Fraud in Reimbursement Schemes & Spending Policies

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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.

About Dawn W. Brolin, CPA, CFE

Dawn W. Brolin

Dawn is a Certified Public Accountant, Certified Fraud Examiner, and CEO of Powerful Accounting, LLC.  Powerful Accounting is a nationally recognized accounting, tax, forensic and fraud, IRS and State Agency audit professionals as well as a QuickBooks consulting firm. Recently, Powerful Accounting has partnered with Anderson, Brolin & Coba CPAs, LLC – a powerhouse tax preparation, consulting and wealth management firm, where Dawn is a partner.  Dawn also founded, Your Turn, LLC, which specializes in application consulting and implementation for small businesses.

Dawn’s list of professional accomplishments is extensive and includes speaking and consulting for prestigious companies such as Intuit, TSheets by Intuit, Finagraph, SmartVault, Skyline Cloud Services, Mike Michalowicz, Tory Johnson, MSNBC, SEEMA, AbacusNext, The Woodard Group, and many more.  Named “Top 25 Most Powerful Women in Accounting” 2012-2017 by CPA Practice Advisor, a “Top 10 Managing Partner Elite – Great Accounting Firm Leader” in 2017 by Accounting Today, and selected as a “Top 40 Under 40” by CPA Technology Magazine in 2009. Dawn continues to pursue excellence with the support of her amazing Team at Powerful Accounting. 

Dawn has been featured on MSNBC “Your Business” and has spoken at Intuit’s QuickBooks Connect, Scaling New Heights, Sleeter Conference, TD Bank North locations, Tory Johnson’s Small Business Spark and Hustle Tour, Live Your Legacy Summit, and many more.  Her commitment to continuing education motivates her to teach regularly to bring new techniques and processes to the accounting community.

Professionals seek out Dawn W. Brolin, CPA, CFE and her educational keynotes, webinars and articles.  They enjoy her energetic and humorous delivery as well as the action ability and depth of her content. 

Video of Dawn W. Brolin, CPA, CFE is available on YouTube:



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