One of the easiest ways for employees to steal from their company is via expense reimbursements. About 14.5 percent of all asset misappropriations investigated by the Association of Certified Fraud Examiners in 2012 were due to improper expenditure reimbursement. Theft from inside an organisation may be mitigated if strict controls are put in place, offenders are punished severely, and management sets a good example. Whether you manage a multinational corporation with salespeople all over the world or a little nonprofit with limited resources, your firm is vulnerable to fraudulent cost reimbursement schemes.
Workers requesting reimbursement for nonexistent expenses and firms overstating their true costs are the two most common types of scams. These are only few instances of the kinds of fictitious costs that have been discovered on expense reports:
- Charging for services or goods that are used for one’s personal use.
- Attempting to get money back for travels that were never taken and expenses that were never spent via invoicing.
- There was collusion amongst the employees, who made separate claims for travel or mileage reimbursement while travelling together but at the same time.
Intentional falsification or alteration of the receipts
Employees may increase a company’s expenses in a number of ways, some of which are listed below. To prevent expense fraud it is important.
- File a claim for repayment of any unreimbursable expenses, such as those incurred for meals and entertainment that exceeded the per diems allowed.
- Tipping should be reimbursed even if it was already included into the original cost.
- If they received any gratuities in addition to what was really left over, include these in their reimbursement paperwork.
- It’s inefficient to take a first-class flight or hire a limo service when more cost-effective alternatives exist.
- You should round up your mileage totals to maximise your chances of being reimbursed for your car travel costs.
Defenses and Precautions Against Fraud
Keeping your workers honest and protecting your business from fake expenditure reports is not hard to do. As a first step, you should establish reliable internal controls.
Establish some kind of trip reimbursement policy or set of standards to enforce if you want to keep tabs on this. It is important to clearly communicate to employees both the prohibited behaviours and the daily allowance amounts that are outlined in your policy.
- To facilitate an audit, the original documents should be submitted with the reports or filed away for a certain length of time.
- Kick off a formal review process when a department manager or other person with equivalent authority reads through employee reports. The payroll or human resources division should also do a short review.
- Any costs that appear out of the ordinary or unusual should be looked at carefully. As the problem worsens, it will become more inconvenient and costly to address.
Ensure that the accounts payable and payroll divisions are handling all payments in a timely manner. Workers shouldn’t be paid in advance if it can be helped. Implement the use of corporate charge cards to increase your degree of control. Whether a company uses corporate cards for transactions, it may check the status of each card and see if any charges have been made.