3 Tips to Help Prevent and Detect Fraudulent Travel Expense Activity 

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GUEST BLOGGER

Misty Carter, CFE, CIA, CISA
ACFE Research Specialist

Have you ever wondered, “Are my travel expenses being reviewed?” Fraudsters who have been successful at defrauding companies through the submission of fictitious travel expenses most likely have. If management, though, has never considered this question from the employee’s perspective, they might unknowingly be paying out thousands of dollars to fund a fraudster’s lifestyle — that fraudster being one of their own employees.

Unfortunately, this was the case with New York State Assemblyman William Boyland, Jr. Boyland, indicted on charges of allegedly filing tens of thousands of dollars’ worth of fraudulent travel expenses, claimed he had been traveling on legislative business in Albany, New York, between January 2007 and December 2011 when he allegedly was not (as reported in Metropolis, a Wall Street Journal blog). In fact, in some of the instances where he allegedly claimed he was traveling to Albany, he was in New York City meeting with undercover investigators who were building an unrelated bribery case against him.

While the exact dollar amount falsely claimed by Boyland is still uncertain, an audit found no record of him being in Albany 609 of the 975 days he claimed he had traveled there. Based on these audit findings, Boyland is required to repay the state $67,497 in mileage reimbursement and per-diem payments. In addition to the indictment for submitting fraudulent travel expenses, Boyland has two other pending charges against him related to bribery and mail fraud.

This is just one example of many where employees abuse company or tax-payer dollars through expense reimbursement schemes. According to the 2016 Report to the Nations, expense reimbursement fraud schemes made up 14 percent of the asset misappropriation schemes with an average loss of $40,000. The report also noted that these frauds lasted a median of 24 months before being detected, as was the case with Boyland.

Even though the detection and prevention of fraudulent employee expenses can seem overwhelming, there are controls that management can put in place to mitigate risk in this area. The following tips can aid in the detection, prevention and deterrence of this type of fraud:

  • Implement continuous control monitoring software. This software is automated and can review 100 percent of expense data. It can be configured to identify outliers or areas where fraud and noncompliance are most likely to be detected. Data reported from these monitoring solutions can help decrease fraudulent expense activity through trend reviews of anomalies. Employees might also be deterred from attempting a fraud if they know that a tool is in place to review all expenses submitted. 
  • Implement a formal travel and entertainment expense policy. It is important for management to develop a clear travel and entertainment expense policy and communicate it to their employees. Management should also ensure employees are aware of their expectations toward policy adherence and establish consequences for failure to comply with policy requirements. 
  • Hold management accountable. Management might be lax in its review and approval of employee expenses, but if held accountable for approving fraudulent expenses, they might spend more time reviewing them. Approving managers should also consider occasionally questioning employees about expenses they submitted. This practice can actually have a deterrent effect: if employees know someone is actually reviewing what they submit, they are less likely to submit a fraudulent expense. 

Although expense reimbursement fraud is rampant, it can be minimized if the proper action is taken. Management must be proactive and implement the necessary controls to help deter employees from committing schemes and detect if they do occur. Failing to take action can be detrimental to the company and leave it exposed to this and other types of fraud schemes.