Misappropriation Schemes – Expense Reimbursement Fraud

Overview

Common indicators, resources and prevention tips for expense reimbursement misappropriation schemes.

Description

Employees submit false or overstated business expenses and receive reimbursement from their employers. The amounts are recorded on the company’s books, and are likely supported with receipts and/or invoices submitted by the employee.

This scheme can occur in a variety of ways:

• Submitting expenses that do not qualify for reimbursement (e.g., personal expenses)

• Manipulating receipts (or mileage) to increase the amount due

• Submitting expenses to more than one payee (e.g., employer and external organization)

• Submitting the same expense for reimbursement multiple times

Indicia

• Higher than expected mileage costs

• Higher than expected meals and entertainment costs

• Higher than expected frequency of other expenses claimed for reimbursement with a purported business purpose

Validation Resource(s)

• Verify appropriateness of mileage claimed for employee trips via an Internet map program

• Compare dates expense incurred dates to employees’ work schedules

• Require detailed expense receipts if not provided

Prevention Tips

• Require detailed receipts, including documentation of business purpose

• Require that meal and entertainment receipts include the number and names of attendees

• Ensure that employees’ supervisors review and approval all expense reports prior to payment

• Establish policy for approval of executive management expense reports (some organizations require approval by a board member)

• Attach conference schedules to expense reports, as applicable

• Use standard daily per diem rates for meals and incidentals

• Establish budgets for travel and entertainment expenses by person/level, and perform budget to actual reviews of travel and entertainment expenses for each employees at least quarterly