5 Components for Effective Internal Controls

Prevent and detect employee misconduct in your medical office

Internal controls are defined as a process designed to discourage fraud, safeguard company resources, and ensure compliance with laws and regulations. Internal controls are only effective if they are determined by the specific needs of the medical office, implemented,  monitored, and measured to make sure they are functioning as planned. 

The medical office must take a proactive approach to prevent and detect employee misconduct by having a policy in place regarding internal controls.  Prevention and detection play a very important role in any internal control process by minimizing a certain level of risk.

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Hiring the best medical office staff is an effective way of strengthening an internal controls process. Hiring staff that is competent, trustworthy and reliable by thoroughly prescreening candidates is just good business sense. Background checks and reference checks are easy ways to weed out any bad apples and deter certain people from applying for the job. 

Although previous employers are not allowed to give any information other than employment status and eligibility for rehire, you can request that applicants provide contact information for previous supervisors or coworkers to get more detailed information.  Background checks including credit checks also provide details about an applicant's personal history.

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Separation of Duties

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Separating duties prevents one employee from having the responsibility of multiple transactions involving the handling of finances. Whenever an employee has to handle money there should be one person who authorizes certain transactions, another person responsible for processing, and a different one for reconciling and recordkeeping. This ensures that no one person can perform any task that is not detected or reviewed by another person.

Separation of duties makes it difficult for any amount of money to be lost, whether it is at the front desk level or the administrative level of the medical office. When employees know that every process is tracked and monitored, it encourages accuracy and honesty in performing tasks.

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Documentation

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Every financial transaction should have a paper trail. Documentation is not just the practice of writing or documenting actions, but also of keeping copies of all financial records such as invoices and payment remittances. Employees should be made aware to never perform a transaction based on a verbal request.

Valid documentation includes official medical office forms, letterhead, or invoices and should be authorized by signature, when necessary. Checks should always have an invoice, as should refunds, money transfers or payment postings. Cash should only be accepted, never handed out unless to give back patient change. Cash box reconciliation should also be documented at the beginning and end of each shift. 

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Physical and Electronic Safeguards

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The use of safes, alarm systems, cameras, and locks can assist the medical office in safeguarding data, inventory, assets, and money.  

1. Keep all cash boxes, checks, and receipt books locked in a safe with limited access by the medical office staff. Combinations should be changed regularly.

2. Have alarm systems in place for after hours and nonoperational days.

3. Cameras can be placed at each entrance and exit, the front desk and aimed at the safe.

4. Keep doors to the supply room and/or pharmacy cabinet locked at all times and only allow access to certain areas as needed.  

Electronic safeguards include the use of passwords and restricting access to authorized personnel only.

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Monitoring Operations

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Any internal control process would be incomplete without a way to monitor operations. Internal controls monitoring involves reviewing the daily operations to ensure the processes are operating properly.  

1. Cash reconciliation

2. Account or chart auditing

3. Verification by comparing reports

4. Regular inventory checks

Keeping a close eye on all processes is essential, but first and foremost a medical office manager must:

1. Establish rules and goals

2. Communicate them to all staff

3. Provide feedback on a regular basis

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