One of the largest threats to any organization or institution is occupational fraud. That is fraud committed against an enterprise by its own officers, directors, or employees. In its “2018 Global Study on Occupational Fraud and Abuse,” the Association of Certified Fraud Examiners (ACFE) analyzed 2,690 cases of occupational fraud across 23 industries – adding up to total losses of more than US$7 billion.1
While combatting fraud is top of mind for finance leaders in every industry, it is particularly high on the agenda for government organizations and institutions of higher education that rely on public tax dollars for funding.
Of the incidents of fraud studied by the ACFE in 2016, 18.7% occurred in government agencies.2 This can be particularly devastating for state and local governments, where budgets are often tight and every dollar must be used with fiscal responsibility. Undetected errors, policy violations, and fraud steal from communities that rely on government funds for critical programs and services. Once discovered and made public, incidents of fraud, waste, and abuse degrade citizens’ trust in the government’s overall ability to provide those programs and services in the first place. No matter how small the agency, every incident of fraud, waste, or abuse – detected or undetected – makes it harder for government agencies to do their jobs.
In this era of soaring education costs and rising student debt, it is also critical that institutions of higher learning meticulously account for every dollar spent. Finance leaders must ensure they’re putting as much of their expenditures as possible into mission-critical, student-facing services, while minimizing back-end operations and overhead. There is no room for waste or over-spending, whether fraudulent or in error. Yet in the 97 cases of fraud in education reported to the ACFE, the median loss was $68,000.3 Current and prospective students – and loan- and grant-giving organizations – keep a sharp eye on what educational institutions can deliver. Headlines of fraud and wasteful spending are a black stain on any organization. But in higher education, it can also mean the loss of accreditation, plummeting enrollment, and a total shutdown of operations.
For finance leaders in both government and higher education, transparency and accountability are everything. Why, then, is cutting out fraud, waste, and abuse so complicated?
Internal control weaknesses are responsible for nearly half of occupational fraud incidents.4 This is not surprising given the evolving nature of modern business operations. As spending becomes increasingly decentralized and employees across an organization are empowered to make more and more spending decisions on their own, the risk of fraud goes up. Manual processes and a lack of integration between systems make it nearly impossible to manage regulatory and policy compliance, and to identify errors, violations, and potential fraud.
On the bright side, of all the major risks to business, occupational fraud is the most preventable,5 especially in the area of employee-initiated spend.
Finance leaders must have the tools to eliminate administrative burden and inefficient workflows that bog down their processes and teams. They also need to ensure they have accurate data in place to manage ever-changing compliance policies and regulatory and data security requirements without adding cost and complexity.
SAP Concur solutions can help
Concur Detect by AppZen allows your finance team to automatically audit 100% of expense reports for fraud and compliance issues in near-real time, using artificial intelligence (AI) and machine learning (ML) technology. Concur Detect works with Concur Expense to uncover policy compliance errors by using AI and ML to collect detailed information about submitted expenses through automated receipt extraction, translation, deep learning, and natural language processing. It is also able to tap into external sources to research receipt data and confirm if a transaction is valid. As a result, you can execute consistent policy enforcement across the institution.
The ultimate goal for organizations is not just to identify fraud, but to resolve the situation that allowed it to happen in the first place. Remember also that every breach of spending policy is not necessarily an incident of fraud and could just be an honest mistake. By increasing accountability for employee-initiated spend and making expense reporting and management easier, you improve employee behavior.
The user-friendly interface of SAP Concur solutions helps everyone – whether students, employees, or auditors – manage spend and compliance better. And, by tracking incidents of errors against your employee base, Concur Detect helps you distinguish between fraud and honest mistakes.
Government agencies and higher education institutions across the United States are using SAP Concur solutions to proactively protect their organizations’ budgets and reputations from misuse, human errors and fraud. Take a look at these two infographics to see how your state or local agency or higher ed institution can start doing the same.