Fraud Prevention

While most workers in a midwifery practice are highly committed to the practice’s sustainability and the provision of midwifery care to clients in the community, midwifery practices are not immune to fraud.  If an individual is given the responsibility for managing both the company’s records and funds, the opportunity to commit fraud is endless. The risk of fraud can be mitigated by taking preventative steps:

  • Build checks and balances by dividing responsibility over bank funds. The more partners there are in the practice group, the more the financial duties can be segregated and periodically rotated. For example, segregation is possible between the individuals who:
    • post entries into the accounting system(s) and those who prepare cheques;
    • open and review bank statements and returned cheques and those who reconcile the statements;
    • reconcile bank statements and those authorized to deposit or withdraw monies or prepare cheques; or
    • record bank deposits and those who make the bank deposits.

Note: Smaller practices may use alternate approaches such as frequently reviewing financial records.

  • Implement controls over cheques and other fund transfers:
    • Develop a policy outlining which partners will have signing authority and how many signatures are required (typically one or two). Practices can also develop policies on whose approval or how many signatures are required for expenses over a certain amount or under defined circumstances.
    • Consider having signing limits listed on the bottom of purchase orders and cheque requisitions so that signatories are reminded of their limits. Each officer signing cheques should review and initial background paperwork before signing and issuing the cheques.
    • Electronic fund transfers should be treated like cheques and require two signatures on the backup paperwork.
    • Order continuous numbering for each new set of cheques and have a lock-up procedure for both signed and unsigned cheques.
  • Limit the number of credit cards issued; put small limits on any practice group credit cards; encourage payment by cheques where possible.
  • Support workers to identify and report issues of concern and to have the skills needed to complete their duties:
    • Develop a written code of conduct to promote ethical behaviour that discourages fraud, including prevention of theft or damage to the personal properties of staff, midwives, volunteers, students and clients.
    • Encourage reporting suspicious activities, questioning of expenses, back-up paperwork, unknown suppliers and complex transactions.
    • Conduct a background check prior to commencing a contract with staff and midwives who will have access to financial transactions.
  • If a security/surveillance camera is used, keep the tapes for at least one year in case of fraud or theft.
  • Conduct periodic surprise audits of all financial transactions to ensure strict application of financial control rules.  
  • Provide staff and midwives an orientation; provide staff a formal annual performance review.
  • Consider hiring an external accredited bookkeeper or accountant.