Five expense claim fiddles – and how you can stop them

It’s the fear every business owner has – that a trusted employee is somehow stealing your company’s money. And as last week’s resignation of Hewlett Packard chief executive Mike Hurd showed, it’s a problem companies of all shapes and sizes must confront.

The computer manufacturer confirmed Hurd actually inflated or fabricated, expenses in order to conceal a relationship he was having with a female contractor. Reports suggest the amount was about $US20,000 and was spent on travel, food, and getting the contractor paid for work she didn’t actually do.

“The investigation revealed numerous instances where the contractor received compensation and/or expense reimbursement where there was not a legitimate business purpose,” HP general counsel Michael Holston said on a company conference call last month.

“And the investigation found numerous instances where inaccurate expense reports were submitted by Mark or on his behalf that intended to or had the effect of concealing Mark’s personal relationship with the contractor.”

Chump change for a billion-dollar company, but a potential catastrophe for a struggling SME.

Andrew Firth from Rushmore Forensic says these types of fraud are “so common” they pop up all the time on forensic accounts.

“It’s actually one of the easiest frauds to detect. Most other cases of employee fraud are actually quite hard to spot, but these types are easy if you know what you’re looking for. With the clients I work with, it’s one of the first things I spot.”

Gary Gill, head of forensic at KPMG, says while many of these expenses tend to be fairly small, they are potentially serious problems. The issue is not necessarily the amount, but the employee’s trustworthiness.

“We’ve run into a number of areas where these fiddles have run into the hundreds of thousands of dollars.”

“A lot of these occur when employees are given their own credit cards for expenses, and they pay the bill on their own and are then reimbursed for that. Fraud can happen there, and where the company pays that bill directly, there is more potential for abuse.

Make sure your business isn’t being taken for a free ride. Here are five of the most popular expense fiddles you need to be watching out for.

Car expenses

Vehicle expenses is probably the most common form of employee expense claims, but experts say it’s also one of the key areas where employees can run up a hefty bill on your behalf. Business owners need to be vigilant.

Arnold Shields from Doleman Bateman says the more common abuses here are fake or incorrect petrol dockets being handed in by the employee, who will then be reimbursed.

“Most of these claims come through petrol dockets, so an employee hands them in and then they get reimbursed. But often they’ll just throw in their partner’s dockets, or someone else’s, and they’ll try and get in on the payment. It’s more popular than you’d think.”

“This is why a lot of companies have got cards they use to pay for petrol, or they make sure you can only get reimbursed after handing in a log, or so on. They often give a card to an employee and it can only be used for a particular vehicle or for petrol only. That often works.”

The key here is surveillance. Watch the amount of petrol an employee is claiming, and consider confronting the employee if you think they’re just spending too much, as this could be a tip-off of a deeper problem.

Travel expenses

Whether your employees are travelling by taxi, train or in the air, there are always little ways they could be sneaking in an extra expense claim.

Slade Sherman, founder and chief executive of online discount and coupon service Myzerr, says he knows of an organisation which had to crack down on its employees handing in discarded train tickets that weren’t actually theirs at all.

“You often see people leaving their train tickets around at the station if they’ve been used up for the day. I knew an organisation which had to stop its employees from actually taking those and getting reimbursed for them.”

The business didn’t bother to check whether these train tickets were actually being used or not, until the boss finally caught wind of the situation.

“The boss would bring someone into his office and say, ‘you’re brilliant, you’ve actually managed to be in two places at once. How did you do it?'”

Train tickets aren’t the only travel expense being take advantage of here. Taxis are a particularly common trouble area, KPMH’s Gary Gill says.

“Taxi fares are another area that really gets abused. There’s only one real abuse here, and that’s using the taxi outside of company time and going to places they shouldn’t have.”

“Certainly we’ve experienced some very interesting situations here where someone has gone somewhere inappropriate, and then claimed it on company time.”

Gill admits these are harder to catch. But Firth says the idea is to keep a watchful eye on your employee’s schedules, and “watch for anything out of the ordinary, or something that wouldn’t usually be done on company time… question it all.”

Firth also says while airplane travel is slightly more difficult to claim as an expense, there are still areas where employees can claim an extra frequent flyer mile here and there without your knowledge.

“There are situations where an employee may travel between two cities regularly, such as Melbourne and Sydney, and they’ll book a flight, cancel it, and then sometimes receive a credit for the cancelled ticket and use that for their own personal use.”

“Another more unusual one is that someone went overseas, lost their suitcase, and then claimed a suit for business while he was overseas – then he claimed the luggage on insurance. He got reimbursed twice, when only once was sufficient. However, that’s harder to detect, and you’re more likely to find something unusual if you’re constantly monitoring bookings.”