By JASON THOMPSON
Partner, Director of Valuation and Litigation Services, Sponsel CPA Group
Ever wonder what employees are trying to pass off as legitimate business expenses through the expense reimbursement process? Certify Inc., a travel and expense software reporting company, has a list of their Top 10 most outlandish things people tried pass off in 2015.
I particularly liked the fellow who submitted $18,000 for a night in Las Vegas. That took a lot of guts to put on an expense report. I wonder if that included gambling losses?
Among the others:
- $400 for a shotgun given to a customer as a gift
- $85 for a separate hotel room for garlic samples, because the sales person couldn’t stand the smell
- $1,000 for “adult entertainment”
These make for great stories. What’s really amazing is that some of these came not from the financial officer responsible for reviewing the expense report, but were actually sent in by the people who submitted the expense.
Head over to the Certify website to read the rest.
All joking aside, occupational fraud is a serious problem and expense reimbursement fraud is one of the sub-schemes within the asset misappropriation category. According to the Association of Certified Fraud Examiner 2014 Report to the Nations on Occupational Fraud and Abuse, expense reimbursement fraud made up about 14 percent of all asset misappropriation cases, ranking fourth in overall frequency.
Another interesting stat from this survey is that about 50 percent of companies utilize a spreadsheet as the system for the expense reimbursement process. While that stat appears to be in line with what we see across our own client base, there are a number of issues to consider when using this basic system for expense reimbursements.
Generally speaking, a spreadsheet system for expense reimbursements should include/address the following:
- Communication of the acceptable guidelines for when employees may utilize their own funds to pay for a business related expense. This should be done frequently — definitely more than once after an employee’s initial hire. Ideally, business-related expenses should be paid with business funds whenever possible.
- A template spreadsheet for reporting the common types of expenditures acceptable for reimbursement.
- A time limit for submitting an expense for reimbursement.
- A requirement that expenses submitted for reimbursement be substantiated with an original receipt or appropriate documentation.
- Independent approval of expenses submitted for reimbursement. This tends to be a critical factor in preventing fraud.
- Comparison of expenses submitted for reimbursement to a budget or expectation for the expense.
- Review of trends and ratios for expense categories that are typically reimbursed.
- Surprise audits of employee’s expense reimbursement submissions and communication to the employee group that these audits occur.
Preventing occupational fraud is an ongoing process. In many instances, oversight or the fear of oversight is an important deterrent. Something as simple as another employee, supervisor or even business owner reviewing an expense report for approval can be enough of a deterrent to prevent fraud in the expense reimbursement process at your company.
Source: Inside Indiana Business