Are Your Employees Stealing From You? HTML version

Top 10 Ways Employees Steal From Their Employers
According to the Association of Certified Fraud Examiners, total business fraud in 2009
was $2.9 trillion dollars; small business, defined as less than 100 employees, accounted
for 30% of all frauds or $870 billion dollars! The median loss at small businesses was
$200 thousand dollars and was typically taken over a two or three year period. 82% of
small to mid-size businesses report they have experienced employee theft. We all want
to believe it can’t happen to us, but with these numbers, the odds are very much against
The vast majority of employees are honest and hardworking. Unfortunately, it may only
take one dishonest employee to put your business in serious trouble or even destroy it.
The methods used are only limited by a dishonest employee’s creativity. Don’t assume
you can “profile” an employee thief. Many frauds are perpetrated by long-term
employees that no one ever thought could be involved in fraud.
One of my favorite fraud stories is about a parking lot outside Britain’s Bristol Zoo.
Allegedly, for 25 years, 7 days a week, approximately $500 was collected in parking
fees every day. The attendant never took a day off and then one day he didn’t show up
for work. When the zoo called the city about a replacement, they were told he was not
a city employee and the zoo was responsible. The zoo was shocked that the attendant
was not a city employee because he certainly was not a zoo employee! At $500 a day,
7 days a week for 25 years, that equates to $4.6 million dollars! Although the veracity of
this story has been challenged, the lesson to be learned rings true. Many times a fraud
may be right under our nose and we may not see it! Be professionally skeptical, follow
up on anomalies, and respect your instincts.
I think we can broadly characterize most employee fraud into 10 categories. If you
know what broad types of fraud schemes exist and have some basic knowledge of
internal control, perhaps it can help you prevent employee fraud at your company.
I’ll provide the broad categories here and then briefly explore each of them in additional
1. Help Yourself!
2. Fake Documents
3. Fake Vendors or Fake Employees
4. Misapplying Customer Remittances
5. Bribes, Bid-Rigging, and Kickbacks