What Expense Report Fraudsters Don’t Want You To Know

bear trap illustrating expense report fraud
Expense report fraud is corrosive. If it’s happening at your company, it probably goes on undetected. At least it starts out that way, as a sneaky (non-compliant) purchase makes its way into an expense report submitted by a trustworthy employee or—heaven forbid—group of trustworthy employees. Unfortunately, that’s just the beginning.

Expense Report Fraud: It’s A Big Problem That’s Costing You

In their article, The Impact of Expense Reimbursement Fraud, global financial advisory firm Stout Risius Ross estimate that over $1 billion is lost to fraudulent expense reimbursement each year. Additionally, consider these statistics from the Association of Certified Fraud Examiners’ (ACFE) 2014 Global Fraud Study:

  • Median loss due to expense reimbursement fraud is $30,000
  • Median number months to detect expense reimbursement fraud is 24
  • Percent of fraud cases involving expense reimbursements is 16.5 for companies with less than 100 employees and 13.1 for companies with 100 or more employees

These insights show that expense report fraud is a major concern in the universe of occupational fraud—and businesses of all sizes need to pay attention to what’s going on within the details of their employees’ expense reports.

Spotting the Schemes

There are many ways a crafty fraudster can “work the system” to make money from their employer and, unfortunately, expense reports can be a goldmine. Purchases can be mischaracterized, like the $40 worth of candy expensed under “miscellaneous—trade show” that in reality purchased souvenirs for the kids. Transaction amounts can be overstated, like a $9 cab fare expensed as $15. And the hefty bar tab that’s submitted as a client meal—that’s flat-out fictitious.

These are just a few simple examples. According to the ACFE, there are other common travel and expense reimbursement fraud schemes that include:

  • Unassigned or unused credits—an employee’s business trip gets cancelled, for instance, and they receive a refund on their corporate credit card that they use to make a personal purchase rather than returning the money to their employer.
  • Duplicate or fictitious expenses—an employee or group of employees conspire to submit the same business lunch receipt, for example, using different expense reports.
  • Cash advances—an employee withdraws cash from an ATM using their corporate credit card and claims (fraudulent) business expenses in their expense report

And don’t forget about accidental fraud, wherein an employee submits a non-compliant expense thinking the transaction is reimbursable. Those new-fangled desktop computer speakers? Sure, they enhance your at-work multimedia experience, but they’re not a sanctioned expense.

What You Can Do

Don’t find out the hard way that expense report fraud usually begins as small but adds up over time. Nexonia Expenses can be an asset for your company, by increasing visibility, and reducing the risks of expense fraud.  It’s easy to miss fraudulent activities if you’re not looking carefully, especially if administrators rely on a manual process that leaves them with a constant backlog of expense reports. But there are things you can do to help stop expense report fraudsters in their tracks. We’ll share a recommended plan of action in an upcoming article.