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Anti-Fraud Issues for Dental Practices


Why Dentists?

Among professionals, the most susceptible group is dental practices. Some of the reasons are:

  • Dentists spend more time with patients which leaves less time to manage their practices;
  • Dentists are highly trained in their profession but do not typically have much business training. They place great reliance on others for the business aspects of the practice;
  • Dentists are ethical and trusting and attribute these same traits to their employees;
  • Typically, a lot of trust is placed in few people. Think of the typical staff structure – there are very few employees involved in the front office and they do everything related to the business aspects of the practice;
  • Dental practices are generally quite profitable so make attractive targets;
  • Documentation of processes and procedures is often lacking;
  • Anti-fraud controls and peer or management reviews are often lacking;
  • Red flags of fraudulent activity are often missed;
  • Employee turnover is often quite low. Long term employees know the systems better and how to beat them. They are also inherently more trusted by the dentist.

Aren't We Just Talking About Theft?

No. Theft is simpler. Theft is a crime of opportunity. Theft is often not premeditated and is often a one time thing. And it is easier to detect.

Fraud involves something more -- deceit, planning, intent. It requires someone to perpetrate a crime and cover it up. It requires access to the records that must be manipulated to hide the action. And fraud usually occurs over a period of time -- often measured in years. One reason is to keep individual transactions to small amounts that won’t attract attention. So, to make it worthwhile, the perpetrator needs to repeat the behavior many times.

I Don't Hire Criminals So Why Should I Worry?

85% of people who perpetrate fraud have no previous criminal record. Most are long term, trusted employees.

According to some statistics, 60% of people exercise situational ethics. In other words, good moral people will undertake aberrant behavior when they feel their personal circumstances are so dire that they have no other choice. Often this is precipitated by financial troubles. There are many potential causes, ranging from a gambling or a drug problem to major health issues to the loss of family income from some other source or to an unexpected tragedy in their personal lives.

What Is My Real Risk?

Fraud hits professionals particularly hard since it is damaging both professionally and personally. The professional is the business face and the anchor of the practice’s brand. So, while the practice absorbs most of the impact of fraud, it spills over into the personal lives of the professionals and their families.

According to the 2010 Association of Certified Fraud examiners (ACFE) Report to the Nations, the average loss against professional practices from fraud schemes is $110,000 per year due to billing schemes, cheque or payment tampering, expense or payables fraud and skimming of cash.

How Do I Protect Myself?

There are many things you can do to prevent fraud from happening or to detect it and lessen the impact. For starters, ask yourself whether or not you have done these:

  1. I have created an internal culture that is intolerant of fraud.
  2. I know the history and background of all my employees and require regular vacations be taken.
  3. I know where I am vulnerable.
  4. I have appropriately segregated duties in my front office.
  5. I have software controls in place to track access to financial data.
  6. Accounting reconciliations are performed in a timely fashion and reviewed.
  7. I know what my results should be and I regularly monitor the accounts and reports personally.
  8. I have a system of management oversight to review the work of my support staff.
  9. I regularly assess the personal and professional ethics of my staff.
  10. Banking activities require two signatures or management oversight.

If you have any doubts about your risk or would like more information on this topic, please contact your local MNP advisor.