MLR

Expense accounts: Are your employees ripping you off?

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Maintaining strong controls and consistently reviewing expense reports will help you nip problems sooner rather than later when it comes to expense reimbursement fraud.

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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.