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Ten top tips for protecting yourself against fraud

Accountant Melanie Thomas has some tips for GP partners on how to reduce the risk of fraud in the practice

Low staff morale, high workload, distracted and overstretched partners together make for a stressful environment in general practice and create the ideal conditions for a dishonest employee to defraud the practice. Anyone with access to resources can defraud the practice - from receptionists stealing petty cash to GP partners accessing the practice bank account - several instances of fraud committed by practice managers have hit the headlines recently.

Thankfully, these cases are rare but when they do occur it is easy to see how staff managed to defraud a practice. Practice managers are particularly crucial to the successful running of a GP practice. Typically they are responsible for almost all the administrative functions of the practice from ordering the stationery, recruiting staff, paying suppliers and maintaining the accounting records.

At our accountancy firm we meet many GPs who place a high level of trust and reliance on their practice manager and therefore feel they need little involvement in the finances themselves. But GPs should never relinquish their responsibility in this way.

Often fraud is difficult to detect or by the time it is detected, it has reached such a scale that the doctors have already suffered significant losses. In some of the most high profile cases practice managers have been able to extract hundreds of thousands of pounds. Rarely are the practices able to recover these stolen funds.

GPs should ensure that controls are in place to avoid the fraud happening in the first place. Here are ten tips on typical frauds, the warning signs and how to avoid them.

1 Protect your payroll

Fictitious employees, false overtime claims, changes to salaries, running more than one payroll per month - there are several ways for a staff member to defraud the practice payroll.

Warning signs include unexplained increases in staff costs, or staff costs being higher than average. Review monthly payroll - do you recognise all the names on the list? Look at the gross salaries - do they look reasonable?

Partner authorisation should be required for all payments. Review bank statements to check the amount paid tallies with the authorised summary. There should only be one payroll per month.

2 Spot fake suppliers

If details on a cheque stub differ from those on the cheque, someone at your practice may have used a fake supplier to defraud the business. Unexplained increases in expenses (postage and stationery, drugs), or higher than average costs are red flags for this type of fraud.

To avoid losing money in this way, the partners should authorise any cheques or BACS payments. Practice managers should not be cheque signatories. Have only one cheque run/BACS run per month, make sure all payments have original and genuine invoices behind them and review bank statements to ensure the payments are reasonable.

3 Prevent theft from petty cash

Poor petty cash records, and balance of cash recorded does not correlate to the amount in tin are all warning signs that someone’s been defrauding the petty cash records. Staff members can do this by taking cash from the bank and recording as petty cash without contributing it to the petty cash box, or by taking cash from the tin for a fictitious expense.

To avoid it, review bank statements for what was taken out for petty cash. Review the system of recording petty cash: is it clear? Does the balance in the book agree to the physical cash in the tin?

4 Stop cheating on cash sales

If you notice reduced income from private medicals, fewer travel vaccinations are logged, or income from private work goes missing, staff may be pocketing cash received from patients for these services. Patients should receive a sequentially numbered receipt. All cash received should be banked and the amount banked reviewed - does it agree to the amounts on the receipts?

5 Secure your stock

When signing the cheques/BACs payments, check the invoices. Be aware of what the practice is buying and how much. Have adequate ordering procedures and a system of being able to check who has used vaccines and drugs. Don’t be afraid to ring the odd supplier to ensure they are real and ask them how much the practice spends with them. Check for unexplained increases in expenses, or higher than average expenses, if you suspect that someone has been stealing IT equipment, consumables or medicine.

 

Dr Nick Clements at the Medical Protection Society advises: ‘If drugs go missing from a practice and you suspect theft or fraud the practice should carry out a prompt investigation to clarify the facts, such as double checking the concerns are justified and to look for other discrepancies. If concerns remain, and the drugs still cannot be accounted for then the LAT should be informed.’

 

6 Break up the task load

Wherever possible, duties should be separated between staff members so the person writing out the cheques should be different to the person recording the expenses on the bookkeeping software. The receptionist collecting cash from patients should be different to the person recording the amounts received.

7 Appoint a ‘deputy’ to the PM

Often frauds are discovered when other staff members become involved in the finances. When the practice manager goes on holiday, ideally there should be someone else who can do that role. This is, of course, not always practical in smaller surgeries and needs balancing with the confidential nature of some of the tasks.

8 Ask all the partners to look out for unexplained losses

The excuse GPs often use for lack of control over finances is that they are too busy. It is difficult enough keeping on top of the huge changes currently facing the NHS, without the need to become a forensic accountant as well. However, in these times of cost-cutting and falling GP income, protecting the finances of the surgery should be paramount. Indeed, a GP showing some interest in the finances can often act as a deterrent for most would-be fraudsters.

9 Improve the trust between PM and partners

You should try to ensure that your practice manager does not have too much autonomy within the practice and becomes so powerful that doctors may fear a confrontation. We have come across practices where the practice manager agreed all the staff pay awards, including her own. Sometimes practice managers may also influence the decision by their GPs to change accountants, usually when the incumbent accountant starts to ask too many awkward questions.

When recruiting practice managers, and indeed all staff, ensure that they are who they say are. Check out their qualifications and references and do background checks.

10 Don’t leave it to your accountant

Ask your practice accountant about the quality of the accounting records. Was the accountant able to easily trace payments made from the bank to the underlying original invoice? Did the practice manager provide payroll records and good quality petty cash records?

But remember that the accountant’s role is not to uncover fraud. The role is to produce a set of accounts from the books and records provided. So finally, listen to your accountant and investigate where the practice is underperforming to ensure the reasons are understood.

Melanie Thomas is a director at Hall Liddy Chartered Accountants, a member of the Association of Independent Specialist Medical Accountants

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