How Do Performance Metrics Impact the Amount of Fraud Losses Recovered?

GUEST BLOGGER

Andi McNeal, CFE, CPA
ACFE Research Director

It is often said: what gets measured, gets done. In the newly released In-House Fraud Investigation Teams: 2017 Benchmarking Report, the ACFE surveyed its members regarding the performance, structure and operations of their organizations’ internal fraud investigation teams.

As part of the survey, we asked respondents which performance metrics, if any, are used to evaluate their investigation teams, and 39% reported that no performance metrics are used. The figure below (Fig. 22) shows the performance metrics used by the 61% of teams in our survey that do formally measure performance. For those teams, the most commonly used metric is the number of cases closed year-over-year (58%), followed by the amount of losses recovered (50%).

To see how these various performance metrics affected organizations’ recovery of fraud losses, we then looked at the average percentage of fraud losses recovered based on the performance metrics that organizations had in place.

Not surprisingly, the two metrics associated with the highest average recovery rates are the amount of losses recovered and the percentage of estimated losses to actual losses. An interesting trend in this data is that performance metrics that focused on the quality of the outcome of investigations (e.g., recovery of actual losses or change in expected losses, cases resulting legal action, compliance with investigation standards, and amount of losses diverted) tend to correspond with greater loss recovery than performance metrics based on the quantity of cases completed (e.g., number of days to close cases and number of cases closed year-over-year).

In Fig. 22, the number of cases closed year-over-year was the most common performance metric, but, as shown in Figure 23, organizations using this metric averaged one of the lowest percentage of losses recovered. Another significant finding is the relatively low percentage of fraud losses recovered (25%) by organizations that do not use any performance metrics to measure their investigation team’s effectiveness. Based on this analysis, organizations might consider revising some of their performance metrics or adding metrics to improve their recovery of fraud losses.

You can find these and other survey results in the full report, available for free to all ACFE members and for only $129 for non-members, at ACFE.com/benchmarking-report. 

Coming Soon: New Report on Measuring In-House Fraud Investigation Teams

FROM THE RESOURCE GUIDE

Andi McNeal, CFE, CPA
ACFE Director of Research

Proving ROI on anti-fraud initiatives can be incredibly difficult. Measuring the amount of fraud that’s been prevented, determining whether investigations are being performed as efficiently and cost-effectively as possible, evaluating whether frauds are being detected and responded to quickly and thoroughly enough — we frequently hear our members express how challenging these types of assessments are to perform. And the effort of explaining these issues to management, who is pressing for formal metrics, can make this area even more challenging in many organizations.

But anti-fraud teams need to be held accountable, just like every other team within the organization. One of the best ways for any team to measure and report its effectiveness is to benchmark its structure and performance against industry norms. Organizations often have historical data about their own investigation teams, but lack access to similar data from other organizations that can be used for benchmarking purposes. In 2015, we released our first benchmarking report for fraud investigation teams, and the response was incredibly positive. We knew there was a need for this type of data, but we heard from so many people — both members and non-members, from all over the world, from numerous industries, from all over the organizational chart — that this was the information they had been waiting for. Two years later, we are excited to release our next edition of this members-only resource, which has been expanded from the first to include additional benchmarking angles. 

Some insights from the upcoming In-House Fraud Investigation Teams: 2017 Benchmarking Report include:

If you want to learn more about how other fraud investigation teams are structured and how your investigation team measures up, you can see the full benchmarking report next month on ACFE.com. We hope this report helps support your team’s effectiveness and highlights its success to your organization’s decision-makers. And if there are benchmarking metrics or questions you’d like to see covered in future ACFE benchmarking research, send your ideas to Research@ACFE.com.

Find out more about the ACFE's latest resources, products and events in the most recent Resource Guide.