Management and Organizational Studies 3367A/B Chapter 7-8: Ch7&8

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Chapter 7 Expense Reimbursement Scheme (second common)
Employees who engage in this fraud seek to have the company pay for their
personal expenses
Employees pad the amount of business expenses they have incurred in order to
generate excess reimbursements
Four ways to abuse this process to generate fraudulent reimbursements
o Mischaracterized expense reimbursements
Claim personal expense as its business related
Mostly undertaken by high ranked managers
Very costly (however ranked second least costing in median loss)
Prevention and Detection
Organization should require detailed expense reports that
include original support documents, dates and times of
business expenses, method of payment, and descriptions of
the purpose for the expenses
A direct supervisor of the requestor should review all travel
and entertainment expenses.
Organizations should establish a policy that clearly states
what types of expenses will and will not be reimbursed, that
explains what are considered invalid reasons for incurring
business expenses, and that sets reasonable limits for expense
reimbursements.
organizations should scrutinize any expense report that was
approved by a supervisor outside the requestor’s department.
To compare dates of claimed expenses to work schedule or
use trend analysis to detect frauds
o Overstated expense reimbursements
Overstate the actual business expenses
Altered receipts (most fundamental)
Overpurchasing
Overstating another employee's expenses
occur in a system in which expenses are reimbursed in currency
rather than by a check, since the perpetrator would be unable to
extract her “cut” from a single check made out to another
employee.
Orders to overstate expenses
Prevention and detections
Organization require original receipts for all expense
reimbursements
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