Sometimes the amount involved can be in excess of £100,000.

This is effectively a dual crime. Not only are they stealing from their employers, but they are also taking money indirectly from the public purse. Very often these fraudulent acts occur over a number of years, so why are they able to do this?

Examples of tried and convicted cases over the last 10 years:

2017 – Nearly £30,000, referred to Crown Court
2016 – £55,000, custodial sentence 16 months
2016 – £250,000, custodial sentence two years, eight months
2014 – £160,000, custodial sentence of two years, eight months
2013 – £150,000, custodial sentence of 18 months
2013 – Nearly £100,000, custodial sentence of two years, nine months
2010 – £180,000, custodial sentence of four years, six months
2009 – £70,000, custodial sentence of 15 months
2008 – £100,000, custodial sentence 18 months

It is not just about financial fraud it can also be a case of obtaining goods by deception. Examples include obtaining prescription drugs for someone else or stealing or falsifying prescriptions to allow individuals to obtain the drugs they want for free. These drugs are then often sold on the black market, an activity that compromises patient safety.

How does this occur?
If it’s not identified early, employee fraud become a significant problem in your practice.  In theory, processes should be in place to ensure such instances cannot occur. However, we generally trust people, which is the first potential flaw in any organisation. If someone says that they have done something and we rely purely on trust, the opportunity to deceive us has been created.

Types of fraud
Generally, the examples above demonstrate financial fraud, but there are other types of fraud. It could also be a case of misappropriation of assets (and yes, this includes paper, stamps and stationery) such as dictaphones and laptops. Of course, practices also have to be vigilant about third party fraud. This might include false invoices for services not actually received or payment for services using counterfeit tender.

Fraud prevention
Generally, all staff should be aware of  the practice fraud policy, which should be included in the staff handbook. You should not shy away from bringing this matter up with staff during an appraisal. You are not accusing them of anything, you are creating a culture of awareness and you should always encourage staff to report instances where they believe misappropriation has occurred.

Key steps to preventing fraud in your organisation

1.  Look after your employees
Very often fraud will result from an individual’s change in behaviour, which normally arises because of something that has happened in their personal life or due to a disagreement at work.  Fraud is often driven by a misconception on behalf of the perpetrator that he or she is the victim and all they are doing is addressing this injustice.  General practice has at times become a stressful place to work in recent years and as a responsible employer, you need to ensure that small matters are addressed – to ensure staff welfare is maintained. Ignoring your workforce or simply placing unrealistic expectations on them can become a trigger for a negative future event to occur.

2.  Empower all staff
Discussing your fraud risk policy collectively with staff should not be an issue. The majority of individuals will see this as part of their personal development.  More importantly, they will welcome being told what processes to follow in the event that they identify a potential risk. They then become your eyes and ears, helping you ensure that potential risks can be identified. Consider introducing a reporting system as well. This can be transparent, but also include an option for events to be reported anonymously.  The important factor is that events are being reported and not ignored.

3. Use internal control systems
Very often fraud occurs because safeguards and checks are not in place or not utilised properly. A key thing you can do is to segregate responsibilities. If someone calculates the monthly payroll figures, someone else should be responsible for actually making the payments or independent authorisation should be obtained. Most of the cases cited above are due to individuals creating false overtime payments or unauthorised pay increases. You should ideally never have only one person responsible for all practice finances. Also, check that you are receiving all your private fees. Often patients can pay in cash (this should be avoided if possible), money that may initially be deposited in the practice petty cash. Make sure your petty cash is checked regularly to avoid money disappearing.  Communicate the fact that routine and random checks are being carried out: this will act as a deterrent to potential fraudsters.

4.  Monitor attendance and vary duties
This might seem odd, but if you have a member of staff who works extended hours or turns up on days that they are not meant to be at work, they might be wishing to conceal activity they do not want others to know about. If you believe staff are acting in an unusual manner, consider delegating some of their duties to others to gauge their reaction. The routine redistribution of duties should not be seen as a threat, just practice policy.

5.  Employ qualified individuals
Ensure that the people you entrust with the practice finances have the relevant professional knowledge and background to deal with this responsibility. Are they qualified and do they have professional registration with a recognised body? If they do, they are less likely to pose a risk (although this can never be fully guaranteed). As part of their registration, they will abide by codes of conduct. As the employer, you can also make enquiries to the registered organisation about the membership status of the individual.

If you have practice accountants or other specialist advisors, use them appropriately.  Maintain a good relationship with your bank and review activity on a regular basis.  The evidence is always there but often it is not noticed for a period of time, often long after the guilty party has left the organisation.

6.  Create a happy workplace
Providing a good working environment can help ensure that your organisation does not fall victim to a potential fraudster.  Open discussions with staff regarding work practices and what is acceptable sets the right tone. Those who have more senior management roles need to lead by example and be transparent in their actions.

It’s key to remember is that processes, checks and controls need to be in place.  They need to be followed and also need to be reviewed to ensure that they are still relevant. If one of these processes is missed or is inappropriate for its purpose, it will create an opportunity for fraudsters.

Steve Williams is the co-founder of the Practice Management Network