Expense fraud
Employees claiming money they are not entitled to through their expense reports, by inventing, inflating, repeating or disguising expenses.
In short
- Most expense fraud is small and repeated, not one large claim.
- The four common schemes: fictitious, inflated, duplicate and mischaracterized expenses.
- Itemized receipts, matching to card data and pattern checks deter far more than spot audits.
Expense fraud is the deliberate misuse of an expense process to get paid for costs that were not business costs, or not incurred at all. It rarely looks dramatic. The typical case is a steady trickle of small, plausible claims that nobody questions.
Common schemes
- Fictitious: claiming a purchase that never happened, sometimes with a fabricated or edited receipt.
- Inflated: changing an amount, adding a tip that was never paid, or claiming a higher mileage.
- Duplicate: submitting the same receipt twice, or claiming a company-card purchase for reimbursement.
- Mischaracterized: presenting a personal cost as business, such as a family dinner described as a client meeting.
What deters it
Controls that make each scheme harder are more effective than occasional audits. Itemized receipts expose personal items. Matching claims against card and bank data exposes invented purchases and inflated amounts. Duplicate checks across reports catch repeats. Mileage checked against actual routes catches padded distances. Just as important, employees who know claims are checked automatically are far less likely to test the system.
Worked example
A pattern, not a single claim
An employee's taxi claims average $42, while colleagues on the same routes average $27. Each receipt looks normal. A review shows tips added by hand to printed totals on 18 receipts over six months, about $270 in all. No single claim was large enough to draw attention; the pattern was.