Uncovering the hidden cost of
staff fraud: an assessment of 45
cases in the UK
Mark Button, Dean Blackbourn, Chris Lewis and David Shepherd
Centre for Counter Fraud Studies, University of Portsmouth, Portsmouth, UK
Purpose – The purpose of this paper is to provide evidence on the additional costs of dealing with staff
fraud, beyond the initial fraud loss, based on 45 cases of staff fraud.
Design/methodology/approach – The research began with a “brainstorming” session with counter
fraud professionals to map all potential costs in a staff fraud. It then utilised a twin-track approach of a
survey and interviews. A survey was distributed using a number of methods yielding 28 usable cases.
Interviews were also sought with organisations willing to discuss staff fraud, which secured a further
17 cases. Both the survey and interview used the same questionnaire, although the latter enabled a
deeper questioning of participants.
Findings – This study examined 45 cases of staff fraud from a wide range of sectors drawn
predominantly from larger organisations. From each of these cases detailed, estimates of the costs of
dealing with the fraud were identied. Major additional costs included the costs of investigation, staff
suspensions, internal disciplinary costs, external sanctions, permanent staff replacement,
miscellaneous costs as well as intangible costs. The ndings identied signicant costs which are
signicantly above the initial value of the fraud, particularly on initial frauds under £25,000.
Research limitations/implications – Staff fraud is a very sensitive subject with many
organisations unwilling to reveal what happens when it occurs. The approach was therefore to secure
as much data as possible and as such this might not be representative of the broader economy.
Practical implications – The paper highlights the need for greater investment in prevention given
the substantial costs of staff fraud to deal with.
Originality/value – This is the rst attempt to gauge the full costs of staff fraud to an organisation.
Keywords Measurement, Cost, Hidden cost, Staff fraud
Paper type Research paper
There are a plethora of studies of varying sophistication and validity which seek to
estimate the costs of fraud to society and organisations (for some of the most high
prole: Levi and Burrows, 2008;ACFE, 2012;Button et al., 2012;KPMG, 2012;National
Fraud Authority, 2013). These studies, however, focus on the initial loss. The reality for
most victims of fraud is that the initial fraud loss is the start of a whole series of
additional costs which transpire for the organisation to deal with. There has been
limited interest in the additional costs of dealing with crime in general and none vis-a`-vis
fraud, rooted in an evidence base founded on research. The British Home Ofce in recent
times has attempted to estimate the costs of crime to society with two signicant studies.
In 2000, it was estimated that the total costs of crime to society amounted to £60 billion
(Brand and Price, 2000). Included in the additional costs beyond the actual loss were
security expenditure, insurance, lost output, victim services, health services, criminal
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Journalof Financial Crime
Vol.22 No. 2, 2015
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