Tuesday, September 24, 2013

9 Sobering Stats About Fraud

Every nonprofit manager knows that fraud is a bad thing but too many operate under the belief that it can never happen to them. It's that attitude that can lead to fraud occurring in the first place.

Managers can’t eliminate human weakness, but they can be vigilant in preventing fraud or, if necessary, dealing with it right away. Further, prevention can be helped in part by awareness throughout the organization.

During the recent AICPA Not-for-Profit Industry Conference, Mitchell Lewis, David McRoberts and William Mellon shared several statistics regarding fraud, taken from the Association of Fraud Examiners 2012 Global Fraud Survey (which includes for-profits). Get ready to be demoralized:
  • Asset misappropriation schemes made up 87 percent of reported cases.
  • The typical organization loses 5 percent to fraud each year.
  • Reported frauds last approximately 18 months before detection.
  • Some 77 percent of frauds were committed by individuals in one of the following six departments: accounting, operations, sales, executive/upper management, customer service, purchasing.
  • Owners/executives and managers committed median losses at $573,000 and $180,000, respectively.
  • The median loss caused by occupational fraud was $140,000.
  • Median losses for nonprofits totaled $100,000.
  • Approximately 85 percent of fraudsters are first-time offenders.
  • Approximately 54 percent of fraudsters were between the ages of 31 and 45.

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