Embezzlement at Veterinary Practices

As a veterinary hospital owner, you want to trust your hospital employees. And you should. You hired them, after all. Your staff members produce good work for you, come in on time, and even bring coffee and snacks to the office. But what you may not realize is that even the best, brightest, and seemingly trust-worthy hospital employees may feel the temptation to steal more than just that extra five minutes at lunch.

With people everywhere feeling the economic pinch, employee embezzlement is something veterinary hospital owners should keep on their radar. In fact, reports have estimated that $400 billion is stolen through employee embezzlement every year in the U.S. alone. This unfortunate statistic reveals the need for veterinary hospital owners to start keeping a tighter watch over their hospital’s finances. Otherwise, you too could become the subject of the next financial scandal.

Why are veterinary hospitals vulnerable?

Although most people assume only large corporations with large cash-flow and low oversight to be the targets of embezzlement, news reports may be misleading. These may be the only companies to solicit media coverage, but reality reveals quite the opposite. In fact, small and medium-sized businesses are some of the most vulnerable to employee embezzlement. This is especially true since even small amounts of missing cash are likely to damage a small company, such as a veterinary hospital, during these rough economic times.

Veterinary practices are vulnerable to fraud and embezzlement for several reasons. They generally have few employees, so it’s difficult to segregate duties. Often the person receiving inventory also pays the bills, creating opportunity for theft. Veterinarian owners appear to be very trusting. Veterinary practices deal mostly in payment at time of service, and they tend to store large stocks of mostly unsecured and highly valuable inventory, including pharmaceuticals. Since inventory is rarely taken, both cash and stock are targets for theft.

A recent survey of 183 veterinary practices (conducted by Marsha Heinke, DVM for DVM 360 Magazine) reported these findings:

• • 67.8 percent of the practices had been the victim of fraud, theft or embezzlement
• • 60.5 percent of the embezzlers were identified but not prosecuted
• • The average duration of fraud was 12.2 months
• • In 38.3 percent of the cases, fraud was discovered through an internal controls audit.
• • The most common position of embezzlers was receptionist, followed by technician assistant.
• • 69.3 percent of the guilty parties had been employed in the practice for 3 years or less
• • Cash and inventory were the most common areas where embezzlement occurred, but treating friends’ animals for free and theft of personal effects were also noted.

During poor economic times, methods of financial review, auditing, or internal controls may be some of the first areas hospital owners cut from their expenditures. In so doing, veterinary hospital owners may actually be shooting themselves in the foot. Therefore, hospital owners should evaluate whether these cuts are worth the risk of creating more opportunity for employee embezzlement.

Why employees are motivated to steal from their job is not always obvious. The most common factors include desperation or a sense of entitlement wherein an employee may feel that he or she should be receiving greater compensation. Many may justify their actions as not really committing a crime, but rather as a favor that they will eventually pay back, but never do. Of course there are also situations where employees simply want more money to live a more lavish lifestyle. Whatever the case may be, there are steps you can take to help protect your business.

Although methods may vary, a few suggestions to help ensure against employee embezzlement include:

• • Don’t make unnecessary cuts in monitoring and auditing practices within your hospital.
• • Don’t rely solely on financial statements to reveal fraud.
• • Read between the lines: Do finances seem uncharacteristically tight right now? Are expenditures unusually high? Are people being paid at unusual times? Are there sufficient reasons for these changes?
• • Hire an auditor to conduct a search for any irregularities in your hospital finances.

Be very careful and exercise caution before making an accusation.

If you suspect that embezzlement is a problem at your veterinary hospital, make sure you have ample facts and evidence to support a claim before accusing a hospital staff member of this crime. Being overly paranoid or making false accusations could be equally damaging to you and your veterinary hospital.

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