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Expense reimbursement schemes remain a top occupational fraud, study shows.
One of the easiest ways for fraudsters to steal from an organization is through expense reimbursements. In its most recentReport to the Nation on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) determined that 13 percent of all fraudulent disbursement schemes investigated involved expense reimbursement fraud.
ACFE defines expense reimbursement fraud as any scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expenses. Examples can include:
- Billing for travel and expenses that never occurred.
- Requesting reimbursement for items that were never purchased.
- Charging for items used for personal use.
Lack of controls, absence of management review, and override of existing controls are cited as the most common factors that allow expense reimbursement schemes to occur, according to the ACFE report. The report also points out that the median length of time a an expense reimbursement scheme went undetected was 24 months.
“A Novel Credit Card,” featured in the February 2004 issue of Internal Auditor magazine, explains how a New Orleans executive defrauded his company of US $88,000 by running an employee credit card scheme thanks to several control breakdowns.
So, where were the control breakdowns? First, Larry had sole authority over the credit card function. He managed the corporate credit cards, reviewed the delinquent accounts, had access to the employee statements, and dealt with the bank’s account managers. No one reviewed his work. As soon as accounts payable walked the checks down to his office, he had all he needed to perpetrate the fraud.
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