Jimmy Rodefer: Travel and entertainment expenses: Fact or fiction?

If your business lacks effective tracking and verification of employee travel and entertainment reimbursement verification, it's party time.

That would be party time for people using the company's money to commit fraud with travel and entertainment expense reimbursements.

This category of cheating is, sadly, quite frequent within organizations. Pad a number there, turn in a bogus receipt here, run a small scam by not returning to the company the full amount of a ticket refund, and inevitably it turns into big money.

Monitoring and verification is a challenge because the per-individual dollar figures can be minimal. The time-and-expense costs of verification — particularly for large companies or government departments or agencies - can appear to be a losing proposition. However, the costs of lax controls can add up to substantial losses for an organization, public, private or non-profit.

Among the most common travel and entertainment frauds are:

• Falsely claiming reimbursement for hotels, meals, and other personal expenses.

• Claiming multiple reimbursements by turning the same claim in to different departments.

• Personal use of credits issued by an airline, restaurant, or hotel, or any other service provider.

• Asking taxicab drivers for blank receipts and filling in amounts higher than the fare and tip.

• Using a company credit card to make a cash advance for personal use, then claiming it as a business expense or combining it with legitimate business expenses.

There are many more such tactics that separate organizations from their money. The motives range from dishonesty to feeling as though these actions aren't really much more than someone taking home pens and a stapler.

In March 2015, U.S. Rep. Aaron Schock of Illinois resigned from Congress after the publication Politico reported that he had requested mileage reimbursement for 170,000 miles on a vehicle that had only about 80,000 miles on it when Schock sold it.

Another example is a Huffington Post item from 2012: "Port of Oakland officials suspended its maritime director, James Kwon, alleging that he four years ago filed a $4,537 expense report for a drinks and dinner reception with clients at an establishment called D. Houston Inc. Turns out, that's the corporate name of Treasures, a Houston-based strip club. 'The nature of the venue is not evident from the receipt,' the Port of Oakland said in a statement.'"

What to do? Here are several suggestions:

• Have a written, clear, and definitive expense-reimbursement policy. This will serve as a valuable guide for employees who don't want to get into trouble and will eliminate the "I didn't understand" or "It wasn't clear" defenses by individuals who are seeking ways to take advantage of the system. Everything that doesn't conform to the policy is not reimbursed.

• If there isn't a budget for a trip, there are at least expectations. If an employee's trip expenses were $450 daily rather than an anticipated $250 a day, was the total justifiable?

• Do away with cash advances: reimburse only documented expenses.

• Conduct random audits of employee or management travel and entertainment expense reimbursement reports.

• Institute a cross-referencing system among departments to ensure that the same reimbursement is not requested of more than one department.

• Have managers review expense-reimbursement requests, and use periodic audits to review the managers (to avoid potential collusion between employees and managers).

• Pay special attention to reimbursement requests from multiple employees assigned to the same project for which travel and entertainment reimbursements are submitted.

In the end, the best protection against this type of fraud is for everyone — from top management down — to know that their reimbursement requests are subject to careful review. You can't do things in the dark when the lights are on.

You may view the original article from the Knoxville News Sentinel here.


Tagged Business Expense, Featured, Fraud, #JimmyTalk