You have 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 company.

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.