Your company uses a popular expense reporting system that includes an audit of t

Question

Your company uses a popular expense reporting system that includes an audit of the expenses by the vendor of the reporting system. The vendor’s auditors send you a report saying that when Bob Smith travels, he has a high percentage of hotel and meal charges that are flagged as “not billable” to the client. This means that the charges will be reimbursed to Bob by your company but not invoiced to the client. Although this happens regularly in your business, Bob’s percentage of “not billable” charges are much higher than other employees.

Explanation / Answer

Whether you are multinational corporation employing sales representative travelling throughout the world or small non profit organization , you can fall victim to expense reimbursement fraud.

The two primary schemes perpetrated are employees claiming reimbursement for fictitious expenses or inflating actual business expenses.

E.g of fictitious expenses : billing for travel and meals expenses that never materialized. Like concealed air ticket, seminar or convention registration fees, tuition reimbursement and professional dues fees etc

E.g of inflating actual business expenses : claims meals and entertainment expenses that may be in excess allowed per diems or items not reimbursable under company policy like alcohol, leisure activities, sports tickets etc

Safeguard to prevent fraud :

1. Maintain travel and reimbursement policy that governs this activity, prohibited activity, and per diem amount should be detailed in this policy.

2. Requires original documentation to be submitted with the reports or to be maintained for a time period of audit

3. Initiate formal review process in which departments heads or equivalent review this report. Human resource should perform a cursory review aswell.

4. Routinely questions the expenditure that looks extraordinary or abnormal.

5. Have all disbursement made in a formal manner through either accounts payable or payroll.

6. Implement the use of corporate card charge for greater control.

7. Receive credit activity repot on a monthly basis from the issuing company

8. Annually audit a sample employee expenses report to ensure that they meet the company's established guidlines.

9. Prosecute offenders found to be violating or falsifying there expense report.

Here in this senerio auditor found Mr. BOB claiming high reimbursement of travel and meals. By applying above procedure through investigation needs to be done as its not a one of the case found in his case, his expenses are always seems to be high then it is required to be. Necessary action needs to be taken by the company. Also company should ask the questions if they are found to be unreasonable and in excess .company should reimburse only as per the policy and guidlines set as well as as per the limit sett. Expenses in excess of it should not be reimbursed to him and should be considered as for his personal use.

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