MEDICAL PROBLEM

The Brookside Medico Clinic (BMC) has a 9 physician, five office medical practice in Brisbane. Its offices, which provided a wide array of services were managed from an executive office at a separate location. The practice worked hard to apply good internal controls consistently in each office. All personnel clearly understood BMC’s straightforward money-handling procedures.
In the medical office, income arrives in two ways –
• payment made by a patient at the time of service (patient payment with balance being paid by a medical insurance company)
• payment from a medical insurance company (e.g. Medicare, MBF).
Every BMC office handled patient fees according to the same prescribed procedures. The receptionist recorded each patient’s visit in a spiral notebook. The date of office designation was written on the top of each page in the notebook. There were columns for the patient’s name, the time of arrival, the physician to be seen, the patient’s insurance carrier, the amount of any co payment, and how the cop-payment was tendered. This record was called the daily co-pay log. Cash, cheques, and credit cards were accepted. At the end of the day, at least two people double-checked that every patient’s visit had been recorded properly. The staff also verified the amount and type of each co-payment tendered. Totals for cash, cheques, and credit card sales were entered at the bottom of each sheet, along with a grand total and the initials of both verifiers.
After the day’s receipts were tallied on a spreadsheet (Patient’s Receipts by Day.xlsx), the page was photocopied and that copy and all the cash and cheques received that day were placed in a clasped manila envelope and secured in a locked drawer. Credit card payments were handled electronically, so those weren’t included in the envelope.
A BMC-employed courier would collect the envelopes for each office every morning – or sometimes every other day depending on the patient volume – and take the proceeds to the bank. When this courier arrived at each office, the receptionist – Michelle would open the locked drawer and remove the clasped envelope. Together they would recount the entries on the page and verify that the correct amounts of cheques and cash were present in the envelope. The courier then would prepare the transit bank deposit forms from the bank. With the bank deposit ticket form out, the courier would remove the customer copy of the form and attach it to the copy of the daily co-payment log, and these documents were sent to the executive office for filing.
Michelle was also responsible for posting the individual payments received to the Patient Record System. Theoretically, the patient records should contain accurate information on what co payments were paid each visit. However, sometimes patients paid an incorrect amount – usually too much. These errors would not be picked until the insurance company payment was received. In these situations, Michelle’s postings would result in the relevant patient’s accounts being in credit. However, these credits were recorded in the accounting system as if they were new payments from the patient for the next month.#p#分頁標題#e#
The courier, Lachlan Power, was terminated. Lachlan was a well-liked employee, and had started out with BMC 3 years ago. He also assisted with insurance company negotiations. If BMC didn’t agree with a third-party payer’s settlement offer, Lachlan would try to secure a more favourable resolution. A few times when the previous courier was on vacation, Lachlan volunteered for the position, got the job, and added those responsibilities to his existing role as a negotiator.
Lachlan attempted to become everyone’s mate. Whenever someone at BMC had a birthday, Lachlan would buy lunch for the entire staff. He rarely took time off. If he knew he would be out, he would argue against having someone else acting as the bank courier, claiming he would handle it upon his return. His wife suffered a disability requiring extensive modifications to their house. Lachlan attempted to obtain a second mortgage on his house but had been declined.
When Lachlan had stepped up as a substitute courier, he had observed a significant weakness inthe practice’s operation that no one else had discovered. In comparing the monthly bank statements to BMC’s cheque account records, BMC was only able to discern that the amounts deposited and drawn on the cheque account were properly recorded by both the bank and BMC. The accountants made the assumption that the deposit amounts shown on the bank statements were the correct amounts deposited. Lachlan realized that BMC’s failure to identify a readily available internal control was his opportunity to steal.
Once he became the practice’s official courier, Lachlan followed all the procedures for verifying the cash and cheques received at the office. He dutifully received the clasped envelopes from the receptionists, recounted the receipts with them and completed the bank deposit tickets, leaving the customer copies attached to the copies of the daily co-pay logs. But then he exploited the weak link in the system: Lachlan never deposited the cash; those funds went into his pocket. He simply completed a new bank deposit form at the bank that reflected only the amount of the cheques. These he deposited in the BMC account. Lachlan then destroyed the customer copies of the falsified deposit forms that the bank had stamped received. Lachlan pocketed all of the co payment cash, totaling at least $250,000, without fear of being caught. (The exact amount of the theft was never determined).
As time passed, another employee, Cherry, began to distrust Lachlan’s generosity with gifts and his insistence of being the sole courier. Only with the most reluctant approval of management was she permitted to search Lachlan’s desk one day when he was out of the office. She discovered several genuine bank deposit forms, which included both cash and cheque payments, that Lachlan had neglected to destroy.
 
REQUIRED
1. Identify and describe the significant weaknesses in controls which allowed this fraudulent activity to occur undetected.#p#分頁標題#e#英國dissertation網醫療問題案例分析dissertationhttp://www.400190.com/dissertation_writing/sociology/2011/1129/979.html
2. Discuss how Lachlan could have rationalised that these unscrupulous methods were OK.
3. Identify and detail the key fraud symptoms (indicators) of fraud occurring.
4. Identify and detail how you would use technology to gauge some of the extent of Lachlan’s fraudulent activities. Should the CFO have engaged similar procedures as part of his role? Justify your answer.
5. What were the incentives or motives which may have been used by Lachlan to perpetrate the fraud