Study: Employers Lose 20 Cents of Every Dollar to Workplace Fraud

A new study released by Ernst & Young finds 21 percent of Americans are personally aware of some type of workplace fraud, and 80 percent claim they would turn in their coworkers.

Although four in five workers say they would turn in their colleagues, fewer than half (43 percent) actually have done it.

The study, conducted by the research firm Ipsos Reid, surveyed 617 American workers by telephone between June 3rd and 6th. The Ernst & Young study marks the first time that the firm has measured the attitudes of American workers when it comes to fraud in the workplace.

"It may be too often overlooked, but unfortunately workplace fraud happens everyday and the impact of that can be a major drain on the bottom line of corporate America - it's a very real problem," said Stephen Seliskar, a leader in Ernst & Young's Fraud, Forensic & Investigation Services group, a division of the firm's Litigation Advisory Services practice.

According to the survey, American workers estimate that employers lose a staggering 20 percent of every dollar earned to some type of workplace fraud. Not surprisingly, when asked which specific fraudulent acts employees were aware of in their workplace 37 percent reported "theft of office items." "Claiming extra hours worked" (16 percent), "inflating expense accounts" (7 percent) and "taking kickbacks from suppliers" (6 percent) are some of the highest types of fraud witnessed.

The survey found that women (84 percent) were more likely than men (76 percent) to report fraudulent activities. What's more, older employees were significantly more likely to be willing to report a fraudulent act than younger employees by a measure of 87 percent to 75 percent, respectively. Interestingly, when asked to define the type of individual more likely to be involved in fraudulent activities the majority of respondents described an employee who had been with an organization for more than three years, held a junior level position, and was male and younger than 35.

"One-in-ten workers Ernst & Young surveyed reported they felt workplace fraud was increasing in their own workplaces," said Seliskar. "A further 57 percent felt that things were about the same over the past several years. That's bad news for management and indicates that an age-old problem in the workplace is not going away and it is not getting better either."

With 80 percent of employees surveyed willing to report a problem, making an anonymous phone call (30 percent) ranked highest as the best means to report fraud to management. An additional 27 percent would be comfortable reporting workplace fraud by calling a confidential hotline managed by an outside third party. Other options included sending an anonymous letter (20 percent) and using a company Web site anonymously (16 percent). Notably, 39 percent said they would be less likely to report fraud if they needed to identify themselves.

Almost half of those surveyed (44 percent) felt that their employer could do more to reduce fraud in the workplace. According to the respondents, management should create tougher sanctions when employees are caught in a fraudulent act (59 percent), provide better leadership or be better role models (58 percent), communicate better what is allowed and not allowed (56 percent), do a better job of investigating suspected problems (56 percent), and improve screening of new employees (54 percent).

For more information about Ernst & Young's Litigation Advisory Services, visit litigation.ey.com.

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