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How to Detect Top-Level Financial Crimes

Aug 25, 2017
The Bottom Line

Top-level crimes can go unnoticed for many years. However, the following measures can help detect fraudulent financing at the top in its early stages:


  • Practice stringent internal controls. It is important to have at least two people involved in the approval process for any kind of access to liquid-type assets. The facility should have adequate segregation of duties so that no single individual has the authority to complete an entire transaction alone, which should include chief executive officers. Internal auditing reports should be provided directly to the board of directors or trustees, not to management.
  • Develop computer software. Your facility’s program should pinpoint unusual or large transactions over a certain dollar level. You can then send the printouts to the board of trustees or directors, at which point they should ask for supporting documentation and explanations.
  • Keep good, timely financial records. Be aware of the normal occurrences or variances within your facility’s monthly financial statements. For example, one sign of fraud could be that the financial statement shows the increase in revenue for one month is the same as it was a year before but receivables are twice as much as the previous year. Of course, the increased receivables for the current month should show a greater increase in revenue compared to the previous year.
  • Institute regular external auditing. Administrators should select an auditing firm that has enough experience to understand the reimbursement system for Medicare and Medicaid and has extensive experience in healthcare facility auditing.


Protecting Against Fraud

Taking the following recommendations may discourage internal fraud and financial irregularities:

  • Complete a criminal history investigation on anybody who has access to finances or is about to be given access. National and state fingerprint screenings in all states where the employee has resided are highly resourceful.
  • Complete the criminal history investigation annually.
  • Rotate job positions in the financial area.
  • Ensure that all positions are cross-trained so that no one person holds all of the intel for one position.
  • Give internal auditors the ability, time, and access to investigate finances.
  • If a specific problem or suspicion develops, use external auditors for an independent opinion.
  • Have at least two people handling finances. Require a two-step, two-person process for all transactions.
  • Consider having employees bonded.

If there is a suspicion of fraud, it is important to complete a thorough and unbiased investigation. An outside, contracted investigator should be used to determine whether fraud is indeed taking place or whether discrepancies are due to a bookkeeping error. Make sure the firm is reputable and professional to eliminate any unfair treatment toward the employee. It is always safer to err on the side of caution, but it is not a good practice to terminate an employee without just cause.

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