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Academy of Dental Management Consultants Corner: Embezzlement in the dental practice: Can you prevent it or is catching it early the best you can do?


Every day, it seems another tale of embezzlement in the dental practice makes its way into the newspapers or nightly news. Whether it’s a few hundred dollars or thousands of dollars, the emotional and financial toll on a dental practice can be truly staggering.

Following up on our successful series on the current state of fee-for-service dentistry, we once again asked members of the Academy of Dental Management Consultants for their views and their thoughts on, “Embezzlement in the dental practice: Can you prevent it or is catching it early the best you can do?” Click below to see these thought leaders’ opinions and predictions for the future.

An embezzler was once asked why she embezzled. "It was easy," was her response.

Through my investigations, I’ve encountered brazen thieves and opportunistic thieves. Brazen thieves determine to steal regardless of the security measures in place but account for a very small percentage of practice embezzlers. Opportunistic thieves feel entitled to the additional finances and have an opportunity to take it, because no one is watching.

The brazen thief can go unnoticed but he or she will get caught with internal controls. With an opportunistic thief, there is less opportunity and it’s not “easy” with internal controls. Whereas some embezzlers have impulse or addictive disorders, most have experienced a growing need to “keep up with the Joneses.” With most, the addiction to have more evolves into greed.

The point is to not sabotage your employees by not having internal controls. Accountants and fraud examiners encourage internal controls, including the Association of Certified Fraud Examiners and American Institute of Certified Public Accountants. EVERY successful business, without fail, is run by internal controls. Some have called internal controls an unnecessary time restraint, but I’m pretty sure Warren Buffet and Bill Gates would completely disagree. Be certain those are words every doctor would love to hear but it is a death trap.

A “few absolutely without fail” internal controls include no signature stamp, daily deposits, computer users/passwords, computerized time clocks, and petty cash worksheets. In addition, annually review your practice but what’s most important is to use your eyes and ears to pay attention to your practice.

Can you prevent embezzlement? Ultimately no. Human nature will do what it wants to do. Internal controls have never been meant as a silver bullet to prevent embezzlement but it is simply a means to minimize your exposure and to detect embezzlement when it does happen.

Susan Gunn, CFE
Susan Gunn Solutions

Although I have seen a number of articles advocating controls or procedures that are touted as “preventing” embezzlement, our experience suggests that this approach is ineffective. I think that the reasons are as follows:

Embezzlement differs from other forms of theft because the embezzlement victim is preordained. So, while “control measures” work well (by convincing thieves to select a different victim) in other theft situations, this diversion is not possible in embezzlement matters. Many commentators blithely assume that what works against other crime will also discourage embezzlement. This isn’t always true.

The motivation of embezzlers to steal is powerful. Sometimes this motivation is economic. In other cases, the thief derives emotional satisfaction from “beating the system.” Regardless, the motivation of embezzlers to steal is a strong one, and we should not expect them to be deterred easily.

There is a fundamental porosity to dental offices. The existence of third-party payers combined with a complex pricing (and adjustment) structure, and the unintegrated accounting process (primary data capture by practice management software followed by entry of summary data into accounting software) provide ample opportunities for any enterprising thief.

The embezzler has virtually unlimited opportunity to study the habits and thought process of the dentist(s) and to develop an approach that bypasses scrutiny and circumvents controls.

Embezzlers adapt to changes in procedures so that they can continue stealing.

Over the course of investigating hundreds of dental office embezzlements, we have observed little correlation between the strength of the internal controls and the likelihood of embezzlement taking place. However, well-organized practices tend to spot embezzlement more quickly and therefore incur smaller losses.

David Harris, MBA, CMA, CFE

More from David Harris: Lessons learned about embezzlement in the dental practice

Can you prevent embezzlement? This is a great question that, unfortunately, does not have a clear-cut answer. I do believe that some embezzlement can be prevented. Can it be prevented every time? Unfortunately, no.

There are several different types of people who embezzle. Whether you will be able to prevent embezzlement or not depends on which one is in your practice.

If you have the bold, shameless employee in your office, unfortunately the best you can do is catch it early. This employee will find a way to embezzle no matter what controls you put in place.

However, the other types of employees who embezzle (and these are the majority) are those who do it because they either feel they “deserve it” or they are having some type of financial problems in their personal lives. This is where our internal controls come into play because these are the employees who can be prevented from embezzling.

Some internal controls to consider (but not limited to) are:


Verifying deposits

Time clocks

Simply asking questions (Did Mike Jones pay today? What was the adjustment for on Sally Smith?)

When embezzlers were questioned as to why they stole, several reasons were given, including they needed it, they deserve it, and the dentist or practice owner has enough money so he or she won’t miss it. However, the one that stands out most in my mind is, “It was easy!” This is a trend that needs to stop. Let’s not let it be easy. Every practice needs to have internal controls.

Janice Janssen, RDH, CFE

More from Janice Janssen: Battling the emotional toll of embezzlement in the dental practice

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