By Amber Hoover, CPA/ABV
Senior Valuation Analyst
Occupational fraud continues to be a serious problem for many businesses across a wide range of industries. Asset misappropriation is a common type, often involving cash schemes — skimming, larceny and fraudulent disbursements.
The Association of Certified Fraud Examiners submitted their most recent findings in their 2016 Global Fraud Study. It includes many insights on who, when and how occupational fraud is most likely to occur.
Small organizations (under 100 employees) were the most common victims in this study, at approximately 30 percent. The median loss for all cases was $150,000, according to the study.
The best way to deal with occupational fraud is to avoid it. While no system is perfect, taking preventative steps with a robust set of oversight measures is the best defense.
It’s also prudent to conduct periodic audits and other types of in-depth financial analysis to detect when fraud has occurred.
Based on this new data, occupational fraud is most often committed by perpetrators with the following demographics:
- Gender — Males account for 55.7% of total cases of occupational fraud cases that occurred in the United States.
- Age — According to the study, approximately 55% of perpetrators were between the ages of 31 and 45.
- Education — Approximately 60 percent of perpetrators have a college degree or higher.
- Position of Perpetrator (cases that occurred in the United States) — Occupational fraud is committed most frequently by the rank-and-file employees of a company, but losses by managers/executives result in much higher median losses.
- Employee — 45.3% of cases; median loss of $54,000
- Manager — 31.1% of cases; median loss of $150,000
- Owner/Executive — 19.9% of cases; median loss of $500,000
- Perpetrator’s tenure with the business — The longer an employee works for a company, the more trust they can build with their supervisors and co-workers.
- Less than 1 year — 8.2% of cases; median loss of $49,000
- 1-5 years — 42.4% of cases; median loss of $100,000
- 6-10 years — 26.5% of cases; median loss of $210,000
- More than 10 years — 22.9% of cases; median loss of $250,000
- Department within organization — Employees in the accounting department generated the highest number of occupational fraud cases according to the study, followed closely by operations and sales, respectively.
- Prior criminal background or negative employment history — Approximately 88 percent of the cases with prior criminal background information available indicated that the perpetrator had not been previously convicted of a fraud-related offense. Of the cases with employment history available, approximately 83 percent indicated that the perpetrator had no prior termination or punishment for an occupational fraud.
Please keep in mind these demographics are not indicative of an employee who will commit occupational fraud, but are merely common demographics among occupational fraud perpetrators.
If you are concerned about occupational fraud in your organization, please call Amber Hoover at (317) 613-7844 or email [email protected].