Maintaining strong controls and consistently reviewing expense reports will help you nip problems sooner rather than later when it comes to expense reimbursement fraud.
Fictitious expenses employees may submit
- Charging for items used either personally or for unauthorized business purposes (alcohol, electronics, gas, groceries, leisure activities, etc.).
- Billing for travel and expenses that never materialize (canceled airline tickets, convention registration fees, tuition reimbursement, professional dues payments).
- Seeking reimbursement for items that were never purchased (office supplies, gifts for clients).
- Collusion by employees who both billed separately for travel or mileage when they traveled together.
- Outright falsifying or manipulating of receipts.
Examples of inflating business expenses
- Claiming meals and entertainment reimbursement in excess of allowed per diems.
- Adding tips to the reimbursement copies that were greater than what was actually left.
- Adding tips when tips were already included. Flying first class or using luxury transportation when modest means may be available and more applicable.
- Using inflated mileage totals for auto travel.
Establishment of a travel reimbursement policy
- Require original documentation to be submitted with reports or maintained for audit purposes.
- Establish a formal review process in which project managers or the controller independently reviews the reports.
- Routinely question expenditures that look extraordinary or abnormal.
- Have all disbursements made formally through accounts payable or payroll. Discourage cash advances.
- Limit corporate charge cards for greater control and review all credit activity periodically.
- Audit annually a sample of expense reports to ensure they meet the company’s established guidelines.
- Have employees pay expenditures and get reimbursed or have the company pay the expenses directly. Don’t flip-flop between the two allowing possible duplication.
- Punish offenders found to be violating or falsifying their expense reports accordingly.