Report: Fraud incident reporting on rise

BDO Consulting and The Network release 2009 Corporate Governance and Compliance Hotline Benchmarking Report


The Network Inc. and BDO Consulting have released new research on fraud incident reporting -- the 2009 Corporate Governance and Compliance Hotline Benchmarking Report (PDF download). According to CEO of The Network Luis Ramos, the goal with the release of the data is that it "allows companies to compare incident, investigation and resolution information to other similar organizations."

The study looked at compliance hotlines and their use for organizations seeking to identify fraud. The study found that fraud-related incidents were up from 10.9 percent in the first quarter of 2006 to 21 percent in the first quarter of 2009. That data included reports on corruption and fraud, misuse of assets, conflict of interests reports and violations of the Foreign Corrupt Practice Act (FCFA).

The research also linked that increase in reports with certain key industries. According to The Network and BDO Consulting, the highest overall incidents reports came from retail trade, service industries, transportation, communication and utilities.

Generally, the reports were being acted upon. Although case outcome was not always provided, the companies found that, when the case outcome was known, 71 percent of the reports did warrant an investigation, and 38 percent resulted in some form of corrective action taken based on 2008 numbers.

The report found that management was not typically notified before a report was made; this was true in 70 percent of cases, and has held steady over the five years of data collected. In reviewing the five years of data, it was found that most calls were anonymous, although use of anonymity was down some in 2008 compared to 2007.

"Our goal for this benchmarking study was to identify a starting place for companies to evaluate their own ethics and compliance programs, particularly fraud prevention, detection and investigation," said Timothy Mohr, CFE and partner at BDO Consulting. "Organizations will find benchmarking data a valuable tool in determining if changes are needed to their program, if investigations should be utilized and what should be done to build an ethical culture within their organization."