control, and governance
Fraud Reporting Is on the Rise
As the global economy continues to drive increased fraud, more people are stepping up to report suspected fraudulent activity within their organizations.
During the first quarter of each year from 2006 through 2009, reporting of fraud-related incidents — corruption, misuse of information, conflicts of interest, and U.S. Foreign Corrupt Practices Act violations —surged from 10.9 percent to 21 percent, according to the 2009 Corporate Governance and Compliance Hotline Benchmarking Report published by The Network Inc. and BDO Consulting. However, a separate report by BDO LLP shows that nine out of 10 larger frauds are not reported to authorities.
The benchmarking report, which provides an analysis of 477,940 reports from 1,328 Fortune 500 and large public and nonprofit organizations, shows that out of all reports received during the five-year period, the majority fall under the category of personnel management. This category encompasses a variety of human resources matters including wages and management interaction and is therefore relevant to all employees. Although the percentage of personnel management allegations have fluctuated by approximately 2 percent each year, the highest percentage — 53 percent — was reported in 2004.
Other key findings highlighted in the report include:
Although the U.S. Sarbanes-Oxley Act of 2002 began requiring publicly traded corporations to provide a mechanism for reporting financial irregularities while enabling tipsters to remain anonymous, implementing employee hotlines can be a powerful tool to help any organization stay alert to fraud as well as gather critical feedback.
"It's Never Too Late," featured in the August 2006 issue of Internal Auditor Magazine, details how a Whistleblower Protection Act poster prompted a service-industry employee to consider reporting suspected reimbursement and expense report fraud.
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