The Association of Certified Fraud Examiners’ 2016 Report to the Nations on Occupational Fraud and Abuse concluded expense fraud accounts for 14 per cent of all asset misappropriation fraud schemes. It is among the most common forms of fraud, and affects businesses big and small.
Recent research suggests that employee expense fraud is far more common than you think. With 42 per cent of surveyed Australians admitting to fraudulent mileage claims, chances are your business has already been a victim.
Employers across the globe are giving their workers a bonus for all their long hours and exhausting business trips. The catch, however, is that they probably don’t know it. Fraudulent expense claims are contributing to significant business losses and new research shows it’s much more common than you may expect.
Fudging the numbers
The Global Report on Employee Expense Fraud, released last year by expense management software company webexpenses is based on a survey of more than 4000 office workers in Australia, New Zealand, North America and the UK. In the findings, 42 per cent of Australian respondents admitted to mileage fraud, and 22 per cent said they had taken friends or partners out for a meal or drinks and claimed it as a work-related expense. A similar percentage had claimed personal items and their own food and drinks on expenses.
“One respondent admitted claiming an anniversary dinner on client-related expenses, and another said they upgraded a hotel room to accommodate their partner tagging along,” says Ashley Whiteman, Asia Pacific general manager of webexpenses.
Whiteman says mileage fraud is the most common category because it generally goes unnoticed.
“Employees often view rounding up of mileage as an easy and quick win,” he says. “It’s often unnoticed by approvers due to a lack of sufficient checks in place for business travel.”
Why is it happening?
Emily Jaksch, director at Melbourne-based HR consultancy HR Gurus, regards expenses fraud as a crime of opportunity.
“Human behaviour is a fickle thing and people will most often take the opportunity to rort the system if it is there for the taking,” she says.
“Bad behaviour sometimes starts at the top, so if senior executives are committing expense fraud, so are the rest of your employees.”
Whiteman says expenses fraud often occurs due to lack of robust expense claim management, and manual processes that can’t keep up with a growing business’s needs. Finance teams simply don’t have time to check and interrogate every expense claim; in fact, the webexpenses report found that 86 per cent of office workers had never had expense reports challenged or declined.
“Often the checks for claims are insufficient, particularly with a manual process, as it’s hard to keep track receipts, duplicates and spending limits,” say Whiteman.
Poor communication is also opening the door to fraudulent claims: 61 per cent of respondents said they hadn’t seen or read their company’s expense policy within the past 12 months.
“Expense fraud is a big issue,” says Jaksch. “To ensure people know your expectations, you need to regularly update your policy, ensure employees know what it is, where it is and keep talking about it.”
To find out how automating expense management has helped other companies reduce employee expense fraud, or to request a demo, visit www.webexpenses.com