One-Fifth (21%) of American Workers Are Personally Aware of Fraud in their Workplace

However, While Eight-in-Ten (80%) Employees Say They Would Report on A Co-Working Stealing from Employer . . . Of Those Who've Had the Chance Less Than Half (43%) Actually Did Inflating Expense Accounts (50%), `Cooking the Books' (50%), and Pocketing Cash Sales (48%) Seen as Biggest Problems

Toronto, ONTARIO - With an increase in the number of `white collar' crime stories in the media, a new study by Ipsos-Reid for Ernst & Young indicates one-fifth (21%) of working Americans indicate that they have personally witnessed fraud in their workplace during the past year. "Taking office supplies" (37%) is the most common form of workplace fraud acknowledged.

While eight in ten (80%) of employed Americans say that they would likely report a co-worker who was defrauding their employer by taking either goods (with a value of more than a pad of paper or a couple of pens) or money that did not belong to them, of those who have personally witnessed workplace fraud, less than half (43%) actually did so.

"Inflating expense accounts" (50%), "altering the books to make profits or costs look better" (50%), and "pocketing money from cash sales" (48%) are viewed as the biggest problems regarding workplace fraud in America.

These are the findings of an Ipsos-Reid poll conducted between June 3rd and June 6th, 2002 on behalf of Ernst & Young. The poll is based on a randomly selected sample of 617 adult Americans who are working full-time or part-time. With a sample of this size, the results are considered accurate to within 177 3.9 percentage points, 19 times out of 20, of what they would have been had the entire adult population of Americans working full-time or part-time been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population. These data were statistically weighted to ensure the sample's regional and age/sex composition reflects that of the actual American population according to the 2000 Census data.

One-Fifth (21%) Are Personally Aware of Fraud in their Workplace During Last Year

One fifth (21%) of employed Americans indicate that they are personally aware of or have been personally involved in fraud in their workplace over the past year. Eight in ten (78%) are not aware of such instances in their workplace during the past year.

  • Employees who work in the services sector (35%) are the most likely to report being aware of fraudulent activities in their workplace, while those in the high tech or telecommunications sector (10%) are the least likely to report knowledge of these types of activities.
"Taking office items or shoplifting" (37%) is the highest reported type of workplace fraud. "Claiming extra hours worked" (18%), "stealing or taking product or money" (13%), "pocketing money from cash sales" (12%), "inflating expense accounts" (8%) and "taking kickbacks from suppliers"(6%) are the next highest types of workplace fraud witnessed. While "altering the books" is viewed as a major problem in America as noted earlier, within their own companies, only 2% report to personal knowledge of this type of fraud. "Improper use of a company vehicle or for personal use" (2%) and "creating phony supplier invoices" (1%) are the least reported types of workplace fraud.
  • Americans who are in positions of little or no supervisory responsibility (42%) or are supervisors to middle management (39%) are more likely to know of incidents of office items being taken or shoplifting than mid to senior level managers (25%). Those in supervisory to mid-management (26%) and mid to upper management (20%) are more likely than those with little or no supervisory responsibility (10%) to indicate knowledge of incidents where extra hours were claimed.
  • Mid to senior level managers (23%) are more than twice as likely to know of situations where money was pocketed from a cash sale than employees without supervisory responsibility (11%) or supervisors to mid management levels (6%).
  • Younger American workers (50% compared to 22% of middle aged Americans) are more likely to report being aware of situations where office items or shoplifting occurred. While a higher proportion of middle aged (26%) workers know of situations where extra hours were claimed that were not worked, compared to their younger (12%) or older (10%) counterparts. Older (28%) employees are more likely to be aware of incidents where product or money was stolen from their employer, this compares to only 11% of middle aged or younger respondents.
  • Men (40% versus 34% of women) are more likely to indicate knowledge of taking office supplies or shoplifting, while women (22% versus 14% of men) are more likely to say they know of incidents where extra hours were claimed.

Of those who were aware of fraud occurring the estimated number monthly lose to their company was $1,548.60. Over a year's time this level of fraud would result in the lose of $18,583.20 to their employer.

