Expense Report Fraud: How Does It Take Place and Ways to Tackle Them

Expense reports are considered to be very important for business analytics purpose. But many a times these reports are misused to conduct fraudulent activities. Employers provide their employees a bonus for their performance, business trips, and in some cases for their long working hours. But, employees unethically fiddling and tampering with their expenses can turn out to be a horrible matter of concern.  A survey conducted recently by Association of Certified Fraud Examiners states that employees of upper level and executives in an organization account for nearly 27% of expense reimbursement fraud cases. Expense reimbursement frauds are extremely difficult to trace and manage. Internal controls for monitoring expense reports may not work properly at times and relying on manual process introduces chances for human error and inaccurate data entry.  Today, with laser printers and scanners it is quite easy to fake and alter receipts. Beyond fake receipts, there are numerous ways to cheat a business organization. Do you know how these expense frauds occur and the ways to tackle them? Here we present few ways of fraudulent activities and steps to handle them.

  • Double Billing Methods
    In this case, the employees charge a certain amount towards the corporate credit card for reimbursement along with submitting a personal expense reimbursement with a receipt attached to it. They can also submit the same charge twice in various time periods. Using an automated expense management software, an organization can control expense frauds that will send alerts about any duplicate transaction detected automatically.
  • Reports Are Different from the Actual Cost
    Employees also submit requests showing different reports and not the actual one. For instance, if a car ride is $7, it is can framed and submitted as a reimbursement request for say, $12. Internal policy within an organization can be so designed that it will not require receipts below $25, and hence unintentionally leaves a window for committing expense fraud.
  • Purchasing More Than Needed
    There are instances where an employee purchases abundant office supplies and submits the purchase for reimbursement, but does not submit the receipt at the same time. He receives reimbursement and returns office supplies for refund.
  • Claiming False Business Trip Expenses
    One of the most common fraud schemes includes buying a first-class ticket and then cashing it for two coach tickets for taking a friend or a family member along with them. Similar fake schemes may be employees stating that they took a client out for a business dinner, but in reality, it was a family member. For travellers, it is very easy to inflate distances travelled for business trips, and in most cases the accounting team or managers will not minutely scrutinize expenses over miles travelled if the explanation seems reasonable.
  • Claiming Charges That is Not Related to Business
    Many employees think that organizations will sponsor them when they step out on the road. So, they start claiming for their personal purchases without any proof.

How to Safeguard Expense Report Risks

You can find a number of ways for controlling irrelevant expenses along with strict company policies that can combat expense reimbursement frauds. This may include stating clear, transparent, and defined travel policies and enforcing consequences for violating the rules. One of the best practices may also involve a “pre-trip” approval for all costs that will include lodging costs, meals, and non-flight costs.  Moreover, rise of automated expense management platforms like SutiExpense helps accountants and managers in the review process and dive deeper into expenses. With technological advancement, fraudulent expenses can be easily identified and checked via policy enforcements, trip authorization protocols, and spending category limits.

Organizations must utilize new technologies by integrating applications with the corporate cards and directly submitting receipts electronically so that they cannot be altered. The same thing can be done by using smartphones by uploading receipts immediately in order to prevent them from getting misplaced or lost. There are other automated expense tools that can be utilized for integrating corporate credit card data, allowing quicker reimbursement.

Your organization can start by initiating a formal review process where managers can review employee reports and routinely question expenditure that may look suspicious or abnormal. It is important to keep in mind that larger problems become even more difficult to solve later. You can also review credit activity reports every month as these reports will help you in determining the charges that are cancelled or credited back to account.

The Bottom Line

Monitoring activities are truly crucial and expense reports are always at significant risk of getting tampered for different organizations. To commonly, employees are considered honest and trustworthy and their reports are not examined properly. By maintaining rigid controls and reviewing expense reports more often for compliance eliminates upcoming bigger problems. An automated travel and expense tools can clearly state “out of policy” reports related to expense and thus can investigate and resolve them accordingly.


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