The Fraud Examiner
Under Pressure: How Organization Incentive Programs Can Lead to Fraud
Mary Breslin, CFE, CIA
Founder and Managing Partner, Empower Audit
I’ve had a lot of professional nicknames over the years. “Scary Mary” was popular for quite some time, but more recently people have called me “Nancy” as in Negative Nancy. I don’t think I’m negative — I’m more of a realist, or I just have an appropriate amount of professional skepticism. Lately
the target of that professional skepticism has been incentive programs in particular.
Every organization uses incentive programs. Some organizations’ incentive programs can have positive outcomes and others only have moderate outcomes, but both can lead to fraud. So what causes one program to result in fraud while another does not? Unfortunately, there are many factors, but it
starts with the purpose of the incentive program. Is the purpose to inspire, punish, influence or deter?
Pressure takes many forms — professional versus personal, real versus perceived and positive versus negative. An individual may have personal pressure such as financial debt, or an organization may create professional pressure though unrealistic expectations or incentive programs. Incentive
programs can be either “positive” or “negative” in nature. Positive incentive programs reward desirable outcomes, such as accomplishing goals or exceeding expectations. Negative incentive programs take the form of punishment, for example, when employees are punished for not meeting expectations or not
achieving key performance indicators. Pressure can also be “real” — such as a negative incentive program that results in real consequences such as discipline or termination — or “perceived” pressure — believing “I deserve more” for my hard work and loyalty. But to the fraudster they are all equally real.
Pressure can take many forms, and each will have a different level of influence on the individual being affected.
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