Follow the Cash – Banking and Financial Statement Analysis Allows Client to Recover Embezzled Funds

In this case, the client owned and operated a mental health care provider that specialized in providing facility-based therapy throughout the Northeast and Southeastern United States. 

After many years of successful operation and growth, the company owner noticed while reviewing the financials that some items didn’t line up, and the CEO, who led the company from an administrative level, couldn’t provide sufficient answers. The owner noticed much of the year’s cash accounts weren’t reconciled, his cash distributions were becoming inconsistent, and contractors providing the care began reaching out to him about not being paid timely. The owner never had a firm grasp over the company’s internal controls as he focused on the medical compliance and administration of the company. 

Upon retention, we performed various analyses on the company’s general ledger and, most importantly, bank statements to understand how the embezzlement had occurred coupled with the economic impact. Further, we conducted interviews with the company’s employees to provide ample support for moving forward with recovery. Although the CEO did not create fictitious vendors and expenses, he had been paying himself the identical amounts owed to the vendors and delayed their payments or did not pay them. Unfortunately, these types of frauds can last many months (or years) before being detected. 

Luckily, we were retained in time to assist in calculating the misappropriation of cash and review internal controls. As a result, we were able to help the client with finding a trusted attorney to recover all of the outstanding funds, amounting to several hundred thousand dollars. Also, we could ensure a solid foundation for the company’s internal controls moving forward. 

Unfortunately, many cases don’t end this favorably. Bringing in the right experts early is vital when you believe something doesn’t feel right with your company. A robust internal control environment is critical to run a successful business.