2010 Global Fraud Report ACFE

The Association of Certified Fraud Examiners (ACFE) recently published the 2010 Global Fraud Report. For the first time since the study began in 1996, the ACFE included fraud data from around the world. As with previous reports, the 2010 Study is chock full of interesting stats on fraud and the cost it levies against business of all sizes. There is much to digest in the 84 page in-depth research report, for today’s blog I’ll highlight some of the more interesting bits I’ve read so far.

The ACFE estimates that the typical organization loses 5% of its annual revenue to fraud. Perhaps even more frightening is that few of these organizations ever recover the losses. When the money is gone, it’s gone… typically being spent on gambling, drugs, vacations, etc…. an extra 5% out the door with nothing to show for it in return.

More than 85% of fraudsters in the study had never been previously charged or convicted for a fraud-related offense. This often shows in the way frauds are committed. The usual techniques are pretty elementary in nature. Those unfamiliar with fraud are typically surprised when they hear about the bookkeeper who added her kids to the payroll.

As we’ve seen in previous reports, small organizations are disproportionately victimized by fraud. They lack many of the anti-fraud controls used by their larger counterparts, which makes them particularly vulnerable to fraud. Companies with fewer than 100 employees suffered the greatest percentage of frauds again in the 2010 study, accounting for more than 30% of the victim organizations. These same small businesses also suffer the highest median loss of all sized companies at $150,000 per occurrence in the U.S.

Besides reporting on the nature of fraud, the ACFE also makes recommendations on how to address this growing problem. One topic of particular interest to me is “surprise audits”. The ACFE says: