Dishonest employees can see an opportunity to steal from the company through expense reimbursements. If you don’t have a strong travel and expenses policy that is routinely monitored and enforced, you open yourself up for the risk of expense reimbursement fraud. Some common examples of fraud schemes that impact everyday companies are:
- Double billing: seeking reimbursement for the same expense in different months
- Charging personal items such as gas, groceries, school supplies, etc.
- Falsifying receipts
- Billing for travel and expenses that were cancelled or didn’t take place
- Manipulating receipts
- Inflating actual business expenses
- Seeking reimbursement for fictional expenses
- Inflating mileage totals
- Overcharging the company card
Some of the red flags for these schemes include failure by employees to provide receipts, employees exceeding allowable expense limits, employees seeking reimbursement months after expenses took place, and higher expense amounts by employees in comparison to other employees in comparable positions.
How do you prevent or detect fraudulent expenses? We recommended the following safeguards:
- Create and maintain a travel and expenses policy or set clear guidelines.
- Have a formal disbursement procedure for expense reimbursements.
- Train personnel in charge of approving expense reimbursements on what is allowable, how to spot questionable claims, and how to question expenditures.
- Require original receipts and documentation.
- Implement the use of corporate charge cards and reconcile the credit activity reports on a monthly basis.
- Routinely audit a sample of reimbursements to ensure the policy and procedures are being followed accordingly.
- Discipline offenders.
Most importantly, have management lead by example. By having management follow the expense reimbursement policy and guidelines in place, this sets a good organizational tone at the top.
Jonathan Poppel, CPA