Learn how to fight fraud
Learn how to fight fraud

Fraud in Reimbursement Schemes & Spending Policies

Dec 13th 2018
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What we are seeing in the world of fraud is that it is extremely simple to pass $25, $50 and maybe even $75 in reimbursements that are not even related to business! 

These reimbursement schemes represent $31,000 of loss to a business and represents approximately 14% of asset misappropriation schemes. The employee MUST retain and document those expenses. If the employee cannot justify the expenses, then the reimbursement will be handled on their W-2 as it is then considered compensation. 

So how does a business owner minimize the risk of this scheme from occurring in their business?  Implement a tool that will allow management to monitor the receipts submitted by the employees. I personally recommend something like Receipt Bank in order to implement this important internal control. 

What I like is that Receipt Bank doesn’t just minimize the risk of expense reimbursements, but it will also assist in backing up business expenditures on a tax return. This is important to minimize the risk of tax fraud.

Many companies have corporate credit cards, which are rarely monitored at the receipt level. They also rely on the statements to ensure that corporate card expenses are in fact for business. 

But if an employee goes to Staples, for instance, do you know exactly what was purchased?  If you do not have the receipt, you really don’t know the purpose of the expenditure. This can be a violation of a company spending policy.

Proper planning prevents poor performance. Therefore, establishing a spending policy that is clearly spelled out and signed off on by the employee is critical.

Taking that a step further, you should consider reviewing that policy on an annual basis. With tax law changes, the business owner always needs to remain in compliance.

Wrapping this back to the prevention of fraud, because business owners are experts at whatever they went into business to do. Therefore, the risks of fraud without any internal controls will expose business owners to asset misappropriation schemes such as reimbursement and company spending policies. 

Consider having your clients implement Receipt Bank as a cost-effective means of internal control and substantiation of business deductions.  HINT:  This will also likely sync with their accounting system and allow for easy categorization of the deductions with the backup the IRS requires – even a bigger bonus!

Join me on the Fraud Fighter website for more information, the Weekly Fraudcast and the Fraud Blog, all of which will provide you with more prevention resources.