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Issue: 39 - Mar 15, 2012
Why Would Employees Steal From You?
By: Phil Zeltzman DVM, DACVS, CVJ
Dr. Phil Zeltzman
Many articles discuss how to prevent embezzlement, or at least how to decrease the risk.  It seems that theft becomes more prevalent in tough economic times, and the veterinary press has reported a few juicy (sorry, scary) stories lately.

I recently attended a conference given by Don Elsenbaumer, a CPA in Allentown, PA, about why embezzlement occurs.  I found the explanation so interesting, that I thought I should share it with ImproMed readers.
 
Things are easier to understand then you consider the “fraud triangle,” explained Don Elsenbaumer.  The 3 corners of the triangle, i.e. the three conditions for fraud to occur, are:pressure, opportunity and rationalization.
 
1. The pressure to steal is typically related to financial trouble.  The employee may face debt, medical bills, the loss of a spouse’s job, divorce, gambling, drug or alcohol problems.  A sudden cash flow problem or a bad investment may have occurred.  For example, one employee was caught stealing after her boyfriend ended up in jail.  She simply couldn’t afford to care for her kids.

A lavish lifestyle may catch up with an employee who may have just realized that plastic money has to be repaid one day.  An infinite number of work, family or life related pressure can lead to embezzlement.  It can stem from pure greed or even “for the game” or “for the challenge.”
 
2. Opportunity comes with two conditions: the opportunity to perform the act and the opportunity to conceal it.  The potential thief will look for conditions to act without being noticed.  This can require specific working hours (early or late shift), a specific location (front desk, storage room) or specific conditions (nobody is around).  Having easy access to cash, products, supplies (including office supplies) or pet food may be too tempting.  There are also “time thefts:” they may pad their time card by clocking in early or late, or by taking an extended, paid, lunch break.
 
The next step is to conceal the act, which may or may not be easy depending on a number of factors including how well the clinic, the cash drawer and the inventory are managed; how strong your internal controls are; how well duties are separated (cross-training has its disadvantages).  Concealing such an act can require extreme measures, such as never taking a vacation to ensure that nobody ever digs into the employee’s files while (s)he is gone.
 
3. The third condition for theft to occur isrationalization.  The goal is for the embezzler to feel better about the act just perpetrated and be convinced that what they did is not that bad after all.  This justification can take many forms:

  • “I’m just borrowing the money, I’ll repay later.”
  • “I’m not hurting anyone.”
  • “It’s just a little sin.”
  • “I work hard and I deserve it.”
  • “Everybody’s doing it.”
  • “Nobody will ever know.”
  • “The company owes me.”
  • “That’s pay back for last week.”
  • “That will teach you for declining my last raise.”
  • “I have no other option.”
  • “My boss can afford it.”
Now that you understand the three prongs of embezzlement, - pressure, opportunity and rationalization-, it should be easier for you to prevent it, which is much cheaper that to detect it after the fact.
 
There are many ways to reduce the risk of theft, including:

  • A hospital culture of honesty and high ethics.
  • A written code of conduct.
  • Employee assistance programs for drug, alcohol and gambling related problems.
  • A system to manage disgruntled employees.
  • Background checks.
Hiring a repeat offender may not be the greatest idea ever. After all, what keeps most of us honest are typically morals, values and fear of consequences. Someone who has none of these is more likely to do something reprehensible.
 
Sadly, the size of your practice, or the fact that your nurture a family atmosphere, is no guarantee that embezzlement won’t occur.
 
In order to minimize opportunity, you can implement a number of simple changes, including:

  • Vary employees’ routine, whenever possible. Cross-trained employees can take turns between “the front” and “the back.” Of course, it’s difficult for a highly trained surgery technician or your bookkeeper to do anything else but what their primary function is, but it is very possible with other, less specialized employees.
  • Install video cameras in strategic locations, such as the cash register.
  • Enforce mandatory vacations.  They’re good to prevent situations as described above, and they’re good for employees.
  • Use common sense: open your own mail, especially anything financial such as bank statements.  Double check deposits, and double check the amount of paychecks.  At tax time, verify that the salaries on employees’ W2 forms make sense.
  • Although most of us would rather be a doctor than an accountant, it is critical to avoid relying 100% on one single individual for all things financial.
  • If you have a partner, or a trusted manager, one could write checks above a certain amount, and the other could sign it. Or two owners may be required to sign checks above a certain amount. The idea is not that you can’t trust each other. Rather it’s an easy system to force you to double check things.  That said, keep in mind that quite often, theft occur in multiple, small amounts, rather than one single, large amount.  Sadly, this makes it even tougher to detect.
  • Analyze your financial reports and monitor your inventory turnover.
  • Know your employees, and actually talk to them.  This should help you monitor any personality or lifestyle changes, as well as any new pressure they experience.
 Before you end up with an ulcer, worrying about what each employee might do, it’s important to remember not to sweat the small stuff.  Stealing cash or a bag of pet food (or a pulse oximeter!) is a big deal, but should you really lose sleep at night because employees “forget” a pen or a highlighter in their scrubs pockets now and then?
 
In other words, pick your battles.
 
Phil Zeltzman DVM, DACVS, CVJ
 
Dr. Phil Zeltzman is a mobile, board-certified surgeon in Allentown, PA. His website is www.DrPhilZeltzman.com. He is the co-author of “Walk a Hound, Lose a Pound: How You and Your Dog Can Lose Weight, Stay Fit, and Have Fun Together (www.WalkaHound.com).”