Mary Schaeffer

Preventing T&E Fraud

Five best practice tips divulged.

May 1, 2008
by Mary Schaeffer

There has been a spate of stories in the press over the last few weeks that makes one wonder about the ethics of the people who have been hired with our tax money. The latest disaster involves a director at the Smithsonian Latino Center and the misuse of her expense accounts. This follows on the heels of inappropriate charges by the U.S. postmaster for an online dating service, lingerie purchased by State Department officials and Veterans Affairs employees who spent funds at casino and luxury hotels, Sharper Image, etc. Did these folks really think these purchases were acceptable or just that they wouldn’t get caught?

How Common Is T&E Fraud?

In a recent Accounts Payable Now & Tomorrow fraud survey, accounts payable managers were asked about the occurrence of T&E fraud on their watch. An eye-popping 38 percent had experienced it in their own organizations in the last three years.

What makes this figure so disheartening is that survey respondents were asked to omit minor infractions that many might not consider fraudulent. Examples would include putting a movie or other minor expenditure on the expense report. Although the losses on T&E are not huge, there is an important reason to focus on them. Many a larger corporate fraud has been uncovered because the employee, not satisfied with the money already stolen, could not resist cheating on their expense report.

Duplicate payments are often created when an organization pays for something with a p-card and the vendor still issues an invoice. Sometimes this happens simply because the vendor cannot suppress their payment system’s automated printing and mailing of invoices. Even if a firm notes that it has already paid an invoice after receiving it, it often ends up paying the same invoice again.

T&E Fraud Prevention Best Practices

If you’re wondering how to ensure this does not happen in your firm, we’ve got some help. Here are five tips your company can do to prevent inappropriate spending by your traveling employees.

  1. Have a written T&E policy and share it with every employee. Even better, post it on your intranet site.
  2. Update the policy on a regular basis. Do this at least annually and distribute the new policy under the signature of a senior-level executive, such as the CFO, COO or president.
  3. Enforce the policy uniformly. What’s good for the rank-and-file is just as good for the executives. When policies are not enforced uniformly, the odds of employee misconduct are likely to increase.
  4. Insist managers review reports they approve. Have management personally responsible for any expenses they approve that the company later disallows due to serious policy violations.
  5. Have consequences for those who misuse company cards. Employees who clearly cross the line should be terminated. This should be spelled out in the policy and if it happens should not be hidden. One dismissal will send a loud and clear message.

Concluding Thoughts

Not everyone has the same view on this issue. What is considered fraud in some organizations would not even rate a slap on the wrist at other firms. The problem with allowing minor infractions is they seem to grow. For example, a dinner can turn into a weekend trip and then even more. This is why many fraud experts insist that it is important to crack down on even the most minor infractions. Otherwise, before you know it, you have an employee paying for an online dating service using the company’s credit card.

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Mary S. Schaeffer is the author of a dozen business books including the just-published Travel & Entertainment Best Practices (2007 John Wiley & Sons). She serves as the editorial director of Accounts Payable Now & Tomorrow, a newsletter for professionals interested in payment issues, and directs the organization’s consulting practice. Her next book, Fraud in Accounts Payable: How to Prevent It will be published in August.