How to control expense account fraud

January 9, 2013
in Featured Article,Office Administration

restaurant checkWhen Dave or Julie comes back to the office from a weekend business trip, do you or other supervisors just sign off on their expense reports?

What you may not know is that those mileage forms, taxi cab receipts and restaurant checks could be doctored or even phony. And are all those company credit card purchases business-related?

Often when employees feel undercompensated, they give themselves “raises” through fraud.

And according to a recent study by the Association of Certified Fraud Examiners, expense reimbursement makes up about 13% of company fraud with a median annual loss of $25,000.

Keeping your organization safe from employees who commit fraud requires you to maintain tight controls and take tough actions. Here’s how:

  • Communicate the company’s expense account policy. Make sure that guidelines for credit card use (e.g., no personal charges allowed) and procedures for reimbursement (e.g., submission of receipts) are regularly communicated to employees, so they can’t later try to shift blame by claiming that they were unaware of the policies.
  • Implement a formal review process. Regularly review employees’ expense reports for compliance with company policies and to catch errors.  
  • Review credit card bills with a fine-tooth comb. Compare credit card bills to expense reports to make sure that employees are not inflating business expenses or seeking reimbursement for items that were never purchased. Doing so will also help you detect personal charges that employees omit on expense accounts. Organizations that assume their employees to be honest and trustworthy and let expense reports go unexamined are at a greater risk of fraud.
  • Question any expenditures that look out of the ordinary. Giving employees the benefit of the doubt or waiting for a larger problem to build will only make the problem more difficult and more expensive to resolve later.
  • Discipline all offenders found to be violating expense account policies. If you allow violators to go unpunished, others are more likely to follow their actions.  
  • Lead by example. If management flouts the company’s expense policies, employees will think it’s OK for them to do so also.

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