Page 120 - ACFE Fraud Reports 2009_2020

Measuring the Cost of Occupational Fraud

At the outset, it should be clear to anyone who has spent time dealing with

the subject of occupational fraud that attempts to accurately measure the
frequency or cost associated with occupational fraud in the United States
will be, at best, incomplete.

Fraud, by its nature, is hidden, and so the true amount of recognize that they have been defrauded, because they
fraud taking place in U.S. businesses at any one time can- choose not to report the crimes for fear of bad publicity or
not really be known. simply because they do not want to deal with the repercus-
sions. Furthermore, even when fraud has been detected it
Even attempts to measure the amount of fraud that has al- may not be possible to determine exactly how much was
ready been detected will lead to incomplete results. There stolen. Many frauds go undetected for years before they
is currently no central repository where fraud data is col- are caught, and organizations may find it unproductive or
lected in the U.S. and a great deal of fraud cases go un- unsettling to trace through years of historical financial data
reported, either because the victim organizations do not to put a precise figure on the size of the crime.

Nevertheless, it is important that we try to learn as much
The typical organization loses 5% of its about occupational fraud as we can. This is a crime that
annual revenues to occupational fraud. affects, or has the potential to affect, every business in the
United States — indeed, in the world. It is critical that we
try to understand, as best we can, the size of the threat that
confronts us all.

While there can be no precise measure of the cost of fraud
to U.S. business, we have asked each of the 1,134 CFEs
who participated in our study to give us their best estimate
of the percent of annual revenues that a typical organiza-
tion in the U.S. loses as a result of fraud. The answers to
this question were based solely on the opinions of CFEs,
not specific data from cases they had investigated.

The median estimate was that a typical organization loses
5% of its annual revenues to fraud. To give the reader an
idea of the scope of that figure, consider that the estimated
2006 United States Gross Domestic Product is $13.037
trillion. If we multiply that figure by 5%, the result would
1
be roughly $652 billion lost to fraud.

1 Based on U.S. Commerce Department first quarter 2006 GDP growth estimate.

ACFE Report to the Nation on Occupational Fraud & Abuse