CPA, CVPM, MBA
Mira Johnson is the managing partner with JF Bell Group, a CPA firm serving veterinarians exclusively. Born and raised in Slovakia, she earned a master’s degree in financial management and accounting. She obtained her CPA license shortly after arriving in the United States. Mira became a certified veterinary practice manager in 2022. Her passion for technology has helped many veterinarians better their practice and improve their personal lives. To learn more, visit jfbellgroup.comRead Articles Written by Mira Johnson
According to an American Animal Hospital Association survey, 86% of the respondents said employees had stolen from their veterinary clinic. That sad statistic is one of the hardest to swallow for any practice owner or manager. Yet, most of the time, the thief or fraudster is one of your most trusted employees, someone who worked with you for years. You know their spouse. Your kids have played with their kids on the same soccer team since age 5. You threw their daughter a graduation party last year because the co-worker’s spouse lost a job and their finances are tight.
Yeah, that employee. But why? And how could you have prevented the crime?
Thwarting and detecting theft or fraud requires understanding the three main factors contributing to it. In the 1950s, researchers Donald Cressey and Edwin Sutherland decided to answer the “Why?” by interviewing prisoners who had committed embezzlement.
One of their conclusions was that all fraudsters have three things in common.
The human mind is powerful. As a result, there are many versions of rationalization. In this case, employees:
- Believe they will repay the money or return the product: “I’m not stealing,” they think. “It’s just a loan, and I will repay it.”
- Think the act is for the greater good: “I’m not keeping it. I’m giving it to an animal shelter for stray cats, so what I’m doing is OK. After all, this clinic has plenty of resources.”
- Imagine they are entitled to the money or product: “I deserve it. I should have gotten a raise.”
Whatever the reasoning, the belief is strong. For example, a veterinary technician admitted to stealing controlled drugs and returned one half-empty bottle. She looked at the practice owner and asked, “Can I keep my job now? I returned it, so it’s OK, right?”
2. Financial Pressure
Some people think employees feel financial pressure only when they’re poor and have issues like alcoholism, gambling or drug addiction. But it also can stem from being sued or a spouse losing a job, for example. Have you heard the expression “Keeping up with the Joneses”? Those who live by it long for a better car than their co-worker’s, want a house bigger than their sibling’s or desire a vacation spot more exotic than their friends’.
A survey conducted by OnePoll discovered that 1 in 3 people makes home improvements and renovations only to keep up with or impress a friend, family member or neighbor.
Greed and easy enrichment are other financial motivators.
This is the most critical factor in fraud because committing it isn’t possible without opportunity. The average fraud occurs 24 months before discovery. As a leader, you can minimize the opportunity and play a significant role in safeguarding your practice.
Does no opportunity mean complete protection? Hardly. But you can mitigate the risk and detect the crime early. Long-tenured employees and managers usually know where the opportunities lie and where the internal controls are weakest. That’s one reason most fraudsters are experienced employees.
When you appreciate those three factors, you will better understand the “Why?” behind embezzlement. For example, you won’t panic when an employee asks for a pay advance because the utility company is about to shut off service due to nonpayment. However, making a mental note would be prudent. Think of it as a red flag that one or more of the three factors might be present.
Other red flags within the practice include:
- Mysterious cash shortages.
- More client refunds.
- Unused paid time off.
- Overly protected financial records.
- Job dissatisfaction.
- Inventory shortages.
- Unexplained financial irregularities.
- Greater employee irritability.
- Lifestyle changes.
- Refusal to transfer a job task.
- Insistence on working with a specific vendor or shipping company.
The hard truth is that many practice leaders are in denial. They overlook the red flags waved by long-term employees who are friends, siblings or spouses. “It won’t happen to me,” their inner selves say. Unfortunately, we see fraud in family-owned businesses. Spouses, siblings, childhood friends and veteran employees are the culprits.
Statistics show that fraud or theft impacts 9 out of 10 veterinary hospitals. If you discover financial wrongdoing in your clinic, at least one of the three factors will be present. The red flags are usually much more visible after the discovery.
Because veterinary clinics are so busy helping furry friends and trying to do the best for their teams and communities, they tend to overlook the subtle “unimportant” things. Trusted, law-abiding employees are among your most valuable assets and the keys to your success.
You can implement strong internal controls to protect your veterinary practice against embezzlement. Check out Fritz Wood’s article “Vaccinate Against Fraud, Embezzlement” at bit.ly/fraud-TVB.