Data Hub

Middle managers most fraudulent in Kenyan firms


Economic crimes by mid-level managers have become the biggest threat to companies in Kenya, a new survey shows, bucking a trend where junior and senior management were most linked to internal fraud.

A PricewaterhouseCoopers (PwC) report showed that economic crimes committed by middle-level managers have increased from 29 per cent in 2016 to 41 per cent in 2018 — signalling the rising risk paused this category of employees.

On the contrary, the economic crimes committed by both junior and senior management decreased over a similar window — indicating a shift of the internal fraudster to the middle manager.

Theft by junior managers dropped from 43 per cent in 2016 to 31 per cent in 2018 while those with senior management decreased from 24 per cent to 14 per cent over a similar period.

“This suggests that perpetration of an economic crime by an internal actor is most likely to be committed by a middle-level manager followed by a junior manager and is least likely to be committed by a senior manager,” PwC said in its report released last week.

Junior and middle managers execute the majority of the operational and management tasks in companies and most likely to engineer internal fraud by virtue of them having a deeper insight into the weaknesses of the organisation’s systems.

“It, therefore, behoves the senior management to continuously monitor the actions of their junior teams and employ sufficient supervisory structures and operational controls to curb fraudulent activities by the lower management team,” PwC says.

The consultancy, however, cautions that the trend does not mean that senior managers are a safe bet for companies.

“Unlike in Kenya, our survey reveals that the share of serious internal fraud committed by senior management globally continues to rise dramatically — up 50 per cent (from 16 per cent to 24 per cent) since 2016,” the report said.

Most of the economic crimes by internal managers in Kenyan companies were reported in operations and production as well as procurement and finance.

“Results of the survey also showed that 24 per cent of the respondents indicate that the principal function under which the main internal perpetrator resided was in the Operations and Productions function” PwC added.

“Procurement (14 per cent) and Finance (14 per cent) were the other two functions within which the internal perpetrator was most likely to reside”.

A separate survey by the Ethics and Anti-Corruption Commission (EACC) showed low-level employees are the biggest perpetrators of graft in the public service in Kenya.

In a report released in February, the commission said 48 per cent of the corruption complaints were against low-level personnel such as chiefs, assistant chiefs, clerks, and council law enforcement officers while 43 per cent of the grievances were pointed at middle-level officers such as inspectors and procurement officers.

The rest of the corruption complaints were filed against senior and top public officials such as Cabinet and principal secretaries, accounting officers and chief executives.