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Whom do you trust?

In the U.S., most states, like Georgia, divide the operation of the state government in a three ways. There is the Governor, who manages the executive side of the government, including most of the state agencies. Then, there is the Legislature, which creates and amends the laws and controls the financial appropriations of the state government. And finally, there are the Courts, which are responsible for adjudicative maters, both civil and criminal, and have responsibility to interpret the laws and constitution of the state.

This three-part system ensures that no one branch of government becomes too powerful and overreaches its authority. It is often referred to as a system of checks and balances. Checks and balances are important within your business, too.

A recent case from Macon shows the danger of fraud when one individual has too much power and authority and not enough supervision. The woman was the office manager of a surgical practice and was found to be embezzling funds. At first, the sheriff's office was expecting to find she had taken between $50,000 and $100,000.

However, the more they looked, the more they found missing, until investigators estimated she had taken more than $1.4 million. The FBI was brought in because of the scale of the theft, which included interstate transactions and could have implicated Medicare and Medicaid funds.

Clearly, too much trust was placed in a single individual. The best way to avoid these types of problems is to consult with an attorney when laying out the management structure of your office, and ensure that responsibility for financial matters is spread sufficiently wide that one or two individuals cannot conspire to drain your financial accounts with no one's knowledge.

By doing this early in the life of your business, you set the proper expectations and avoid damaging personal relationships with questions of trustworthiness.

As they say, trust, but verify.

Source: macon.com, "Ex-office manager accused of embezzling more than $1 million from Surgical Associates of Warner Robins," Becky Purser, August 27, 2105

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Kaufman & Forman, P.C.
8215 Roswell Road
Building 800
Atlanta, GA 30350

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Robert Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the May issue of The American Lawyer & Corporate Counsel magazine.Alex Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the December issue of The American Lawyer & Corporate Counsel magazine.

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