It was with great interest that I read the results of the Association of Certified Fraud Examiners (ACFE) recent survey on fraud as reported in Business Travel News. What grabbed my attention was the headline, “27 Percent of Executives/Upper Management Employees Commit Expense Fraud”. The percentage of fraud attributed to executives really jumped out at me. In benchmarking our own customers’ T&E monitoring, we found that 20% of employees overall had at least one potentially fraudulent expense entry per year. But, 5% of employees account for over 80% of all potentially fraudulent transactions.
Our experience is admittedly different because our customers automatically analyze 100% of their transactions. Most organizations that don’t use automated analysis solutions are sampling transactions, and many place an emphasis on executive expense reports. The difference in analyzing an entire population versus a sample is that surveys represent skewed results.
The ACFE survey is a great example of what happens when you break down the numbers of a survey. The ACFE survey involved 1,438 cases of occupational fraud in more than 100 countries as reported by certified fraud examiners who investigated cases between October and December 2013. Expense reimbursement fraud was classified as a subcategory of "asset misappropriation," one of three types of fraud defined in the survey, along with corruption and financial settlement. No indications were given regarding the percentage of the 1,438 cases that involved asset misappropriation, but in the ACFE 2014 Global Fraud Study the ACFE placed this percentage overall at 85%. If 85% of the 1,438 cases in the survey quoted in Business Travel News were asset misappropriation, and 13.8% of those were expense reimbursement related, then 168 cases of expense reimbursement fraud were at the genesis of the surveys conclusions. This also means that 45 cases of executive fraud were investigated by certified fraud examiners and included in the survey.
What we don’t know is what prompts questions about the results and whether they should be applied universally. How many of the companies involved only routinely analyze expense reports by sampling? How many of these companies focus their samples on executives? How many of the investigations were prompted by whistleblowers? In how many of these companies do executives represent a disproportionate portion of overall travelers?
In the end, all of these statistics are merely interesting in the absence of action. At Oversight, our customers leverage our Insights On Demand platform to help them understand the behavior of their travelers so our customers can take action. This action manifests itself in several ways: changes to policies, communications with and training of travelers, and changes to relationships to suppliers and other travel partners. The objective is to promote compliance with policies, and ensure the most efficient use of travel budgets. After implementing a 100% audit of transactions, even the highest-level executives wouldn’t try to commit expense fraud, largely due in part to our best friend, The Hawthorne Effect. If executive expense fraud truly sits at close to 30%, why aren’t more companies taking advantage of automated analysis?