Category: Fraud

Fraud and Corruption – The Last Great Uncontrolled Cost

Fraud has increased 20% since the GFC.

Chart of fraud great uncontrolled costWhile global research has consistently shown that the typical organisation losses 5% of its revenues to fraud each year, rates within the non-profit and international development sectors are considered to be significantly higher.  Putting this into perspective in 2013, fraud cost the OECD $7.56 billion in Overseas Development Assistance (ODA), while in the case of Australia, the non-profit sector loses around $1.53 billion a year.  And the issue isn’t expected to improve, with a recent study showing that fraud increased 20% in the first two years of the global financial crises (GFC).  Despite fraud being a significant issue for many NGOs and other non-profits, few (if any) view it as a cost to be managed and controlled.

We manage what we measure

Fraud, like any other type of cost, can be measured, managed and minimised, with the figures quoted above highlighting the current costs incurred by non-profits.  Despite this, how many of us view fraud as simply being just that, one of a number of types of costs incurred by an organisation?

By challenging our view of fraud, and shifting the focus even slightly, fraud costs all of a sudden become an opportunity, which – if managed properly – has the potential to drive significant cost savings through an organisation.  By re-classifying it as a separate ‘cost’ category, and setting up the metrics to measure it, it can start to be proactively managed.  Given where the non-profit sector is currently positioned in the fight against fraud, the potential upside is even higher, with immediate savings possible with relatively little effort. More