ACFE Public Relations Specialist
The estimated $3.7 trillion lost by organizations each year as a result of fraud is staggering. But not all frauds are equal; the length of time a fraud goes undetected can have a shocking impact on the amount lost.
According to the ACFE’s 2014 Report to the Nations on Occupational Fraud and Abuse, the average organization lost a median of $130,000 per fraud instance. However, fraud that went undetected for 25-36 months rose to a median loss of $211,000, and only climbed further from there. Fraud that was allowed to continue for 61 months or more reached a whopping median loss of $965,000.
To detect fraud earlier, there are a number of controls that organizations can put in place.
Companies that provided an internal hotline for employees to report fraud saw that more than half of the frauds reported and caught were from a tip to the hotline. The median loss for companies utilizing a hotline was $100,000, which was a 40.5 percent reduction from the median loss of $168,000 for companies that did not utilize a hotline. Employing a hotline also cut the median duration of a fraud from two years to one year.
Regular account reconciliation
Frauds that were caught through regular account reconciliation averaged only $75,000 in loss and were usually caught 10 months after the fraudulent activity began. Account reconciliation is a good example of where separation of duties comes into play. If employees are individually reviewing the financial transactions approved by others, it quickly becomes clear when numbers don’t add up.
Providing fraud training for employees
Companies that offered fraud training for their employees saw a 39 percent decrease in their median loss per fraud incident compared to companies that did not train employees. Training employees to detect fraud also cut the time it took to detect fraud by 50 percent. Free and helpful resources to educate employees on fraud can be found at FraudWeek.com.
International Fraud Awareness Week, November 15-21, is a great time to evaluate just how much time is potentially being wasted in organizations as fraud continues to happen undetected. By implementing a few of these easy controls, you can save your organization time and money.