Four types of expense report fraud to look out for

Corruption audit concept. The inspector uses a magnifying glass for inspecting budget corruption.

Fraudulent spending has the potential to significantly impact an organisation’s bottom line. The 2018 Global Study on Occupational Fraud and Abuse found that for organisations across the globe, approximately five per cent of their annual revenue is lost due to fraud each year, with the average loss in the Asia Pacific region totalling US$236,000 per year.

To ensure that organisations are not continuously looking to recoup losses, it is important to identify potential fraud schemes and implement systems to prevent them.

As organisations grow and more expense claims are filed, it can be hard for accounts to keep up if they are managing all these receipts and invoices manually. This can set up an environment in which both intentional and accidental fraud can occur.

The four types of expense fraud schemes that organisations need to look out for are:

  1. Mischaracterised expenses
    According to Oversight, 37 per cent of business travellers had at least one exception on their expense reports. Claimed business expenses such as theme park tickets, family ‘business’ meals and ‘business trip’ cruises are all examples of expense report fraud. Whether these expenses have been submitted on purpose or in error, an employee has committed fraud and organisations need to keep an eye out for these claims.
  2. Inflated expense claims
    Altering a receipt, invoice or other documents to have expense show up greater than they are is also another method of expense fraud. Inflated expense claims can also be done through over-purchasing, where an employee might buy too many supplies, claim the amount on the receipt and then return some for the supplies for a refund.
  3. Falsified claims
    Falsified claims are hard to overlook, as they are never a mistake. In these cases, either the expense report has been submitted with false documents (such as cheques, invoices or receipts created with a desktop publishing program) or with stolen blank receipts. Often in these cases, the fake receipts would have been taken from a vendor (restaurants, hotels, taxis) and filled in with inflated and falsified amounts.
  4. Multiple claims
    Sometimes, receipts of services or products that were purchased and submitted for approval early in the year get submitted again later in the year in the hopes that approvers won’t notice the duplicate claim. The claim might even be submitted to different approvers in the company to ensure that it goes through.

While in some instances fraud is intentional, in most cases it is a result of an accident or confusion as to what the organisational policy is on travel and expense claims. Regardless, organisations with anti-fraud safeguards and expense management systems can more than halve their fraud losses and double their detection rate.

Fraud can potentially affect any business of any size, with potentially damaging results, so it’s important for businesses to understand the risk and act decisively to reduce it. All organisations need to stay on top of the risk of expense report fraud. Left unchecked, fraud can cost organisations hundreds of thousands of dollars, which they may never recoup.

Technology that uses the most advanced tools such as artificial intelligence (AI) to identify, validate and report on transactions can improve both financial visibility and control. With robust monitoring, data gathering and insights, and policy enforcement capabilities, organisations can effectively manage the issue of fraud and compliance.

Matt Goss, Managing Director ANZ, SAP Concur