Expense Report Fraud with Extreme ConsequencesDubious expense reporting is a quiet scourge in the office world. Unfortunately for one man, there was suddenly noise everywhere over his reimbursements. Sasha Frere-Jones, a music writer for the LA Times, left suddenly after a preliminary investigation into his reimbursement fraud. He filed a $5,000 expense report for a trip to an exotic dance club, which turned out not to be related to his business. This opened up a host of other unethical decisions he seemed to be making, including accepting sponsored trips and trying to exchange coverage for transportation to music festivals.
This level of fraudulent activity is shocking for the paper, which has to review all of his past submissions in much greater detail. While it’s unlikely that the same exact scenario would take place at another company, it is possible that expense report fraud is a problem of some size at many, if not most, companies. Expense report fraud is rated as the third most controllable cost for most businesses. The main problem is that the increased number of people who have access to expense reports leaves the opportunity for fraud more open. Growth is your goal, so naturally you don’t want to avoid hiring new people. Just remember that new employees are potential risks for exposure and be diligent in your hiring process.
Individual cases of expense report fraud, on their own, aren’t too expensive or problematic. People may make mistakes and mischaracterize expenses occasionally. But it only takes one or two bad apples to spoil the whole bunch. An individual who has figured out how to sneak things through the system and is generally well-trusted by the organization can find ways to subtly manipulate their reimbursements and get additional expenses approved. On average, a company loses $50,000 when they fully investigate reimbursement fraud, although actual damages are difficult to calculate in full, much less regain. Most often, fraud is committed by one of a few methods:
- Mischaracterizing expenses
- Claiming higher expenses
- Duplicating reimbursements
- Fabricating expenses
In all of these scenarios, prevention is the most important tool to keeping your reimbursement process successful and fair. Huge crises (like the one Frere-Jones has invariably created at the LA Times) often lead to the imposition of stricter guidelines than are necessary in the interest of added security. It’s great to reconsider your security in the age of receipt generators and credit card forgery but you also have to consider the level of frustration your employees will experience creating an expense report and balance these two needs.
The key to prevention in modern business is software—finding a customizable, reliable software engine that meets all of your needs. Expense reporting modules should allow you to require receipts for varying types of expenses, set dollar thresholds for categories, and enforce supervisor review requirements that you’ve established. A SaaS technology provider like NextProcess can help you create a better submission process for expense reports and reduce fraud potential throughout your organization. Take advantage of the new technology available to ensure that your employees are meeting your highest standards every time.