The Network and BDO Consulting Release Third Quarter 2011 Findings in the Quarterly Corporate Fraud Index™

ATLANTA – The Network, Inc., a leading provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO USA, LLP, today announced the third quarter 2011 findings of the Quarterly Corporate Fraud Index™, a comprehensive examination of fraud incident report activity from almost 15 million employees worldwide.

For the third quarter of 2011, the Fraud Reporting Percentage (FRP) increased to an all-time high of 21.1 percent, exceeding the previous record high set last quarter. The FRP statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,400 organizations worldwide. 

Other third quarter 2011 findings include the following:

• FRP (the percentage of fraud-related reports versus all reporting activity) increased 2.2 percentage points – from 18.9 to 21.1 percent – compared to the same quarter in 2010
• Fraud-Related Incidents (FRI), the total number of reported fraud-related incidents,  saw yet another quarterly increase – 17.6 percent – compared to the same quarter in 2010

“The sustained high fraud reporting rate over the past several quarters shows that organizations are continuing to focus on capturing incidence of fraud, albeit reactively,” said Luis Ramos, CEO of The Network. “This could be due to stronger corporate compliance programs and increased employee confidence regarding their company’s anonymous whistleblower reporting systems. It is reassuring to see that in the first quarter following the effective date of the Dodd-Frank whistleblower provisions, reports from whistleblowers have not diminished.”

While not specifically reported in the Fraud Index, “incidents involving some form of theft continue to be the most common type of fraud,” Ramos continued.

Third quarter comparisons of FRP for the past seven years are as follows: 

• 3Q 2005 = 10.3%
• 3Q 2006 = 12.5%
• 3Q 2007 = 13.3%
• 3Q 2008 = 18.6%
• 3Q 2009 = 20.2%
• 3Q 2010 = 18.8%
• 3Q 2011 =21.1%

 Third quarter comparisons of FRI for the past seven years are as follows:

• 3Q 2005 = 2579
• 3Q 2006 = 3722
• 3Q 2007 = 4988
• 3Q 2008 = 5697
• 3Q 2009 = 6173
• 3Q 2010 = 5892
• 3Q 2011 = 6938

"Fraud is not necessarily more widespread today than it has been in the past,” said Glenn Pomerantz, partner at BDO Consultingand a Certified Fraud Examiner. “However, there is greater awareness of fraud and the risks it poses to companies, so employees have become much less tolerant of unethical behavior.”

Pomerantz continued: "The real measurement comes in how an organization leverages its proactive and reactive compliance tools – the employee hotline, risk assessment surveys, investigative procedures, communications, etc. – to deal with fraud and reduce its financial impact on the business."

The Quarterly Corporate Fraud Index is compiled from actual incidents reported by clients of The Network and is analyzed by The Network and BDO Consulting. Fraud-related incidents include reports on corruption, theft, accounting and audit irregularities, misuse of assets, conflicts of interest and FCPA violations.

For more information regarding the Quarterly Corporate Fraud Index, visit www.tnwinc.com or email corporatefraudindex@tnwinc.com. 

About The Network, Inc.
The Network, Inc. is a leading provider of governance, risk and compliance solutions that help organizations mitigate risk and promote organizational compliance. Through the integration of on-demand software and services, The Network helps clients identify, communicate, resolve and mitigate risk issues and incidents. Established more than 28 years ago, The Network serves thousands of organizations in every industry, including nearly 50 percent of the Fortune 500. For more information, visit www.tnwinc.com.

About BDO Consulting
BDO Consulting provides litigation, investigation, business restructuring and risk advisory services to clients in the United States and internationally. Our highly experienced and well-credentialed professionals leverage the global industry and accounting knowledge of the BDO international network, providing rapid, strategic advice to assist our clients.

BDO Consulting is a division of BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited. BDO International Limited is a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. www.bdoconsulting.com