NCPA - Daily Policy Digest - Uncovering Employee Fraud and Abuse

NATIONAL CENTER FOR POLICY ANALYSIS
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Uncovering Employee Fraud and Abuse

Private employers and the federal government alike are taking steps to prevent or detect instances of worker fraud and abuse. The problem is especially acute at small businesses -- some of which have even had to close their doors after being hit.

The federal General Accounting Office (GAO) and inspectors general have found hundreds of thousands of dollars worth of credit card abuses by government employees and the GAO has warned of a "lax control environment."

Private business will lose an estimated 6 percent of revenue -- $600 billion this year -- because of employee fraud and abuse, experts report.

Nearly 45 percent of employers monitor the time their employees spend on the phone and the numbers that are dialed -- up from 35 percent in 1994.

Some employers are initiating precautionary measures such as criminal background checks prior to hiring, oversight of billing, and restricting building access -- while others are instituting controls which include bringing in fraud examiners to go over the books or blocking employees from making company credit card purchases from certain stores.

There are a number of ways to detect fraud. In 26.3 percent of cases it is through tips from employees; internal audits contribute in 18.6 percent; internal controls nab miscreants in 15.4 percent of cases; and in 11.5 percent of instances external audits play a role. Detection is accidental in 18.8 percent of cases.

Source: Stephanie Armour, "Employers Slap Hands Out of Cookie Jars," USA Today, May 15, 2002.

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