  • The estimated monthly loss to fraud in their own company is over three times higher from mid to senior managers ($2,752.50) than from employees with little or no supervisory responsibilities ($792.40). The estimate of respondents who are supervisors or mid-level managers ($1521.50) is close to the national average.
  • The average estimate by older employees ($3180.00) is over four times that by younger employees ($725.50). The average estimate by middle aged respondents is $2,119.30.
  • The highest estimated monthly loss due to fraud appears to be in construction and other trades ($3378.10), manufacturing ($3265.2) and retail ($2489.10).
  • Regionally, workers in the South ($2497.60) have the highest estimated money loss, while those in the West ($330.20) have the lowest average estimate.

Asked to describe the individuals more likely to be involved in fraudulent activities, this group of respondents indicate that they were:

  • Junior level employees - 58%;
  • Younger than 35 years of age - 54%;
  • Longer term employees (more than three years) - 53%;
  • And men - 50%.

While Eight-in-Ten (80%) Employed Americans Say They Would Report on A Co-Working Stealing from Employer . . .

Of Those Who've Had the Chance Less Than Half (43%) Actually Did

An overwhelming majority (80%) of working Americans say that if they were aware that one of their co-workers was defrauding their employer by taking goods (valued higher than a pad of paper or a couple of pencils) or money that did not belong to them, they would be likely to report them. In fact half (50%) indicate they would be very likely. This compares to only one in six (17%) who say they would be unlikely to report on their co-worker.

  • Older (87%) and middle aged (84%) employees are more likely to indicate they would report a co-workers fraudulent activities than a younger (75%) employee.
  • Mid to senior level managers (87%) are more likely than those in supervisory/mid-management (78%) or little to no supervisory responsibility (77%) to say that they would report on a co-worker.
  • Women (84% versus 76% of men) are more likely to say they would report fraudulent activities.

Almost all (90%) indicate that they would know to whom they should report a co-worker who is defrauding their employer.

However, among those who are aware of fraudulent activities in their companies (21%), under half (43%) say that they report the activity. The remaining 57% indicate that they did not mention any thing.

  • Senior level managers (65%) are the most likely to have reported the fraudulent activities that they were aware of. This compares to 48% of mid-level managers, and 25% of those with little or no supervisory experience.
  • Female employees (48%) are more likely than their male (39%) colleagues to report the fraudulent actions they knew of.
  • Middle aged (47%) and younger (42%) workers are more likely to say they reported the incidents than older (31%) employees.

Of this 57% who did not report the workplace fraud that they were aware of, the main reason was they were concerned about their job (17%) and because they didn't know about it until it was reported (16%). Just over one in ten (12%) indicate that someone else reported the activity.

  • Mid-level managers (25%) who did not personally report fraudulent activities that they were aware are more likely to indicate that it was because they were concerned with their own personal position. While those with little or no supervisory responsibility (22%) indicate that they didn't report these activities because they didn't know about them until after it was reported. Senior level managers (27%) indicate that the main reason that they did not report such incidents is because some one else made the report.
  • Middle aged (26%) are more likely to indicate the they did not report fraudulent activities because they were concerned about their own position. This compares to 15% of younger respondents.

When asked if they would be more or less likely to report an incident of fraud if they had to identify themselves, about the same number indicated that they would be less likely (39%) as more likely (36%). One-quarter (24%) indicate that it would not make a difference either way.

  • A higher proportion (48%) of workers who have little or no supervisory responsibility indicate they would be less likely to report incidents of fraud if they had to identify themselves , than mid-level managers (38%) or senior-level managers (25%).
  • This view is shared by a majority (56%) of employees aged 18 to 34, compared to 29% of respondents between 35 and 54, and 26% of employees 55 and older.

"Making an anonymous phone call" (30%), and "calling a confidential hotline to an outside third party" (27%) would be the preferred ways to report an incident of fraud. "Sending an anonymous letter" (20%) and "using a website anonymously" (16%) were other options tested.

