How to Confront an Employee About Expense Reimbursement Fraud

By Linda RoperFebruary 28, 2023
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Expense reimbursement fraud can be a huge problem for companies of all sizes. And while it’s easy to deny or ignore the issue if you don’t have any evidence, it could lead to serious problems down the road.

As an employer, confronting an employee about expense reimbursement fraud is incredibly important, but how do you know when fraud is occurring? And what action should you take?

In this guide, we reveal everything you need to know about expense report fraud, including what it is, how you can confront an employee about it, and why it's important to address expense reimbursement fraud as quickly as possible.

Employer checking files with magnifying glass for expense reimbursement fraud

What is Expense Reimbursement Fraud?

Expense reimbursement fraud is when an employee deliberately submits false expense reports to gain a monetary advantage.

According to the Association of Certified Fraud Examiners (ACFE), there are four types of expense report fraud:

  1. Mischaracterised expenses: Where a worker claims a personal expense as a business expense for reimbursement.

  2. Overstated (or inflated) expenses: This occurs when an employee makes a genuine expense claim but inflates the amount.

  3. Fictitious expenses: This occurs when a worker reports an untrue expense and/or fake receipts for reimbursement.

  4. Multiple reimbursements: This happens when a staff member knowingly submits the same expenses and receipts for reimbursement more than once.

How Do I Detect Expense Report Fraud?

Start by looking for suspicious charges on company credit cards. If you see a large number of charges that seem unrelated to work-related travel or business expenses, this could be an indication that someone (or multiple employees) is fiddling with their expenses and committing financial fraud.

Additionally, pay close attention to food and entertainment expenses when staff are not working or travelling, or which have occurred during weekends and holidays.

Check your company's official travel policy and compare it against what employees have submitted for reimbursement purposes. You should also talk to your employees about their travel plans before they leave on business trips. If someone asks for an unusually large amount of money for travelling expenses, this could be an indication of fraudulent activity and could be punishable.

How to Confront an Employee About Expense Reimbursement Fraud? Our Top Tips

Manager confronting employee about expense reimbursement fraud1. Call the employee into your office

Make sure the employee understands the reason for the meeting and refer directly to the company’s policy regarding expense report fraud (if there is one). If an employee has already been reprimanded or punished for submitting false receipts in the past, then refer back to this incident when explaining why you need to speak to them about these costs.

2. Explain that this is an important issue, and ask for the employee's cooperation in solving it

You want to make sure that you communicate to your employee why this is an important issue for you and your company. You can do this by explaining that falsifying expense reports is not only illegal, but it can also lead to serious consequences and punishment for them personally as well as the business.

You can also explain that expense report fraud is a common problem in the business world. In fact, 21% of fraud in small businesses is down to expense reimbursement fraud and it’s important for you and your employees to work together to put an end to it.

3. Ask the employee to explain the expenses and receipts that have come into question

Ask them to provide receipts or explain why no receipts are available. Then you can move on to asking them what the expense was for and why they thought it was necessary. This helps you understand their thought process behind each expense in question.

4. Make sure the employee understands that you are not accusing him/her of fraud, but that you have a real concern about it

When you approach an employee about expense report fraud, it's important to make sure they understand you are not accusing them of committing fraud. You should explain that you have a real concern about it and want to get to the bottom of this issue.

If you can, try to get the employee to open up and explain what happened. It might be that they misunderstood your policy or had a legitimate reason for their actions. If they are clearly guilty of fraud, however, you need to act.

expense fraud

5. Take the appropriate action

If there is evidence of fraud or misuse of company funds, the consequences will depend upon the amount. Smaller amounts of expense reimbursement fraud might require an official warning, while larger amounts could require legal action to be taken against the employee.

If this happens repeatedly and it becomes clear that your employee has been doing it intentionally on more than one occasion, this could lead to them being punished by being dismissed from their job. If there is no evidence of fraud or misuse of company funds, however, then there will be no consequences.

Why is it Important to Confront an Employee About Expense Fraud?

It's important to confront an employee about expense fraud because it can have a big impact on your business. If an employee is using company resources for personal gain, it could be a sign of other problems in the workplace. You need to set a good example for other employees and demonstrate that you take these kinds of things seriously.

People who commit financial crimes tend not only to be repeat offenders but also escalate their activities over time if they don't receive a form of punishment. Even if this particular incident doesn't seem like much, confronting them now may prevent worse behaviour down the road.

Finally, fraud is a crime and it's important to treat it as such. Therefore, you need to address the issue head-on and as soon as possible.

How Can ExpenseIn Help You Combat Expense Reimbursement Fraud?

Expense reimbursement fraud costs businesses millions of pounds in lost revenue each year, and 'up to 75% of employees admit to stealing from an employer at least once in their lifetime'. Therefore, it's vital that companies put stricter measures in place when approving expense claims.

The quickest and easiest solution to this is by using an automatic expense management tool like ExpenseIn. With features like automated policy checks, receipt verification, and audit policy acceptance, ExpenseIn increases policy compliance and reduces employee expense reimbursement fraud. By relying on technology to take care of these tasks for your company, you not only minimise human error, but also free up your finance department to concentrate on other important tasks for your business.