According to a recent study conducted by the Association of Certified Fraud Examiners (ACFE) shows fraud losses continue to plague privately held organizations. 5% of all revenues are lost annually as a result of fraud.

Summary of Findings

  • The median duration — the amount of time from when the fraud commenced until it was detected — for the fraud cases reported to us was 18 months.
  • The median loss caused by fraud in the study was  $145,000. Additionally, 22% of the cases involved losses of at least $1 million.
  • Organizations with hotlines were much more likely to catch fraud by a tip, which the data shows is the most effective way to detect fraud. These organizations also experienced frauds that were 41% less costly, and they detected frauds 50% more quickly.
  • Most occupational fraudsters exhibit certain behavioral traits that can be warning signs of their crimes, such as living beyond their means or having unusually close associations with vendors or customers. In 92% of the cases we reviewed, at
    least one common behavioral red flag was identified before the fraud was detected. Managers, employees, auditors and others should be trained to recognize these warning signs that, when combined with other factors, might indicate fraud.
  • Corruption and billing schemes pose the greatest risks to organizations
  • Most occupational fraudsters are first-time offenders with clean employment histories. Approximately 87% of occupational fraudsters had never been charged or convicted of a fraud related offense, and 84% had never been punished or terminated by an employer for fraud-related conduct.
  • The presence of anti-fraud controls is associated with reduced fraud losses and shorter fraud duration. Fraud schemes that occurred at victim organizations that had implemented any of several common anti-fraud controls were significantly less
    costly and were detected much more quickly than frauds at organizations lacking these controls.
  • Approximately 77% of the frauds in the study were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
  • Corruption fraud schemes continue to increase, 33.4% in 2012 to 36.8% in 2014.  The average fraud loss resulting from Corruption Schemes is $200,000.
  • 28.8% of all companies with less than 100 employee are victims of fraud with an average loss of $154,000.
  • 23.6% of all companies with 100 employees are victims of fraud with an average loss of $128,000.  Larger organizations tend to have hotlines and anti fraud measures in place which detects fraud sooner thus reducing the average fraud loss.

Top 5 Fraud Schemes in organizations:

<100 Emp       100+ Emp

Corruption Schemes         33.0%             39.5%
Billing Schemes                28.7%             20.3%
Check Tampering             22.1%               6.8%
Non Cash                         18.1%              22.8%
Skimming                         17.0%              10.2%

Victim Organization – Average Loss:
                                                                         2014              2012
Privately Held < 100 employees                  $154,000         $147,000
Privately Held > 100 employees                  $128,000         $150,000
Not For Profit Organizations                        $100,000         $100,000
Healthcare                                                   $175,000         $200,000

Click here for the full survey results, 2014 – Report of the Nation