Fraud
May 2, 2017

Who's to blame when accidental expense report fraud occurs

Meena Chockalingam

Blame it on sticky fingers, late nights, or month end deadlines. Employee misconduct can sometimes just be an honest mistake. Yes, there are instances when the misconduct is intentional, and it happens again, and again, and again... until it becomes headline worthy.

But the typical instance of accidental expense fraud isn't so clear cut

For example, imagine a new employee submits their personal phone bill for $110/month for reimbursement. The company expense policy only allows reimbursements up to $40/month. However, the employee is successfully reimbursed $110, and continues to submit subsequent monthly phone bills for reimbursement -  

It’s easy to place blame on the employee - they should ‘know better’ and ‘read the T&E policy’ is what we tell ourselves

However, it’s important to distinguish between misconduct and genuine human error - it will prevent unnecessary and lengthy internal investigations and maintain the reputation and integrity of the employee. But when it comes to accidental expense fraud, the lines between an honest mistake and misconduct are often unclear. From the company perspective, it’s difficult to definitively determine if misconduct was an error in judgement or intentional, without conducting extensive due diligence. The key to distinguishing the difference entails having an independent party gather and review the facts, including the employee’s work history, performance reports, previous misconduct, manager's opinions, previous expense reports, etc. Definitely not an undertaking to go into lightly.

When there’s proof the fraud is intentional, it’s easy to blame the employee for their misconduct. But what happens when the fraud is an honest mistake?

The simple answer is that both parties are responsible - the employee and the company. The T&E (or ‘Compliance’) team should hold employees accountable by having a comprehensive and enforceable T&E policy. This could be in the form of mandatory annual compliance trainings to educate and reinforce company values and regulatory policies. At the basic level, educational and remedial action needs to be taken for any misconduct. Perhaps employees who violate company policy should be subjected to corporate card suspensions, additional sign-offs of their expense reports, or additional compliance trainings. On the other side, employees should be able to easily access company policies. Many companies strive for this perfect balance, but it’s difficult to attain. The key to striking the balance is corporate culture. 

Stay tuned for Part 2 - Corporate Culture: the good, the bad, and the ugly