Survey & Statistics
The Network Releases the 2012 Corporate Governance and Compliance Hotline Benchmarking Report 2 August 2012
Source Yahoo Finance
Beginning in 2007, the current five-year period reviewed for the 2012 Corporate Governance and Hotline Benchmarking Report reflects the largest repository of data to date. This report provides an analysis of 599,162 reports made during the review period. In 2011, 129,199 reports were collected from 1,128 organizations representing more than 15 million employees. The data is compiled from actual incidents reported by clients of The Network and was analyzed by BDO and The Network.
Reports are classified in the following industries: Construction; Finance, Insurance & Real Estate; Manufacturing; Mining; Public Administration; Retail Trade; Service Industries; Transportation, Communication & Utilities; and Wholesale Trade.
The Corporate Fraud Index for 2011, which measures the percentage of fraud-related incidents across all reports, rose to 21.1 percent, an all-time high since the Index was first reported in 2005. The report attributes these increases to the improvements organizations continue to make, primarily via their policies and training initiatives, toward identifying misconduct and strengthening their overall GRC programs.
Association of Certified Fraud Examiners (ACFE) 2012 Report to the Nation on Occupational Fraud & Abuse
The ACFE’s 2012 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,388 cases of occupational fraud that occurred worldwide between January 2010 and December 2011. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in the ACFE study came from 94 nations.
The frauds reported lasted a median of 18 months before being detected. Occupational fraud was found to be more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
The initial tip off from the whistleblower was up from 40.2% in 2010 to 43.3% in 2012. In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct. Living beyond means (36% of cases), financial difficulties (27%), unusually close association with vendors or customers (19%) and excessive control issues (18%) were the most commonly observed behavioral warning signs.
The ACFE recommended “Providing individuals a means to report suspicious activity is a critical part of an anti-fraud program. Fraud reporting mechanisms, such as hotlines, should be set up to receive tips from both internal and external sources and should allow anonymity and confidentiality. Management should actively encourage employees to report suspicious activity, as well as enact and emphasize an anti-retaliation policy.”
The report stated “External audits should not be relied upon as an organization’s primary fraud detection method. Such audits were the most commonly implemented control in our study; however, they detected only 3% of the frauds reported to us, and they ranked poorly in limiting fraud losses. While external audits serve an important purpose and can have a strong preventive effect on potential fraud, their usefulness as a means of uncovering fraud is limited.”
Targeted fraud awareness training for employees and managers is a critical component of a well-rounded program for preventing and detecting fraud. Not only are employee tips the most common way occupational fraud is detected, but our research shows organizations that have anti-fraud training programs for employees, managers and executives experience lower losses and shorter frauds than organizations without such programs in place. At a minimum, staff members should be educated regarding what actions constitute fraud, how fraud harms everyone in the organization and how to report questionable activity.
The Report again showed the that small businesses are particularly vulnerable to fraud. The ACFE found “These organizations typically have fewer resources than their larger counterparts, which often translates to fewer and less-effective anti-fraud controls. In addition, because they have fewer resources, the losses experienced by small businesses tend to have a greater impact than they would in larger organizations. Managers and owners of small businesses should focus their anti-fraud efforts on the most cost-effective control mechanisms, such as hotlines, employee education and setting a proper ethical tone within the organization. Additionally, assessing the specific fraud schemes that pose the greatest threat to the business can help identify those areas that merit additional investment in targeted anti-fraud controls.”
Employers still lax in controlling workplace bullying 6 June 2011
A national survey of over 5,100 employees found close to one third (28%) of Australian workers say they have been bullied in the workforce, while 42 per cent of employees report having witnessed their colleagues being bullied or discriminated against at work.
The 2011 Workplace Pulse Quarterly survey, conducted by employment screening solution provider, WorkPro, revealed bullying and discrimination remain prominent features of the Australian workplace. One quarter of employees (23%) say that they have been a victim of bullying or discrimination in the workplace in the last two years, while 12 per cent report that it has happened multiple times.
