How a GPs’ practice can be susceptible to fraud, how to spot this and how to react

Why are GPs’ at risk?

The cases handled highlight the way in which a GPs’ practice can be more susceptible to fraud than other similar sized businesses.  Often the partners concerned are busy individuals who would rather spend their valuable time engaged with providing patient care rather than having to become embroiled in matters of finance.  However, this can be just the opportunity that a rogue and unscrupulous employee might look to exploit.

What is fraud?

Employee fraud involves the intent to defraud and the employee relies on his or her deception to accomplish or hide their fraudulent activities.  If a GPs’ practice is able to understand why employees commit fraud in the first place, then the practice will ultimately be better placed to identify the risks it faces and then consider whether the measures it has to counter and deter fraud are adequate.

How to spot fraud in a GPs’ practice

Fraud in a GPs practice has, in our experience, the following similarities:

• “Opportunity” – how the employee is able to carry out the fraud. It could be that the employee has uncontrolled or unrestricted access to the cheque book or there are inadequate checks and balances in place for dealing with cash that comes into the business.
• “Pressure or Incentive” – how the fraud has occurred when pressures overcome acting honestly. This has been as a result of the employee living beyond their means, being in personal debt and/or having gambling or other addictions.
• “Rationalisation” – how an employee has attempted to use perceived grievances that they may have with the business to rationalise what they are doing.  Common examples that we have seen are a belief that the employee is not paid enough, or that the sums taken were small when compared to the sums being made by the practice.

How can you help prevent fraud?

We have seen cases where an employee has been able to write cheques to themselves but recorded the same in the practice’s books as legitimate practice expenses such as drugs or locums. The cases that we have seen highlight that policies for handling cash and cheques are essential for a GPs’ practice in order to deal with the potential fraud risk that a practice faces and all practices should ensure that they have effective cash/cheque control measures in place such as:

• Establishment of responsibility – ensure that only designated personnel are authorised to handle cash/cheques.
• Segregation of duties – ensure that different individuals receive cash/cheques and record cash/money receipts.
• Documentation procedures – ensure that remittance advice receipts and deposit slips are used.
• Independent internal verification – have other partners review cheque payments daily or carry out a verification process;
• Have a reconciliation procedure – ensure that a system is in place for reconciling bank statements and other internal records on a regular and ad hoc basis. Make sure that a system is in place for resolving differences so that these are brought to the attention of the appropriate level of management within a practice.
• Verification – have records periodically verified by an independent employee on a surprise basis.
• Rotation of duties – ensure that employees’ duties are rotated and that holidays are taken.

What to do if fraud is suspected

The cases that we have dealt with all have in common the need for speed.

If a fraud is detected whilst the employee is still employed by the practice, then the practice should be live to the need to respond quickly (and often in secrecy) so as to not alert the suspected employee that their wrongdoing is about to be uncovered.

If word gets back to the employee that the fraud is suspected, then the employee may go to great lengths to cover their tracks by destroying or altering incriminating evidence. Establishing an effective investigation strategy and limiting “who knows what” whilst initial enquiries are undertaken will be vital.

Securing the available evidence can have a direct impact upon the prospects of a successful civil recovery of the loss suffered by the practice. It is not uncommon for a practice to suddenly find that a certain financial record or company laptop is “missing” when they investigate a possible fraud.

Any investigation will obviously need to take into account how the employee will be dealt with under the applicable disciplinary procedures. Accordingly, the question of how evidence will be gathered and preserved will inevitably be closely related to the disciplinary process.

Even if the disciplinary process is the main focus of attention, a practice faced with employee fraud should always have one eye on how best to gather and preserve evidence so that it is available for any future civil recovery action the practice may decide to take against the, by now, likely former employee.

The fraud has, in many cases, been perpetrated over a number of years.  GPs’ practices that address the above issues, as part of their overall fraud prevention strategy, will maximise their prospects not only of detecting and deterring cash/money fraud in the practice but also of potentially recovering the money misappropriated. In cases that we have dealt with, we have been able to recover and secure substantial sums of money not only from the actual person that has committed the fraud but also from third parties that either received the misappropriated funds or from third parties that should have prevented the fraud (such as a bank who allowed cheques to be drawn in breach of the practices’ bank mandate).

Full advice should be taken in any specific case.  For more information please don’t hesitate to contact any member of the GP Practices team or, in this instance, please contact Simon Lockley