$674 billion dollars... $674 thousand-million dollars $674,000,000,000! This nation cant afford a loss like that Mr. President!
This sounds like a recent headline, doesnt it. Well, dont worry, were not going to get into tax policy debate here. We give you this number only as a point of reference. Add this to the 2001 tax cuts and the total of the actual and proposed cuts in the last two years (the Bush Plan?? is $2 trillion over the next 10 years. Keep these numbers in mind.
Would you believe these numbers pale when compared to the estimated cost of fraud and embezzlement each year? Lets take a look at the numbers based on the report 2002 Report to the Nation, Occupational Fraud and Abuse published by the Association of Certified Fraud Examiners:
Have we gotten your attention yet? What if we told you that the estimated annual loss in the AFCEs 1996 study was $400 billion? In six years, the average loss has increased by 50%. Just to give you another statistic, the Consumer Price Index increased by only 14%. This would suggest that occupational fraud is increasing in scope as well as dollar value. This is an alarming trend. How much will it be in the next study?
The AFCE report found that organizations with fraud hotlines reduced their losses by 50%. Significant reductions in fraud loss were also realized from the presence of internal auditors, external auditors and background checks.
The key in any fraud prevention program, however, is diligently following good accounting procedures. Some of the more common safeguards are:
This article has discussed only occupational fraud, including fraud caused by intentionally misstating operating results to creditors and investors. We havenâ??t even discussed checks that bounce through the stratosphere, credit card fraud or identity theft. Can you imagine the combined cost of all types of fraud? Its mind-boggling and, frankly, whatever action you take will only be a drop in the bucket toward controlling this blight on our society. We bet, however, that drop??would be significant to you.
We strongly urge you to take a look at your operations to see if there are any holes that would allow fraud to flourish in your business. Sometimes, being too close to the company and employees can be a detriment and you need an objective look at your controls. When that happens, give us a call. With our experience and training we are uniquely qualified to help you find potential cash leaks.
Now that weve told you there may be fraud in your organization, have a terrific February!