If your company reimburses employees for travel expenses, chances are you are the victim of fraud.
Surprised? This means it’s time to up your game by creating a tight travel and expense reimbursement policy—one that allows for fair compensation while rooting out dishonesty, says Mary S. Schaeffer, an accounts payable expert.
In an Eli Financial conference, “T&E Fraud and Shenanigans Prevention,” Schaeffer explores common reimbursement fraud methods and reveals what top-tier companies are requiring when it comes to receipts and documentation.
Travel Expenses: The ‘Gateway’ Fraud
The Institute of Internal Auditors (IIA), in their report “Travel Expense Reporting Fraud,” said that the risk for fraud and abuse in travel expense reimbursement is significant—and could lead to great losses down the line.
“With the continuing globalization of business, we will see a corresponding increase in travel and entertainment to facilitate this growth,” the report said. “The level of expenditure and the amount of people involved with it means that there is an inherently higher risk of potential problems.”
Anecdotal evidence shows that travel expense fraud rates may be higher than 6 percent, the group said. Plus, it’s difficult to prove the full extent of losses, and, in any case, financial recovery is unlikely.
Beware: Travel expense fraud also typically signals that there are bigger risk issues lurking. Potential abuse can include mischaracterized expenses, overstated expenses, fictitious expenses, and multiple reimbursements, the report said.
The bottom line with this type of fraud—where recouping is unlikely and losses may add up—is that your best defense is a good offense.
The High Cost of Fraud
A recent report from the American Association of Certified Fraud Examiners, “Report to the Nations on Occupational Fraud and Abuse,” confirmed that 5 percent of a typical organization’s annual revenues could be lost to fraud of one sort or another—including travel and expense fraud. In 2014, more than 13 percent of large companies and 16 percent of small companies reported fraud related to travel expenses.
You need strong controls to shield your company, said Reggie Novak from the accounting firm Ciuni & Panichi. Clues that trouble with expense reports is brewing, he said, include:
- One employee with disproportionally high claims
- Claims that large expenses were paid for in cash despite access to a company credit card
- Submission of consecutively-numbered receipts over long periods of time
- Consistent submission of expenses at or just under the company’s threshold for undocumented claims
“Whether you’re a multinational corporation employing sales representatives traveling throughout the world or a small not-for-profit organization, you can fall victim to expense reimbursement fraud,” Novak warned.
Investigating Suspected Abuses: Caution and Discretion is Advised
The IIA warns that an investigation into suspected abuse is a serious affair: defamation issues can arise, reputations to your company and your partners are likely to suffer, and relationships can be severed.
“Remember,” the organization wrote, “there are no winners in these investigations.”
Whether or not an investigation moves beyond the office to involve the police, Schaeffer says that a company must have in place a strong set of protocols and policies to prevent travel fraud and shenanigans in the first place.
