Small Business Still Ranks Highest in Occupational Fraud Frequency

I don’t know what is more exciting, tuning into a great episode of American Greed, or getting the ACFE’s report to the nation on occupational fraud. I guess you really need to have a love for accounting and financial crimes to understand, and if you do you know what I am talking about. Well, the ACFE’s 2012 Report to the Nation is out and once again, the small business is left in the dust. This updated statistic shows that small businesses with less than 100 employees continue to rank the highest in occupational fraud frequency at 31.8% compared to larger companies. On average, the small business has lost $147,000 per fraud occurrence and continues to have the lowest prevention methods including external or internal audits, internal controls and segregation of duty.
Two months ago I was contacted by the President of the ACFE and asked if I would be interested in speaking at their events. Well, the flattery was off the charts and of course I was more than honored to be involved. Though a little concerned as my area is small business and not the publicized excitement of large corporations or government fraud, but it is something that really needs to be brought to the forefront. Even with the updated statistics from the ACFE, it is painfully obvious that small businesses continue to suffer the highest frequency of fraud and now at the end of this month, I get a chance to talk about the realities and devastation to the little guys in a Webinar - Neglected: Saving the Small Business Fraud Occupational Fraud which is available for 12 months on the ACFE website.

According to the ACFE’s study – in which I was happy to be able to include a few of my own case studies into these numbers –

• The average of all combined fraud schemes lasted about 24 months before being detected
• A "TIP" was still the number one detection method and the source of the tip was from an employee
• The number one fraud scheme was a billing scheme and rose 10% in small business from the 2010 ACFE study
• Mining, Real Estate and Construction ranked highest in the average fraud loss
  
• The duration of fraud before it was detected was cut in half when the victim organization had anti-fraud controls in place
• Men seem to commit fraud more often ranking 65% compare to woman at 35%
• The men also seem to have stolen more as well
• A male Owner/Executive stole an average of $699,000
• The average age of the perpetrator was between 41-45
• The average length of time working for the organization was 1-5 years
• The top two behavioral warning signs were living beyond their means and financial problems.
• 65% of cases studied were referred to law enforcement
• 19% of the cases were denied prosecution
• 48.7% of the victim organizations will never see a dime in restitution
  

Time and time again, the small business continues to rank highest in fraud frequency. Over the past six ACFE Reports spanning from 2002 to 2012, the Small Business has had a combined average of 17% more in fraud frequency compared to larger companies. It is time to get the small business more aware and educated on how to protect their business from occupational fraud.

Julie A. Aydlott, CFE

Business Fraud Prevention, LLC

970-776-8395

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Virginia Radio Personality & Suicide Victim Suspected In $500K Embezzlement

Paul Draisey, of Middleburg, Virginia, who comitted suicide last month at the age of 55, is suspected of embezzling nearly $500,000 from the Middleburg Volunteer Fire Department, for which he was the treasurer and his son was the president.  Draisey was also known as the "Voice of Loudoun County," and a popular radio personality.  Draisey died from a self-inflicted gunshot wound apparently after learning that an investigation was underway into his alleged embezzlement.  Draisey served as treasurer for about 3 years. 

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Read the story here, here and here.