Expense Fraud Estimated to Cost $1.9B Annually

Business travel expense fraud is estimated to cost U.S. organizations $1.9 billion per year, based on a new survey.

The survey, of more than 1,000 business travelers in the U.S., U.K. and Australia by Chrome River Technologies, a provider of expense and supplier invoice processing software, found that travel expense fraud is typically perpetrated by younger employees, with 82.9 percent committed by workers under the age of 44. Managers and white-collar, non-managerial staff are more likely to commit expense fraud. Among the survey respondents, 58.1 percent of those who said they cheated were mid-level employees, while vice presidents and senior vice presidents had the lowest fraud rate at a combined 6.2 percent.

One-quarter of the survey respondents reported they have been caught committing expense fraud. Over one-third of those respondents who admitted to fraud reported padding each report by amounts ranging from $100 to $499, with men doing so at a rate 60.5 percent more than women. On the other hand, women were 30.8 percent more likely than men to misreport amounts of less than $100. Men were 62.2 percent more likely than women to think they wouldn’t get caught falsifying expenses.

Men are nearly twice as likely to commit expense fraud as women. Men are also over four times more likely than women to add over $1,000 to each expense report.

Over 75 percent of the respondents said a warning was the most serious consequence they suffered. Men reported receiving formal warnings at a rate 31.6 percent higher than females, who more frequently received informal warnings about their actions.

Companies using manual reporting procedures are more likely to suffer expense fraud, according to the expense reporting software vendor. Employees who submit expenses through hard-copy receipts and spreadsheets are more than twice as likely to commit fraud as employees who use automated expense management systems.

“Most people are inherently honest and they don’t intend on defrauding their employer of huge amounts of money,” said Chrome River CEO Alan Rich in a statement. “More often, they’re just committing small acts that they don’t even view as ‘fraud.’ And they do it because it’s possible and they don't think anyone will notice. The best thing a company can do to protect itself is make it easier for employees to do the right thing, such as an automated expense management solution which can, for example, alert employees if they are trying to submit the receipt twice. This type of gentle reminder can often be all that’s needed for employees to remain honest throughout the expense submission process.”

Chrome River extrapolated some of its estimates from the Association of Certified Fraud Examiners’ biannual report on fraud. According to the ACFE, expense reimbursement fraud makes up 17 percent of all business fraud. Based on the average reported dollar amounts added to each report. The ACFE found that smaller businesses, which usually have fewer internal controls, typically suffer double the losses compared to larger companies.
(Source:  AccountingToday - Daily Edition - June 1, 2018)