The COVID-19 Pandemic, which began over a year ago, has changed the workplace in many ways. Some of these changes have been for the better, such as reduced office space overhead for employers. Other changes have been for the worse, like employee isolation, mental illness, and low team morale.
One alarming trend that has been shown in recent reports is that employee fraud, waste and abuse have increased during the COVID-19 Pandemic.
In this post, we’ll discuss this trend in detail. Specifically, we’ll cover:
- Reports show employee fraud, waste, and abuse have increased during COVID
- How This Trent Relates to the Fraud Triangle
- What Employers can do to Combat this Trend
Reports Show Employee Fraud, Waste, and Abuse have Increased During COVID
A recent report by the risk mitigation technology firm Oversight reveals that instances of employee fraud, waste, and abuse have increased during the pandemic. This report specifically describes such instances in terms of spending and purchasing.
According to the report, overall purchasing activity has decreased during the pandemic. This is probably due to reduced revenue and uncertainty about the future of many industries as a result of the world-altering year of 2020. However, the report also found that:
- Spending risk has nearly tripled in the last year. A comparison between 2019 and 2020 shows travel and expenses decreased by 55%, but violation rate increased by 29%.
- Out-of-pocket expenses that are considered to be “risky” have increased. Starting in March of 2020, they increased as high as 120% of what they were before the pandemic. One potential explanation for this spike is that many workers had to pay to set up virtual workspaces out-of-pocket. Reimbursements for this type of expenses are complex and inherently carry a lot of risk.
- Two other risky expense categories are “miscellaneous” and “mail/phone orders.” These two expense categories accounted for a greater portion of overall spending in 2020. The potential issues with these categories are obvious when considering the vagueness of expenses that are classified as “miscellaneous” and the ease of abuse with expenses classified as “mail/phone orders.”
Although the report we’ve referenced in this post only discusses financial abuse in terms of purchasing and expenses, it’s easy to consider how other forms of business fraud, waste, and abuse may have increased during the last year. In the following section, we’ll explore these causes.
How This Trend Relates to the Fraud Triangle
Organizational behavior experts have historically explained workplace fraud, waste, and abuse in terms of the “Fraud Triangle.” The Fraud Triangle presents three factors that heavily influence whether an employee will engage in behavior that could be considered fraudulent, wasteful, or abusive. The three elements in the fraud triangle are:
Let’s take a moment to consider each of these elements as they relate to working remotely during the pandemic. For the purposes of this section, we’ll refer to “fraud, waste, and abuse” simply as, “fraud.”
Employees are more likely to engage in fraud when the there are many opportunities to do so. Generally speaking, whenever there is less supervision over employees, there will be more opportunities for fraud. Fewer interactions with management and supervisors may cause an employee to feel like they will be able to get away with fraud more easily.
This presents a problematic dilemma for employers in the era of remote workers. With employees potentially scattered all over the country, how can an employer properly make sure employees are not wasting resources or participating in other abusive or fraudulent behavior?
As we’ve explained in recent posts, employees are experiencing more stress now than ever before. This is especially true for younger workers who are working remotely. Uncertainty about the future can be a primary cause for this stress.
If employees feel worried about the future, those feelings will likely coincide with feelings of added pressure to care for themselves and their families. The fear of being laid off or experiencing other employment hardships could cause employees to make rash decisions to engage in fraud to help them mitigate perceived financial risk.
The third and final element of the fraud triangle is rationalization. Just like fear of an uncertain future can make an employee feel added pressure to commit fraud, the same fear could make them try to rationalize their fraudulent decisions.
For example, consider an employee who uses company money to purchase a personal item. The employee might say to themselves, “This has been a hard year for me and my family. I’ve had bad luck. I deserve this item. It’ll help me be a better employee in the long run, so it’s no big deal that I spent company money on it.”
What Employers Can Do to Combat This Trend
After reading the previous sections about the fraud triangle and trends related to fraud, waste, and abuse trends in the workplace, you may find yourself concerned about the status of your workforce. Managing these unique and unprecedented circumstances is no easy task. Consider the following tips:
- Make sure you are regularly checking in with your employees, especially if they are working remotely. Every employee should have a short phone call or virtual meeting with their immediate supervisor at least once a week, if not more. The more often they touch base with you about their projects and other priorities, the less likely they will be to seize an opportunity for fraud.
- Do everything you can to reduce stress for your employees. Talk with your company’s health care provider and your HR staff to make sure mental health options are available for your employees. Provide perks such as gym reimbursement or exercise incentives to help your employees relieve stress in healthy ways. Doing so will reduce the chances of employees committing fraud due to pressure or rationalization.
- Don’t be afraid to consider installing monitoring software on your employees’ computers to catch certain types of fraud, waste, or abuse. However, you’ll want to be fully transparent about this practice. If you decide to implement a new software to help the company reduce fraud, make sure employees are involved in that decision process and help them understand how it is for the good of the company.
The COVID-19 pandemic has created opportunities, pressure, and rationalization for employees in the modern workplace to commit acts of fraud, waste, and abuse. Data provided by leading risk mitigation firms shows that this is certainly the case for purchasing fraud. A thoughtful consideration of the “Fraud Triangle” makes it easy to see how other aspects of fraud are more common now as well.
To help reduce the chances of fraud in their workplace, employers should consider doing the following:
- Make sure you are regularly checking in with your employees.
- Do everything you can to reduce stress for your employees.
- Don’t be afraid to consider installing monitoring software on your employees’ computers to catch certain types of fraud, waste, or abuse. However, involve your employees in this process.