EMS Insider, Legal Consult

Preventing Theft & Embezzlement

Imagine waking up one morning and seeing your organization on the news feed with the headline: Ambulance Service Officer Indicted for Theft. 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 have 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. The public has an interest in the assets of your agency, even if you’re a private nonprofit organization. Though your agency’s name may be on the title to your ambulances, the state has the legal responsibility to oversee the assets to ensure they 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 have 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. The more eyes 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 travel or other expenditures.

 

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 positions such as president and treasurer when those are perhaps the only two people who sign the checks.

 

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. Your annual audit should adhere to accepted accounting principles and the results should be made available to your governing body.

 

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. 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 should implement comprehensive compliance programs to ensure their organizations are conforming to the highest standards of business ethics.

 

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