Administration and Leadership, Columns

Pro Bono: Preventing Theft and Embezzlement

Issue 2 and Volume 40.

Imagine waking up one morning and seeing your organization on the news feed with the headline: Ambulance Service Officer Indicted for Theft. Your EMS agency depends upon public support and municipal subsidies to fund its operations. Now, imagine trying to solicit the public as part of your annual fund drive, or petition your elected officials for additional funding, while these stories are still fresh in the public’s mind.

Unfortunately, we’ve recently seen an increase in the number of headlines reporting theft, embezzlement and misappropriation of assets by officers and members of EMS agencies—nonprofit, public and private. In some cases, the organizations had already lost thousands of dollars by the time anyone figured out something was wrong. In virtually all of them, the losses could’ve been prevented through the implementation of proper safeguards and internal controls.

EMS agencies must institute internal practices to reduce the possibility of embezzlement and other misdeeds by those few dishonest people who could be lurking within your organization. Remember, the “face of fraud” could be anyone’s face, and those who engage in it could be right under your nose. The culprits are often very good at concealing their improper actions—often in part by the hard work they do for the organization.

The public has an interest in the assets of your agency as these are really public funds—even if you’re a private nonprofit organization. Though your agency’s name may be on the title to your ambulances, and on the deed to your station, the state (typically through the attorney general) has the legal responsibility to oversee the assets of a nonprofit organization, to ensure the assets aren’t diverted from their charitable purpose of providing ambulance services. EMS agencies have the legal and moral duty to ensure that they’re financially sound and that improper loss is prevented. Here are some tips to help you implement the necessary controls to make that happen.

Implement checks and balances. First, ensure that your agency has adequate “checks and balances” in place. Don’t concentrate too much fiscal responsibility in any one individual. For example, in one case in which our firm was involved, one individual, who was the president, accountant and billing agent for a nonprofit ambulance service, was able to embezzle nearly $500,000 over a six-year period undetected. Internal controls could’ve helped to prevent this.

Ensure you have controls in place for issuing purchase orders and signing checks, such as mandating at least two authorized signatures. Make sure the ones who sign the checks aren’t the ones who audit the books. The more eyes that examine the books, the less chance there is that someone will walk away with the funds.

Limit the issuance of company credit cards to only those who must have them. Make sure at least two people review the monthly credit card statements. Have a clear policy on the use of those cards and a system for documenting any travel, conference or other expenditures that officers and members may make.

Don’t keep it in the family! Some EMS agencies have key officers who are related by blood or marriage. Consider a policy prohibiting related individuals from holding key positions, such as president and treasurer, when those are perhaps the only two people who sign the checks. Even if they appear to be the best people in the world, it’s the appearance of impropriety that sometimes leads to problems.

Obtain annual audits. Have an independent outside audit of your organization’s books performed by a qualified CPA every year. To avoid an actual or perceived conflict with the choice of auditor, it shouldn’t be someone who has any financial relationship with the organization or any of its members or officers. It shouldn’t be an accountant who’s also involved in your company’s bookkeeping or other day-to-day financial procedures. Your annual audit should adhere to accepted accounting principles and the results should be made available to your governing body—and perhaps the public as well. “Transparency” is the buzz phrase in today’s instant-information society.

Check your insurance. Consider obtaining “employee dishonesty” coverage as part of your general liability insurance, or “fidelity bonds” on key officers. These policies provide coverage in case of internal theft or embezzlement and aren’t usually included in most standard general liability policies.

Have a strategy. If any misappropriation is detected, be sure your agency responds swiftly and objectively. Promptly engage qualified legal and accounting assistance. Appoint a single spokesperson. Preserve all important documents and put those who retain your company’s documents on written notice to do the same.

Implement a compliance program. As recommended by the U.S. Department of Health and Human Services Office of Inspector General in its “Compliance Program Guidance for Ambulance Suppliers,” (and as will be required under the Affordable Care Act), EMS agencies of all types should implement comprehensive compliance programs to ensure their organizations are conforming to the highest standards of business ethics in carrying out their financial activities.

EMS agencies need to be aggressive when it comes to safeguarding their assets. Without adequate safeguards to protect those assets, your agency is left vulnerable to the dishonest acts of the few—acts that could cripple your agency in the eyes of the public.

Pro Bono was written by attorneys Doug Wolfberg and Steve Wirth of Page, Wolfberg & Wirth LLC, a national EMS-industry law firm. For more EMS law information, visit the firm’s website at www.pwwemslaw.com. Check out the all new Fourth Edition of The Ambulance Service Guide to HIPAA Compliance recently released and now available from PWW.