Inflating Expense Accounts (50%), `Cooking the Books' (50%), and Pocketing Cash Sales (48%) Seen as Biggest Problems

With the backdrop of recent news coverage of `white collar' crime stories and the unraveling of the Enron scandal, when asked to rank on a zero to ten point scale how much of a problem various types of workplace fraud are, according to working Americans the top problems (ranked 8,9,10) are "inflating expense accounts" (50%), "altering the books to make profits or costs look better" (50%), and "pocketing money from cash sales" (48%). The remaining types of fraud tested include "taking office items or shoplifting from your employer of items more than minor things like paper and pencils" (43%), "taking kickbacks from suppliers" (43%), "altering, creating or forging checks issued by your employer" (42%) and "creating phony supplier invoices" (40%).

  • Younger employees are more likely to rate each of the possible fraudulent activities as a problem (rank of 8, 9, 10 on scale) than other age groups. The one exception is taking kickbacks which all three age groups are equally as likely to rank as a problem.

Employed Americans believe that on average, approximately one-fifth (19.6%) or almost 20 cents of every dollar in sales a company makes is lost to workplace fraud. Workers in their own workplace estimated the average monthly loss is $4252.30.

  • The highest average estimated lose to fraud is made by younger respondents (22.7%) or almost 23 cents per dollar in sales. This compares to the lowest estimated average, provided by older respondents of 15.7% or approximately 16 cents per revenue dollar.
  • The average estimate by women employees is 23.7% or almost 24 cents per dollar. This compares to 15.8% or approximately 16 cents per dollar by men.
  • Within their own companies the highest average estimate of monthly lose to fraud is made by those in mid-management positions ($6,240.30). This is twice the average amount estimated by those with little or no supervisory responsibility ($3018.50) and is significantly higher than the average estimation of senior-level managers ($3,791.40).
One in ten (11%) Americans working full-time or part-time believe that employee fraud in their own workplace has increased over the last couple of years, with 4% indicating that it has "increased a lot". This compares to one-quarter (26%) who say that fraud in the workplace has decreased over the last couple of years and over half (57%) who think workplace fraud has remained about the same.
  • Level of job responsibility, age or gender do not appear to make any difference in opinion that employee fraud has increased over the last couple of years.

The effect of technology on the ability to commit fraud in the workplace is split almost evenly, with 41% who believe that technology makes it easier for employees to commit fraud and 38% who believe that it makes it harder to commit fraud. One in five (20%) say that technology doesn't make a difference.

  • Older (47%) employees are more likely than younger (35%) employees to indicate that technology makes it easier for employees to commit fraud.
Half (52%) of working Americans say that their employer could not cost effectively do any thing more to reduce fraud in their workplace. This compares to 44% who believe more could be done in a cost effective manner.
  • Senior-level managers (57%) and those with little or no supervisory responsibility (53%) are more likely to indicate that their employers could not do anything more to reduce fraud in their workplace. This compare to 46% of mid-level managers who express this view.
When asked to rate on a zero to ten scale how effective various ways to reduce fraud would be, the top rated (score of 8, 9,10) options are "tougher sanctions when employees are caught in a fraudulent act" (59%), "better role models and leadership from managers and supervisors" (58%), "better communication to employees about what is allowed and what is not allowed" (56%), "better investigation of suspected problems" (56%), and "improved screening of new employees" (54%). Less effective ways to reduce fraud in the workplace include "more audits specifically to search for fraudulent acts" (44%), "a workplace version of a neighborhood watch program where employees can report incidents anonymously' (42%), "improved supervision and controls over employee's activities" (40%), "making someone specifically accountable for reducing fraud in the workplace" (40%) and "more confidential counseling for employees with personal problems" (38%).
  • Women are more likely than men to indicate that each of these options would be effective in reducing workplace fraud
  • Respondents who are mid-level (62%) or senior-level managers (62%) are more likely than those without supervisory responsibility (52%) to indicate that better role models and leadership from managers and supervisors would be an effective way to reduce workplace fraud.
  • Senior (62%) and mid (59%) level managers are also more likely to indicate that better communications to employees on what is and is not allowed would be an effective way to reduce fraud in the workplace. This compare to 50% of those with little or no supervisory responsibility.
  • Better screening of new employees is viewed by a higher proportion of senior managers (60%) than those without supervisory responsibility (48%) as being effective.

To view the factum and tables, please download the attached PDF files.

-30- For more information on this news release, please contact: John Wright Senior Vice-President Ipsos-Reid Public Affairs (416) 324-2900

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