FINANCE: Expense Fraud - The Cost Of Bogus
Recent Western Cape Business News
Keeping a lid on expenses is an important part of proper financial management. One of the ways that expenses can get out of control is through expense fraud.
“You may think your company is protected against expense fraud, but you’re probably mistaken,” says Ulrich Gericke of Cape Town audit, tax and advisory firm Mazars Moores Rowland.
Statistics from the USA show that expense fraud can account for a significant portion of fraud overall. The 2008 Certified Fraud Examiner’s Report to the Nation on Occupational Fraud and Abuse showed that, in all fraud cases in the United States, as much as 13.2% was due to expense reimbursement fraud.
Expense reimbursement fraud occurs when employees improperly seek reimbursement for expenses – whether they’ve incurred them or not. A common example of this type of fraud is employees claiming reimbursement for personal expenditures such as treating their family to dinner at a restaurant rather than the customers they’ve claimed to entertain, says Gericke.
Another common example is where employees overstate expenses, such as mileage, or alter invoices for expenses, or fabricate receipts to claim as expenses.
“Some employees can be very creative in the ways they perpetrate bogus expense claims, which can be hard to keep up with,” says Gericke.
However, he says there are a number of ways companies can keep up with these common types of fraud.
As a starting point, it’s important to clearly state the company’s policies regarding appropriate conduct, travel and entertainment guidelines and reimbursement policies. Then, it’s necessary to take the time to scrutinize expense reports for reasonableness and authenticity. Do the dates, locations, amounts and personnel involved seem genuine?
Gericke says companies should also insist on original documentation – credit card slips and photocopies of invoices are not valid receipts. Analytically reviewing expenses by type and individual is also important.
Gericke says, where possible, only pay out reimbursement expenses once a month and periodically audit expense reports and communicate this policy to employees upfront as a deterrent against fraud.
Finally, Gericke advises against ever asking anyone in a business setting to reproduce your signature on any kind of document, even a birthday card. This can lead to defence claims that the individual was authorised to sign documents on your behalf, which can undermine your legal standing if the individual forges your signature while perpetrating a fraud.
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