2017 Revenue Losses to Occupational Fraud Approaching $1 Trillion for U.S. Businesses

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Occupational fraud—theft, embezzlement, or any use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources and assets—causes 30% of all U.S. business failures, despite billions spent on internal security.(1) Improved hiring priorities and practices are the solution, says HireBox.

Today’s typical business organization loses 5% of its annual revenues to occupational fraud(2)—which, when applied to the U.S. 2016 GDP of $18.56 trillion, represents a staggering total of $928 billion lost to theft and misappropriation of monetary or other assets, corruption, and falsified financial reporting. For its 2016 study of 2,410 occupational fraud cases, the Association of Certified Fraud Examiners (ACFE) reported a median loss of $150,000, with 23% resulting in a loss of at least $1 million. Worse yet, the median period of time which elapsed before detection was found to be 18 months.(3) “Less than half of these affected businesses will ever recover a dime of their losses, with small to medium-sized businesses suffering the greatest damage,” says president and CEO Patrick Valtin of HireBox.com.

By nature, business owners don’t want to believe they’ve misjudged character when hiring people who turn out to be dishonest. As a result, billions of dollars are invested annually in large insurance policies and the latest internal cyber-security and electronic protection measures—yet the losses due to occupational fraud continue.

Joseph Schmidt operated a 114-year-old real estate business that his father had started. Through inattentiveness regarding his bookkeeper’s daily activities, $650,000 was embezzled from his company, and Schmidt eventually filed for bankruptcy after being one of the most prominent real estate companies in the Bronx.(4)

HR managers in the current business environment are beginning to realize that they must screen job applicants much more closely for their soft skills—those people skills or personal abilities which enable someone to work effectively and harmoniously with others. Key among these are good verbal and written communication skills, tact and diplomacy, accountability, and honesty.

“Honesty is going to be, more than ever, the major issue in preselecting applicants,” says Valtin. “In addition to an observable decreased level of morality in the society as a whole, mounting evidence of dishonest applicants lying while job hunting is quite alarming.”(5)

Screening job applicants by verifying academic credentials, previous employment and personal references, as well as doing criminal background and credit checks, all help to establish a picture of an applicant’s soft skills, particularly honesty. A 2003 study of 2.6 million job applicants showed that 44% lied about prior work experience, 41% lied about their education, and 23% of applicants falsified their credentials or made false claims on their resumes.(6)

About HireBox.com

HireBox is a results-based testing platform utilizing legal quality control to give hiring missions the best outcome. Founded by Patrick Valtin, the job-matching assessments and internal evaluations provide vital information about potential and current employees to human resource professionals, executive coaches, management consultants and CPAs.

Specifically, the Recru-Tec™ pre-hire assessment can detect bully personalities. Based on an evaluation of over 25,000 applicants, Patrick Valtin has come to the conclusion that no matter the talent, competencies or experience, the odds of a successful hire are very, very low if the selection criteria of willingness and ability to contribute to one’s team’s success and happiness are missing. For more information on HireBox and its successful tools for recruitment, assessment, hiring, onboarding and retention, visit http://www.HireBox.com.

About Patrick Valtin

Patrick Valtin is the president and CEO of New Era Management and HireBox, as well as an international speaker and author. Considered an industry leader in recruiting, pre-employment assessment, personnel performance evaluation and human resources development, he has trained more than 125,000 people in more than 35 countries over the last 29 years. Patrick Valtin was an international business consultant for the Belgian government between 1986 and 1988, later starting his Belgian company, U-MAN, in 1988. The company remains today the largest training company in the country for small businesses. Valtin received an MBA in International Business Studies from the Moore Business School at the University of South Carolina in 1982. His clients over the past 22 years have included Ford Motor Co., BMW, Mercedes, Motorola, IBM and Century 21. His book, No-Fail Hiring 2.0, is a bestseller on Amazon.

(1)    Kade, Ryan. “Employee Theft Causes 30% of Business Failures.” BusinessZone, 7 Apr. 2017.
(2)    The Association of Certified Fraud Examiners. “About the Report,” from “2014 ACFE Report to Nations.”
(3)    The Association of Certified Fraud Examiners. “2016 ACFE Report to the Nations.” ACFE, ACFE, 2 Feb. 2016.
(4)    Kade, Ryan. Ibid.
(5)    Valtin, Patrick V. No Fail Hiring 2.0: How to Attract, Select and Recruit Your Best Employees in An Overly Competitive Marketplace!, p. 29. M2-Tec USA Inc., 2012
(6)    2010 Fraud Report to the Nations – Key Findings and Highlights.” ACFE.com. Association of Certified Fraud Examiners. n.d. Web. Aug. 14, 2010.

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