A little padding of the corporate expense account can add up to a lot of lost cash, as evidenced by a report from Oversight Systems. The report found companies lost nearly $14 million due to fraudulent expenses filed in 2014 – and that was a loss calculated over only a 90-day period. Do the math to estimate losses from expense fraud over the entire year, and annual losses climb to more than $50 million.
The Analysis Details
Oversight analyzed expense reports submitted by 160,000 corporate travelers, most of which worked for Fortune 500 firms. The expense reports had been submitted and approved between March 1 and May 31, 2014. The total number of expense reports was not mentioned.
The Fraud Details
Out of the 160,000 travelers, a total of 20 percent handed in at least one report with at least one transaction that did not comply with corporate expense policies. Additional statistics reveal:
6.3: Percentage of total transactions that did not comply with corporate travel and expense policies
19: Percentage of the non–compliant transactions that fell into the fraud category
$115: Average dollar amount for each fraudulent transaction
While the report found all-out fraud was limited to a scant 1percent per 10 million transactions, that 1 percent added up to $13.7 million in losses for companies harboring fraud-prone employees.
Companies experienced additional losses from transactions that did not clearly fall into the fraud category. The most common were transactions deemed as suspicious, out-of-pocket expenses, which accounted for nearly 3 percent of the analyzed transactions.
$15 million: Dollar amount of transactions categorized as suspicious, out-of-pocket expenses
$14.9 million: Dollar amount of transactions categorized as policy misuse
$3.8 million: Dollar amount of transactions categorized as duplicate transactions
The Good News
Two tidbits of positive news did come out of the report. One involved the number of employees responsible for fraudulent activity. The report discovered a scant 5 percent of employees were responsible for a hefty 82 percent of the expense account fraud.
The other involved measures that worked to reduce fraudulent activities. Corporations that took the time to reinforce their expense policies and monitor expenses every month typically saw as much as a 70 reduction in noncompliant behaviors.
Easily monitor your own company’s travel and expense reports with Chrome River expense management software.
Have you dealt with questionable expense reports in your company? How did you address the issue?
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Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care.
We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.