Workplace fraud totalling millions of dollars is hitting firms at a time when they need every cent to climb out of the recession.

According to a survey by accountancy firm KPMG, New Zealand's top companies have been hit hard during the global financial crisis with the average reported fraud doubling in two years.

Stephen Bell, KPMG's national head of forensic practice, said the average cost of fraud at companies that took part in its survey grew from $1.9 million in 2008 to $3.8 million last year. He said the total level of fraud increased from $385 million (2008) to $441 million (2010).

"Not only has the average value of fraud doubled in a short space of time, but the organisations surveyed believe that only one-third of frauds are actually picked up," says Bell.

"This is particularly concerning as the results capture a relatively small portion of the business population. The real fraud price tag for New Zealand is substantially more."

Grace Haden is a director at Auckland private investigation firm Verisure Investigations. Before starting the firm in 2004 she worked for police, leaving the force as a prosecuting sergeant in 1989.

Among other things, Haden helps firms faced with employee fraud. She says committing fraud at work is too easy - partly because of computers, lax controls and poor oversight.

"Invoices can be produced and re-produced, with staff siphoning off invoice numbers," she says.

"It used to be very hard to cook the books but today it is so easy. A customer can get a bogus invoice and they unwittingly pay the money to the employee.

"I am a firm believer that there is only one way to control your business and that is to screen all changes to processes and procedures."

Haden says what employers need to look out for is staff who don't take holidays and who appear devoted to the firm - arriving early, staying late and working weekends.

"Invariably, these are the people who are most trusted within the firm," she says. "If you have the highest level of trust you are going to be beyond suspicion. And that can include the accounts lady. So many bosses don't understand the accounts and will say 'I leave it all to Mary - she is so good at the accounts'.

"But 'Mary' could be operating a bank account with the same name of the company and transferring company funds to her own account."

Haden says everyone should verify everything - a belt-and-braces approach where people shouldn't be able to open a bank account in a company name without the bank calling the listed company directors to confirm it is legitimate.

She also says many firms hush up fraud at work to save face and the reputation of their company with creditors and suppliers. A member of staff suspected of committing fraud will often be let go with a cash bonus to go quietly, she says.

"The thing about dishonesty at work is that no one wants to talk about it," says Haden. "Often they simply dismiss the person caught performing fraudulent acts. I have seen people sacked for fraud given a golden handshake so as to avoid a claim of unjustified dismissal."

Haden says the police aren't interested in investigating fraud of less than $1 million and that companies often have to hire a private investigator to root out a bad apple.

One reason for this, she says, is that "police are performance rated, so it is easier to issue a speeding ticket than spend time investigating white-collar crime.

"So a firm will have suffered a loss, then have to pay to get evidence against the employee," says Haden. "People are in business to make money. So if they can't get a confession they will make the suspect redundant and give them enough money to go quietly. The employee is then free to repeat their actions at the next firm they work at.

"The message employers are sending to the rest of their staff is that fraud is okay and that you'll get a clean reference."

Haden says in her experience people who commit fraud at work are often gamblers or have got themselves into financial difficulty - perhaps through no fault of their own.

"They will borrow cash from work, perhaps gamble it, but hope they can pay the money back later. There are two main drivers for workplace fraud - need and greed."

Haden remembers a lady whose parents died a few weeks apart, causing her severe financial pressure.

"She was the eldest daughter in a Samoan family and was expected to provide big flash funerals for the parents - the only way she could pay was to steal from her employer," says Haden.

"When we caught her out, she agreed to start paying the money back - but then her husband died ... so that was that."

Haden says one factor that is leading to what she sees as an increase in workplace fraud is that getting loans from banks and reputable finance houses is more difficult than it was a few years ago.

"Companies must be being ripped off left, right and centre - but New Zealand is portrayed as being so corruption-free that people don't believe it happens here," she says.

Fraud happens progressively over time and "normally takes 18 months before fraud is detected".

According to the KPMG report, the financial and insurance services sector remains particularly vulnerable to frauds - typically involving credit card fraud, irregular lending and bogus insurance claims.

"While external attackers lifted more than $349 million from the financial institutions surveyed, our survey shows insiders were the main offenders in all other sectors," says Bell.

"Fraud knows no boundaries," says Haden. "It can include siphoning off cash from a company bank account, taking $10 from the till or taking stock and selling it online - fraud can be as creative as the mind of the perpetrator. There are people doing things out there that we haven't even thought of."

Haden says fraudsters are often intelligent people and will volunteer to work in every department they can so they understand how their firm operates. Surprisingly, Haden says, fraud is not often detected without the help of whistleblowers.

"The trouble is we don't treat whistleblowers very well," she says. "In one case, the manager who employed me to find evidence of fraud in his firm was demoted by the company's overseas owners because they didn't want to think that fraud could be going on in the company."

Bell said whistleblowers were responsible for uncovering about 20 per cent of frauds, while fraud warning signs were overlooked in 38 per cent of major frauds.

"It's essential for companies to have a strong 'whistleblower' programme," says Bell. "Employers should have a whistleblower-protection policy and an anonymous external reporting facility.

"Fraud is incredibly costly, sometimes deadly, to business ... prevention and early detection is key to managing the risk of fraud."

Steve Hart is a freelance journalist.