How to control fraud on expense reports

Expense Report Fraud: Inappropriate submissions on the rise in Canada

A full 58% of Canadian CFOs reported an increase in inappropriate expense submissions in the last three years.1 Ouch.

While there are many potential reasons for the uptick in improper claims, the major culprit is simply… process. Employees today are spending more money across more spend categories and using more payment methods than ever before. 

While having more empowered employees on your team is beneficial overall, unfortunately the diversification in employee-initiated spending leaves organizations vulnerable to more forms of expense report fraud, too.

Thankfully, fraud detection technology is keeping pace with the fraudsters. Read on for a glimpse inside the common scams along with tips for how your organization can prevent expense fraud from occurring in the first place.

10 sneaky scams (some may surprise you):

We’ve included the old and the new on this list. How many of the following scams have you heard of?

Pocketing the per-diem: Instead of utilizing a daily allowance (per-diem), the traveller profits from it by using a small portion of the allowance and pocketing the rest.

Magnifying the mileage: Employees may either habitually pad mileage or carpool to meetings but each claim the mileage individually.

Topping up the tip: A common scheme, an employee may write in a generous tip of 20 or 25% on a dining receipt for reimbursement, when in fact they only left 10 or 12%. 

Terminating the ticket: This one’ll cost you! A travelling employee may purchase an expensive refundable air ticket at the full price as well as a second, un-cancellable ticket (perhaps even in a lower class) at a discounted price. The dishonest employee returns the pricey ticket, flies on the secret cheaper ticket, but submits the receipt for the higher-priced ticket. 

Reaping reimbursement on returns: An employee may purchase more supplies than are actually required for a project, return half of the items, but submit the full original receipt for reimbursement.

Double dipping: Sometimes accidental and sometimes intentional, double dipping occurs when an expense is claimed twice. For example, if two employees dine together and they each get a receipt for the total bill, both employees may claim the entire meal instead of their individual portion. Or, one employee may submit the dining receipt now and again in three months to double up on the refund. 

Passing off the personal: When employees are on a business trip, it can be tempting to slip in a few personal items in with the legitimate business expenses. 

Faking the receipt: Counterfeit receipts are a fairly simple DIY project on the computer. Easier still, a simple online search for “create a fake receipt” yields seemingly endless options for creating completely authentic-looking counterfeit receipts for free.

Revising the receipt: In this case, a receipt isn’t a complete counterfeit, however, it has been altered to display a higher amount than was actually spent. Hand-written receipts are especially easy to modify as are electronic receipts that can be changed digitally and printed with no visible signs of tampering.

Claiming money that has never been spent: Perhaps a client treated your employee to a meal and the employee got a copy of the receipt. Not only did the employee score a free lunch, they can submit the receipt for reimbursement. Similarly, employees may also collect receipts from friends and family and submit them as business expenses.

Prevent expense report fraud

Thankfully, most employees are honest! However, the approximate 5% of employees who do commit expense fraud can cost you a lot when the practice goes undetected. Here are seven ways to prevent fraud and foster a culture of compliance:

1. Have a robust Expense Policy that clearly communicates the rules and consequences of deception to employees. If you don’t have an Expense Policy, check out our own SAP Concur Expense Policy Builder. It’s a free resource that makes building a customized policy easy (and you don’t have to be an SAP Concur customer to use it.)
2. Require pre-approval for certain types or amounts of expenses.
3. Require employees to use a corporate card for certain types or amounts of expenses.
4. Use an automated distance tracker instead of self-reported mileage logs. (Organizations are often shocked by just how much mileage padding has been costing them when they compare mileage claim totals before and after making the switch!)
5. Employ automated audits for some or all expense claims to effortlessly flag anomalies, substantiate receipts, identify non-compliance, eliminate double dipping and more.
6. Build compliance in to the tools employees already use to make purchases and book travel. Integrated rules enforce themselves and save everyone time.
7. Discipline offenders quickly when fraud occurs (or when it is attempted). This may be as simple as issuing a warning for a small offense or as unfortunate as terminating an employee and pursuing legal action for sustained and deliberate fraud.

At SAP Concur, we help organizations implement automated safeguards to prevent fraud before it occurs. Learn more about our services or download our fraud-busting tip sheet for more suggestions on addressing dishonesty on expense reports.

LEGAL: 1 Robert Half Management Resources, June 2019 Survey.