By Chrissie A. Powers, CPA/CFF, CFE, CVA
As we begin fiscal year 2011, we still find the economy in fiscal turmoil. The financial pressure of doing more with less is being felt by the employees as well as the business. We see the area of internal controls and security being downsized by businesses leaving the conditions ripe for employee fraud to occur. The employees are feeling the financial pressure as spouses are laid off and prices of everyday items are increasing.
One of the most likely means for the employees to reduce this pressure is to steal from their employer. Expense reports are submitted frequently by many employees and thus are likely to be an area that can be manipulated. The average expense reimbursement scheme costs the employer $33,000 in losses per occurrence. The main categories on an expense report to watch are: airfare, lodging, meals and entertainment, car rentals and fuel.
We have noted employees submitting claims twice for the same expense. Employees have been caught using bogus receipts to get reimbursed for expenses never incurred or flat out inflating the expense. Some employees have been noted to submit their personal expenses for reimbursement through the company as well.
Ever have an employee reimbursed for airfare that is never used? For example, Suzie books and pays for her ticket far in advance of her travel. Then Suzie books another ticket two weeks in advance of the travel at a much higher rate on a second airline. Suzie then cancels the more expense ticket, but submits the receipt on her expense report and keeps the difference. Better yet, Suzie submits both tickets on expense reports. The first, back in May when she booked the September trip and the second, in September when she actually travels, four months apart.
We recommend that companies increase their due diligence and review expense reports for fraudulent activities on a routine basis.
Some best practices for expense report reimbursements include:
Documenting an expense policy and requiring detailed expense reports to be submitted is simply not enough to deter employees from falsifying their expense report. The company must review these reports to deter fraud and minimize the Company's exposure. Expense Reimbursement Fraud can mean the difference from your Company having a profitable 2011 or being in the red.
If you have additional questions or concerns regarding expense report fraud, don't hesitate to contact us.