Fraud Benchmark 2024: Did you know…? Part I

Parking FraudBy Katherine Beaty, TEZ Technology
While understanding the dollars in parking and mobility is essential, ensuring your organization isn't losing money due to unchecked fraud is equally vital.
Every year since 1996, the Association of Certified Fraud Examiners (ACFE) has surveyed thousands of Certified Fraud Examiners (CFEs) about the methods, costs, and effects of occupational fraud, sharing their findings in the Report to the Nations. The 13th edition of this report provides an inside look at how fraud is committed, detected, and prevented in organizations worldwide. This data can help parking and transportation professionals benchmark their fraud risk management programs and implement necessary controls to prevent or minimize losses.

2024 Report Revealed

  • Total losses of more than $3.1 BILLION
  • Median loss per case: $145,000
  • Average loss per case: $1.7 MILLION
  • Organizations lose 5% of revenue to fraud each year

The Schemes

Asset Misappropriation
Asset misappropriation was the most common but least costly form of occupational fraud, accounting for 86% of cases with a median loss of $120,000. Asset misappropriation involves an employee using an employer's assets for personal gain, including:
  • Skimming: stealing cash before it is recorded
  • Payroll theft: paying employees for work they don’t do or stealing time
  • Billing schemes: making false claims for payment (e.g., expense reimbursement, false workers' compensation claims)
  • Misuse of assets: using company assets for personal use
The most common asset misappropriation schemes were billing schemes and theft of non-cash items, each comprising 22% of cases. Billing schemes had a median loss of $100,000, while check and payment tampering schemes had a median loss of $155,000.
Financial Statement
Fraud
Although the least common, with only 5% of cases, financial statement fraud is the costliest, with a median loss of $766,000. This type of fraud involves the intentional misrepresentation of a company's financial condition. Examples in the parking and transportation industry include:
  • Parking subcontractor kickbacks
  • Manipulating depreciation provisions
  • Falsifying sales
  • Recording false profits on disposals
  • Entering sales agreements that produce no profit
  • Offsetting gains against unrecorded losses

Detecting Fraud

Did you know the typical occupational fraud lasts 12 months before detection? Forty-three percent of frauds are detected by tips, with more than half coming from employees and a third from vendors. Common reporting mechanisms include:
  • Web-based: 40%
  • Email: 37%
  • Telephone: 30%
To combat fraud, organizations should enhance anonymous reporting mechanisms, provide regular fraud detection training, and promote a strong whistleblower policy. Utilizing advanced monitoring technologies and conducting frequent audits can help detect suspicious activities early. Fostering a culture of integrity and open communication, along with collaborating closely with vendors on fraud prevention, further strengthens an organization's defenses.

Who Commits Fraud?

Did you know that in 2024, 84% of perpetrators displayed at least one behavioral red flag before their frauds were detected? Recognizing "red flags" is crucial for fraud prevention. Common red flags include:
  • Living beyond their means
  • Financial difficulties
  • Control issues, unwillingness to share duties
  • Divorce/family problems
  • Unusually close associations with customers/vendors
  • Wheeler-dealer attitude
  • Irritability, suspiciousness, or defensiveness
  • Addiction problems
  • Complaints about inadequate pay
  • Refusal to take vacations
In addition to red flags, there are demographic characteristics associated with more frequent and costly occurrences of occupational fraud. For example, owner/executives' median losses were more than seven times greater than those carried out by employees:
  • Employees: $60,000
  • Owners/Executives: $329,000
Fraud committed by groups (three or more individuals) resulted in a median loss of $329,000, compared to $75,000 for those working alone. Over half of the cases originated in these five departments:
  • 14% Operations
  • 12% Accounting
  • 12% Sales
  • 9% Customer Service
  • 9% Executive/Upper Management
To mitigate these risks, it's essential to stay vigilant, conduct regular training on fraud detection, and implement robust internal controls. By paying attention to these red flags and understanding the associated risks, we can better protect our organizations from the damaging effects of occupational fraud.
Stay tuned for next week’s Part 2 on responding to and preventing fraud in your organization!
Visit www.teztechnology.com to learn more about our valet and self-parking solutions and how they can be used to automate your operations, streamline staffing, and eliminate opportunities for fraud in your organization.

Reference:

For more details and to access the full report, visit the ACFE Report to the Nations at www.ACFE.com/RTTN.