In Harold Robbins’ novel “The Carpetbaggers,” Jonas Cord—a fictionalized version of Howard Hughes—entices an executive to join his company using the pretext that the potential new hire can bank his salary, put his personal living expenses on his business expense reports, and live off the reimbursements he receives. Today, the Cord Character’s offer would be considered fraud. But “truth” as the saying goes, “is stranger than fiction.” In fact, if you dig a little, you’ll find many recent examples of expense report fraud so scandalous that they exceed anything Robbins would ever have imagined.


Consider the cosmetic surgery, lottery tickets, pet food, family reunion trailer rental, speeding ticket, teepee, $12,000 family trip, and fine paid to a city municipality when some unlucky executive crashed into one of their tollbooths. All these purchases ended up on recent business expense reports according to the 1,600 U.S. and Canadian chief financial officers interviewed for a Robert Half Management Resources survey.


And the perpetrators of expense report fraud come from literally every level of management. Take the case former Hewlett-Packard chief executive, Mark V. Hurd who was fired when it was discovered that he had filed and approved false expense reports and payments totaling $75,000 for an infrequently-used female contractor. After Hurd’s dismissal, a conference call between Hewlett-Packard executives and the New York Times revealed that theinaccurate expense reports were intended to conceal a “personal relationship” between Hurd and the contractor.


By the way, the contractor later sued Hurd for sexual harassment and the case was settled out of court.*


The sheer audacity of trying to hide an unsavory relationship, charge your cosmetic surgery or lottery ticket to the company you work for may elicit some chuckles but even so, expense report fraud is a serious problem with bottom-line business consequences. A 2002 study by the Austin-based Association of Certified Fraud Examiners estimated that the average expense reimbursement fraud scheme—which often involves a mid- to upper-level executive—costs the average sized US company $60,000 and takes over two years of investigation to detect.


Obviously, the more colorful expense report examples—Hurd and his exploits, the teepee, speeding ticket, or family reunion for example—grab headlines, but it is probably the smaller, more mundane on-going expense report scamming that collectively causes the greatest financial loss. That’s because such illegal activities are easier to hide from expense report reviewers and approvers and hence continue unabated.


The techniques people use to falsify expense reports are innumerable however some of the most frequently used ploys include:


Double billing
Turning in a receipt and a credit card statement on separate reports for the same purchase


Exploiting policy loopholes
Putting in multiple false expense reports for amounts that are so low the company expense policy doesn’t require a receipt for reimbursement


Flying under the radar
Circumventing company-spending limits by spreading high-ticket purchases over several expense reports


Exchange & pocket
Exchanging a full-fare airline ticket for a non-refundable coach fare and pocketing the difference.


Taxi Padding
Collecting multiple taxicab receipts each time a single ride is taken and submitting them with inflated fare and tip amounts


Twin Pumping
Filling up the company vehicle and a family member or friend’s vehicle simultaneously at the gas station.


Getting Personal
Expensing personal purchases, particularly restaurant meals, as business ones.
Surprisingly—even as average losses reach $60,000 levels—many corporations are resigned to expense report fraud and consider it the price of doing business. Often businesses don’t even conduct audits to identify abuses because the audit often costs more than the fraud it discovers. Fortunately there are some relatively low-cost safeguards that some businesses have implemented in order to lessen the chance that expense report fraud occurs—or to prevent it altogether. The following represent just a few of the things companies can do to arm themselves against expense report fraud:


Have a Policy
This is probably the most important thing a company can do to control expense report fraud. A reasonable, companywide expense report policy that spells out the specifics of what is, and is not, considered a legitimate business expense provides both submitters and approvers with set guidelines to follow. Items that are not reimbursable should be specified. Once in place, the protocols of the policy should be communicated to employees.


Set Allowable Rates
Some companies reduce expense fraud by setting specific allowable rates for things such as travel, meals, and other travel-related activities. For instance, a company might have a set limit of $160 per day allowable for hotel, meals, and rental cars.
Online and Mobile Expense Management


Online expense management streamlines the expense reporting process and can automatically flag purchases that deviate from the company expense policy. Mobile phone expense applications let businesses set up expense policies on company mobile devices so both the report submitters and approvers are informed when an expense policy violation has occurred.


Require Itemized Receipts
If your company policy requires fully itemized receipts, many loopholes for scamming are automatically plugged. No longer can heavy drinking sessions at the sports bar be chalked up to business meals, nor will presents charged at the hotel gift shop for a girlfriend or boyfriend be labeled as something else and turned in as a legitimate business purchase.


Corporate Credit Cards
Many companies now require travelers to use a company credit card exclusively for business purchases. Such cards can be programmed to block usage at certain locations—such as an ATM near a casino—and to decline certain purchases that are forbidden by the company expense policy. Because corporate card purchases go directly onto the electronic expense account form and can’t be changed, another layer of control is established. Since the company knows exactly what each submitter’s monthly expenses are (based on their reconciliation), the opportunity to turn in the same receipt multiple times on multiple reports is also eliminated.


At the end of the day, expense report fraud is unethical behavior. It is stealing. Mark V. Hurd may have ended up with a $50 million severance payout after his misadventure but the more likely consequence for many of those falsifying their expense reports is the same outcome Hurd also experienced: hearing the words ‘You’re Fired!’ On a more positive note, a 2009 survey conducted by T&E Magazine found that 83% of participating employees said they were totally honest about the things they put on their expense reports. That’s a significant improvement compared to the 70% indicated by employees on the same survey conducted five years earlier. Perhaps it’s a trend.


* Accessed on August 27, 2012 at:

Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.


payday loans