A $998 ounce of
Sandy Baird, MBA
Jean Patterson, CPA, CFE
THE ASSOCIATION OF CERTIFIED FRAUD EXAMINERS (ACFE) publishes a
biennial Report to the Nations on Occupational Fraud and Abuse. Occupational
fraud can be defined as “the use of one’s occupation for personal enrichment
through the deliberate misuse or misapplication of the employing organization’s
resources or assets.”
1 This report represents a summary of the results of cases
reported by ACFE examiners over the prior two years.
The first topic covered in the 2016 report is “The Cost
of Occupational Fraud,” which summarizes the financial
damage that occupational (employee) fraud causes. Of the
2,410 cases of occupational fraud included in the 2016
report, 30.1% of victim organizations had less than 100
employees. Of these cases, the median loss reported was
In a 2016 guest article in the Prosperident e-newsletter,
Sandy Baird, MBA, noted the most significant way to avoid
being embezzled by an employee.
2 She listed six specific
steps you can take to minimize the risk of hiring an embezzler. While nothing can guarantee that you will be safe
from embezzlement, following her recommended steps
goes a long way to ensure that you have done as much as
you can to bar the embezzler from the door.
No procedure comes without some cost—in time and
dollars. In this article, we examine the cost of these steps
compared to the potential risk of loss by not following
them. The components of the cost estimates of the steps
are as follows:
• Dentist time: $400 per hour ( This cost varies, of course,
depending on location and specialty. This amount is an
average of production loss and net income per hour.)
• Staff time: $16 per hour (As mentioned above, this
• Outside service cost: Varies with each step
• Materials: These costs (e.g., paper, record storage) are
deemed immaterial and are excluded.
Before we discuss the steps, note the following two
points: ( 1) By hiring an employee, you have invited that
person into your business, livelihood, and retirement funding. Ideally, the employee performs his or her tasks to the
benefit of both the employee and you. The responsibility
to ensure that this happens is yours. ( 2) Most (if not all)
embezzlers are liars. They have to be.
Review your business’s code of conduct or code of ethics—it should be fresh in your mind as you begin the hiring
process. Your policies should provide an establishment of
good faith compliance with federal, state, and local laws.
Your code of conduct should be displayed on your website
and a copy should be given to applicants. This sends the
message to the receiver that the business maintains an
environment that fosters respect for others and is intolerant
to those who act otherwise.