Workplace fraud hurts morale, and is on the rise

CALGARY — A report has found workplace fraud is costing Canada’s small and medium enterprises ( SMES) at least $ 3.2 billion a year — probably much more — and is hurting employee morale, just as the authors of the report say the problem is growing.

About 290,000 SMES were victims of one or more instances of workplace fraud in the past year, says The Certified General Accountants Association of Canada ( CGA- Canada) in its study.

“The risk of workplace fraud is almost certain to rise as economic growth slows and more employees experience financial difficulties,” says Rock Lefebvre, CGA- Canada’s vice- president of research and standards and co- author of the report.

The most common forms of fraud were misappropriation of inventory or assets and misappropriation of cash.

“The financial loss is one thing, but it’s staff morale and management confidence that really take a hit,” Lefebvre says. “The reputation, value and public and client trust of these companies also suffer.”

Workplace fraud losses cost between five per cent and 10 per cent of Canada’s gross domestic product, according to Greg Draper, national leader of investigative forensic services with MNP LLP, one of the country’s largest chartered accountancy firms.

At least 10 per cent of business bankruptcies cited fraud as the cause, according to the Office of the Superintendent of Bankruptcy Canada. Most frauds that happen are committed by an employee with seven to 14 years of experience on the job, Draper adds.

It causes an environment of stress and mistrust as everybody’s day- to- day work schedules are “thrown out the window” as companies try to recover from the damages.

“It can be like an atomic bomb going off inside of a business,” Draper says. “There’s shock, frenzy and you don’t want to believe it happened.”

As economic pressures ramp up on individuals, “we’re seeing more of it come up now,” he says, and it goes far beyond just the bottom line of a company to the point where some of a company’s best employees may choose to find employment elsewhere. Those left behind to pick up the pieces often lose faith in the company and its managers.

Tim Houghton, vice- president of risk solutions for CKR Global Risk Solutions in Calgary, says 75 per cent of all employeerelated crimes, including theft, fraud, assaults and other crimes, go unnoticed.

“So much theft and fraud goes undetected,” Houghton says, noting a company is 15 times more likely to have an employee steal from an employer versus a non- employee.

However, CGA- Canada found 74 per cent of respondents believe their exposure to occupational fraud is low.