Reporting Incidents of Misuse or Misappropriation of Assets
By Tayte Domine
Tayte Domine is a summer intern here at Verensics. She is going into her senior year at Embry- Riddle Aeronautical University majoring in Global Security and Intelligence Studies with a focus on Pre Law and Law Enforcement.
Is misuse or mishandling of company assets reported consistently?
Unfortunately, no. Incidents of misuse or misappropriation of assets are grossly underreported. According to NAVEX’s 2023 Hotline & Incident Management Benchmark Report, only 3.9% of all reported incidents in 2022 were related to misuse or misappropriation of assets.
Of the few reports generated, more than half of these tips came from current employees. How many reports are the real deal? According to the same NAVEX review, in 2022, 67% of reports regarding misuse or misappropriation of assets were substantiated.
There are a handful of interpretations and definitions for what constitutes a “misuse of company assets,” so let’s establish the terms. Simply put, it is when company assets or time is used improperly. This can be employee theft, inaccurate expense reporting, time clock abuse, and more. The misuse or misappropriation of company assets can lead to a number of damaging events for a company including financial loss, reputation damage, legal issues, all while likely contributing to a toxic work environment.
Of the many types of misappropriation possible, the Association of Fraud Examiners (ACFE), 2024 Report to the Nations, states that asset misappropriation schemes are the most common, taking up 89% of cases.
While there are a number of ways investigators are made aware of fraud within their workplace, internal tips are the most common (this is unique to corporate fraud investigations. Within retail, internal cases are overwhelming generated via exception based reports). There are two types of internal reporting—named reporting and anonymous. Many employees prefer to report anonymously to avoid repercussions. According to NAVEX, in 2022, 64% reports on misuse or misappropriation of assets were made anonymously. Reporting anonymously gives an employee a sense of security; they feel as if their actions will have no consequences since no one will know it was them. Employees are more likely to put their names behind reports when they feel as if there will be no repercussions against them.
What are some good methods for companies to use in order to allow their employees to report both anonymously and named? Hotlines are one way that allow for an employee to report an incident, this can be a phone number or an email address. Hotlines can be anonymous or named, it is up to the individual reporting to decide what they want. However, according to the Association of Certified Fraud Examiners, 91% of hotline programs receive anonymous reports.
This is a simple and effective method for companies to use, all an employee has to do is call or email in an incident they believe needs attention. Another effective method companies can use is web based reporting. Companies can set up a form online that an employee may fill out to give all the information about an incident without actually having to physically talk to someone. Employees may also have the option to go have a face-to-face conversation with human resources or a supervisor about an incident. In the end, how an employee reports is up to them and whether or not they want to be involved is a decision only they can make. Employers can provide them with the necessary tools and from there on it’s in the employee’s hands.
In the end employees just want to feel safe, making the decision to come forward difficult. But what if you could make reporting easier? For instance, providing a questionnaire that allows employees to report misuse without committing to a formal report could increase reporting rates. Would you be more comfortable filling out the questionnaire rather than making the decision to call a hotline?
At Verensics, we offer this type of solution, an online questionnaire tailored to your company and your employees to help detect these threats effectively.
After a report is received and substantiated, the next steps involve addressing the issue appropriately. This may include referring the case to authorities for prosecution. Alan Saquella, Professor of Global Security and Intelligence at Embry-Riddle Aeronautical University, says “At my last organization, we only referred 5-10 percent for prosecution. However, many companies prefer to go after perpetrators via civil court or similar actions to avoid publicity”. In addition to this, Saquella also says that “those who report the crimes are usually working closely to the perpetrator and prefer to report anonymously to protect their privacy and minimize acts of retaliation.”
While incidents of misuse or misappropriation of assets may not be reported as frequently as other issues, they can have serious consequences for a company. Encouraging and facilitating reporting is crucial in uncovering and addressing such incidents effectively.