The findings come as the Victorian state government sent a clear signal to workplace bullies last week with bullying now considered a criminal offence in Victoria. Changes to the Crimes Amendment (Bullying) Bill 2011 mean Victorian workplace bullies could now face up to 10 years jail.
Tania Evans, Manager of WorkPro, said that employers need to realise that bullying and unfair treatment in the workplace are more common than they think, and they must put strategies in place to help tackle the problem.
“These are issues that over 40 per cent of employees say they have witnessed which seriously affects workplace culture and could put employers at risk of liability from OHS claims,” Ms Evans said.
“Last week’s amendment to the Crimes Act in Victoria makes it clear that threats and abusive words or acts which amount to bullying will incur serious consequences for anyone who engages in this type of behaviour,” Ms Evans said.
However, when compared to WorkPro’s previous survey, the 2011 results are very similar to those seen in 2008, indicating that many employers are still not addressing these issues.
“Employers need to be proactive about making sure employees get the information they need to understand their rights and responsibilities at work. They also need to ensure employees feel they can report inappropriate behaviour,” Ms Evans said.
Ms Evans emphasised that education needs to involve a clear reporting line for bullying and discrimination. She says that individuals working in temp placements are most confused about these reporting lines, with 47 per cent unsure of whether they report to the recruitment agency or the host employer.
Refer Workplace Pulse Quarterly Survey: Bullying and Equal Employment Opportunity @ http://www.workpro.com.au/
KPMG Fraud and Misconduct Survey 2010
The total cost of fraud is increasing: $345.4 million was lost to fraud compared to $301.1 million two years ago. Respondents believed that only a third of total losses are being detected.
The value per fraud is increasing: The number of separate frauds reported fell when compared with the 2008 survey, yet the average fraud rose from $1.5 million in 2008 to $3 million in 2010.
65 percent of major frauds are committed by people already working in the organisation who usually act alone. The main motivator for fraud was greed and lifestyle.
Internal Controls and Whistleblowers remain the two major means of detection.
Association of Certified Fraud Examiners (ACFE) 2010 Report to the Nation on Occupational Fraud & Abuse
The ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,843 cases of occupational fraud that occurred worldwide between January 2008 and December 2009. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in our study came from 106 nations — with more than 40% of cases occurring in countries outside the United States — providing a truly global view into the plague of occupational fraud.
This allowed the ACFE to more fully explore the truly global nature of occupational fraud and provides an enhanced view into the severity and impact of these crimes. Additionally, ACFE were able to compare the anti-fraud measures taken by organizations worldwide in order to give fraud fighters everywhere the most applicable and useful information to help them in their fraud prevention and detection efforts.
Survey participants estimated that the typical organization loses 5% of its annual revenue to fraud. Applied to the estimated 2009 Gross World Product, this figure translates to a potential total fraud loss of more than $2.9 trillion. The median loss caused by the occupational fraud cases in the ACFE study was $160,000. Nearly one-quarter of the frauds involved losses of at least $1 million. The frauds lasted a median of 18 months before being detected.
Tips were by far the most common detection method (40.2%), catching nearly three times as many frauds as any other form of detection. This is consistent with the findings of ACFE reports since 2002 . Tips remain by far and away the most common means of detection. Management review and internal audit were the second and third most common forms of detection, uncovering 15% and 14% of frauds, respectively. It is also noting that 11% of frauds were detected through channels that lie completely outside of the traditional anti-fraud control structure: accident, police notification and confession. In other words, 11% of the time, the victim organization either had to stumble onto the fraud or be notified of it by a third party in order to detect it.
The report highlighted that only 25% of Australian (Oceania) organisations had hotlines compared with more than one-half of USA entities even though disclosures (tips) were the major source for highlighting fraud.
The Association of Certified Fraud Examiners recommended “Organisations should implement hotlines to receive tips from both internal and external sources. Such reporting mechanisms should allow anonymity and confidentiality, and employees be encouraged to report suspicious activity without fear of reprisal.”
The ACFE also found the organisations tend to over-rely on audits. Employee education is the foundation of preventing and detecting occupational fraud combined with tip off hotlines. Internal controls alone are insufficient to fully prevent occupational fraud.