You’ve probably said it before: “We don’t have a fraud problem.”
Too many companies think fraud only happens to someone else. The fact is every company has employees who seek to benefit themselves at the company’s expense. It might be the sales rep that pads his mileage. Or, it might be an executive who mischaracterizes her expenses and claims personal expenses as business expenses. Small or large, expense risk matters.
So, what’s your company’s risk? The following questions are designed to help you start thinking about the scope of your expense risk, and how you might better mitigate your risk.
- Do you reimburse employees for travel and entertainment expenses?
If you reimburse expenses, then you have risk. Period. No exceptions. Every company that reimburses employees for T&E has expense risk. It’s not just outright fraud that you need to be concerned about; waste and misuse are much more common.
- Is your expense report process fully automated?
Not only do you waste time and resources tracking T&E through manual processes, but you also increase your risk. A fully automated expense report process gives you visibility into your data and the ability to understand the decisions your travelers are making. This means you don’t have to count on users to always do what’s right and never make mistakes.
- Can reviewers easily view required receipts?
If you’re still requiring original printed receipts, you’re behind the times. Technology is readily available today to automate expense report creation from digital receipt images and attach receipt images to expense reports for easy viewing online during all phases of management approval and audit. This reduces the risk of lost or misfiled receipts.
- Do you reimburse for mileage?
Employee mileage reimbursement is an especially inviting opportunity to fudge the numbers. A recent survey by Chrome River found that 35% of business travelers who committed expense fraud did so by exaggerating their mileage. With the mobile workforce increasing, it’s important to leverage automation to reduce the risk of inaccurate mileage reporting.
- Do you have corporate cards?
Providing employees with corporate cards eliminates many possibilities for expense fraud. By directly importing credit card statements, the exact amount charged is always included. But, you also run the risk of unauthorized purchases flying under the radar without proper monitoring.
- Is manager approval a primary control?
Managers are supposed to serve as the gatekeepers who identify potential issues and prevent them from moving through the system. But it’s an unrealistic expectation. Managers have no way to compare and contrast the most recent reports with older reports to spot duplication of expenses or irregularities, unless they take even more time to pull those records out of the archives and go through them line by line. As a result, a manager’s approval often becomes a figurative rubber stamp that does little to mitigate expense risk.
- Do you audit pre-reimbursement or post-reimbursement?
Pre-reimbursement review takes a slice-in-time approach and does not spot patterns of bad behavior over time. So, while you may catch a transaction that exceeds the allowable amount today, you may miss the traveler who regularly pads his mileage or submits miscellaneous expenses just under the receipt required threshold. Without a view across time and across expense reports fraud, misuse, and waste can go undetected. Auditing post-reimbursement allows you to identify the root cause of recurring violations in order to reduce their expense risk.
- What percentage of expense transactions or reports do you audit?
Most companies audit only a 20% to 30% sample of transactions every month. This is not an effective approach to detection and prevention of expense risk because it doesn’t enable you to identify the highest risk transactions. Chances are you’re treating all transactions as equals. With sample audits, you cannot catch 100% of the issues because you are not looking at 100% of the transactions.
- Does your expense audit process fully document policy exceptions?
The key to reducing expense risk is to positively influence employee behavior. That means having a process to correct exceptions like a missing receipt, and automated workflows to track every exception and investigation through to resolution.
These are just a handful of the questions T&E program directors and CFOs need to ask themselves about their expense process and subsequent expense risk. There’s always room for improvement, and technology today can do a lot of the heavy lifting to reduce your expense risk.
Have questions? Get in touch with Oversight to see what an automated solution could do for you.