David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

This blog continues my discussion of the Association of Certified Fraud Examiners (ACFE) “Occupational Fraud 2024 – A Report to the Nations”. This week I focus on corruption:

• Transparency International, the global coalition against corruption (transparency.org) defines corruption as: “The abuse of entrusted power for private gain. It can be classified as grand, petty, and political, depending on the amounts of money lost and the sector where it occurs.”
• The 2024 Report shows that 48 percent of all frauds involve some form of corruption (down from 50 percent in the 2022 Report) with the median loss from corruption being $200,000 (up from $150,000 in 2022), and the fraud lasting an average of 13 months (up from 12 months in 2022).
• Seventy-eight percent of the corruption frauds included at least one additional fraud type – either asset misappropriation or financial statement fraud or both.
• The 2024 Report identifies four main types of corruption:
  • Conflicts of interest, including purchasing schemes and sales schemes
  • Bribery, include invoice kickbacks and bid rigging.
  • Illegal gratuities
  • Economic extortion
• Corruption is the most pervasive form of fraud worldwide.
• The Purchasing Department is the department most at risk for corruption. Seventy-nine percent of cases involved Purchasing Department fraud.
• The industries with the highest proportion of corruption cases are:
  • Technology (65 percent)
  • Information Services (62 percent)
  • The Energy Sector (60 percent)
  • Manufacturing (55 percent)
• Corruption is the most likely fraud committed by employees of any size companies/organizations (those with fewer than 100 employees and those with 100+ employees). 52 percent of organizations with 100+ employees reported corruption fraud in the 2024 Report.
• Conflict of interest cases principally involve:
  • Purchases from favored parties regardless of whether the party provides the best quality and/or lowest prices.
  • Sales to favored parties at bargain prices. Often these sales are lower than those offered to other parties (or at a price unusually reserved for larger customers).
  • Favored parties are often friends, relatives, or parties in which the purchaser has a financial interest.
• Bribery cases principally involve:
  • Kickbacks to the purchaser for purchasing either more goods or services than would be normally purchased or at higher prices than would normally be paid.
  • Bid rigging whereby the purchaser provides inside information to a favored vendor in return for payments/kickbacks.
  • Bid rigging can also be achieved by working with the favored vendor to write the request for proposal (RFP) in such a way that only the favored vendor can meet the RFP’s requirements.

My next blog article will discuss how companies/organizations react after a fraud has been discovered and what their experiences are in attempting to recover fraud losses.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst, and a Certified Fraud Examiner in Philadelphia.

If you require the services of a Certified Valuation Analyst in Philadelphia or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.