Expense Fraud Costs Companies Millions

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. 

Additional Losses

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?