Expense Fraud is Costly but Preventable

expense-fraudExpense Fraud is Costly but Preventable

It is just a few dollars here and there, right? An employee may take a carefree stance on the use of the company credit card or expense reimbursement policy.  The reality is, expense fraud is very common within organizations of all sizes. The median impact of each fraudulent expense case on a company’s finances is $40,000, according to the Association of Certified Fraud Examiners. Having said that, all of the cases ARA has worked which involved expense fraud has been well into a six figure loss.

Expense fraud can come in many forms such as falsified travel and mileage reports, billing for items never purchases, excessive reimbursement for leisure, use of company credit card for personal expenses or submitting the same receipt for reimbursement multiple times.

More often than not, expense fraud can be averted if companies implement fraud control policies and procedures and most importantly, periodically audit those controls to ensure employees are not circumventing the controls. These policies must be actively enforced.

Tips to Prevent Expense Fraud:

  • Make sure you have detailed expense policy that incorporates the use of a company credit and how travel expense is handled
  • Review the company credit statement on a monthly basis and question any item that appears personal in nature
  • Require original AND detailed receipts for all expenses paid for on the company credit card and for those expenses where a reimbursement request is submitted
  • Require employees list the business purpose and names of parties they are meeting with
  • Conduct an expense audit on a regular basis to detect any misuse or abuse

A recent embezzlement case we investigated involved an employee who used the company credit card to purchase over $750,000 in gift cards for personal use.  This fraud scheme continued for five years before being detected.  The employee concealed the fraud by manipulating the credit card statements which were presented to management and concealed additional check payments made to the credit card company by manipulating the accounting system.  The fraudster was a “trusted employee”.

To learn more about how to protect yourself against employee fraud, call ARA at 636-346-9273.