32 Questions for Reviewing Internal Financial Controls

Too many doctors fall prey to employee embezzlement due to a lack of internal financial controls.

I know, because I’ve seen it happen.

In at least one instance an office manager convinced her employers that a change in the accounting system was needed to save costs. A couple of years later I received a call from the physician. He told me that the office manager had manipulated the new system to embezzle hundreds of thousands of dollars from the practice.

It’s a sad story, but not uncommon.

Could it happen to you?

It won’t if you have proper checks-and-balances and internal financial controls in your practice. 

Today we’re sharing 32 questions that will help you and your healthcare business consultant find opportunities for improvement.

Let’s get started…

Cash Collections & Receipts

• Is a change fund being maintained?
• Are receipts issued for cash payments?
• Are payments received indicated as being either check or cash on the receipts and in the practice management report?
• Is cash totaled daily to agree with the practice management report?
• Are employees who handle cash bonded?

Deposits

• Is a deposit prepared daily?
• Are deposits held overnight stored safely?
• Are the carbon copy deposit slips attached to the practice management report?
• Is the bank statement opened only by you or the accountant?
• Is the bank statement mailed to your home or the accountant’s office?
• Does the amount deposited into the business account reconcile to the receipts reported for the month by your practice management system?

Practice Management System

• Do you have a manual system should the computer go down during the day?
• Do you run a daily report?
• Do you review and initial each report?
• Are all accounts with balances billed? (Even those pending insurance?)
• Are billing and collection duties done by separate persons?
• Is a back-up on the computer system performed daily?
• Is back-up media stored off-site in a safe place?

Petty Cash

• Do you itemize cash expenditures?
• Are receipts kept for petty cash expenditures?
• Do you keep a running balance of petty cash?
• Does the cash balance agree with the records?
• Are employees’ purses and personal belongings kept in a separate location away from the front office area?

Other

• Are employees required to rotate duties and responsibilities where possible?
• Are refund checks approved by you?
• Do you review “write-offs” and adjustments each month?
• Are accounts in internal collections contacted at least monthly?
• Do you sign all checks?
• Are invoices attached with the check to be signed?
• Do you refuse to keep a signature stamp in the office?
• Do you refrain from “skimming” or “dipping” into the petty cash?
• Do you have your CPA or an outside person perform periodic reviews on your internal controls?

Conclusion

Hopefully you find this list of questions useful in spurring conversation with your healthcare business consultant and your staff.

What internal financial controls does your practice use to prevent employee embezzlement?

Let us know in the comments below.