Occupational Fraud and Abuse Statistics

READ ARTICLES FROM 2016 INTERNATIONAL FRAUD AWARNESS WEEK

According to the 2014 Report to the Nations on Occupational Fraud and Abuse (the “Report”) by the Association of Certified Fraud Examiners (“ACFE”), based on 1,483 cases of occupational fraud investigated and reported by certified fraud examiners (“CFE”), the United States ‘led the way’ with 646 cases with a median loss of $100,000, while 53 cases were reported in the Middle East and North Africa with a median loss of $248,000. Although there is a wide variance in geographical location of victim organizations, the Report has found consistency in how the crimes are committed, who commits them, how they are detected and who suffers from them.

Occupational fraud is defined as the use of one’s occupation for personal enrichment through the deliberate misuse or application of the employing organization’s resources or assets. There are 3 primary categories of fraud: asset misappropriation, corruption and financial statement fraud. Asset misappropriation is the most common, occurring in more than 85% of cases analyzed for the Report. Although it is the most common, it is typically the least costly, causing a median loss of $130,000. Financial statement fraud occurs the least, accounting for 9% of the cases in the survey; however, it is the most costly, with a median loss of $1 million.  Corruption falls in the middle for both frequency and median loss. Although asset misappropriation is the most common type of fraud, the percent of financial statement fraud and corruption cases have both increased since 2010, while asset misappropriation has declined just slightly over the same period.

The detection of fraud schemes often depends on the controls the organization has in place. According to the Report, the most common detection method for cases of occupational fraud is a tip from someone, at approximately 42%. (Occupational fraud can have serious impacts on the employees of the victim organization, which may partially explain why employees were the source of almost half of the tips that led to the detection of fraud.) Other common detection methods are management review and internal audit at 16% and 14%, respectively.  Detection also occurs by accident, account reconciliation, document examination, an external audit, surveillance, notified by law enforcement, IT controls, or confession.

Privately owned and publicly traded organizations accounted for approximately two-thirds of the victims, whereas government entities and not-for-profits made up 15.1% and 10.8%, respectively. The industries with the highest percent of cases were the banking and financial services, government and public administration and manufacturing industries, while the industries with the lowest percent of fraud cases were mining, communications and publishing and arts, entertainment and recreation.

Most frauds are concealed and out of those that are detected, most are never measured or reported. Most frauds carry considerable costs, therefore it is important to stay educated on the warnings signs of occupational fraud, as well as the importance of having good controls in place. Every entity is exposed to the risk of fraud; however, the impact of this threat can be reduced with anti-fraud strategies and good controls.

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FRAUD WEEK ARTICLES

• Preventative and Detective Fraud Controls in Accounting Software
• Fraud in the Workplace
• Do You Know Your Employee
• Important Considerations when Conducting an Effective Fraud Risk Assessment
• Expense Reimbursement Fraud
• Recognizing Vendor Fraud
• Occupational Fraud Prevention in Construction
• Excess Benefit Transactions and Their Impact on Not-for-Profit
• Health Care Fraud 
• Ponzi Schemes
• Occupational Fraud and Abuse Statistics