ACFE Fraud Study: A Little Off the Bottom Line

You know what they say about a free lunch. So if someone in your organization seems particularly well-fed, you might want to take a closer look at their expense reports. A recent study by the Association of Certified Fraud Examiners shows that fraud losses are on the rise. According to Toby Bishop, president and CEO of the association, there are some tried-and-true methods to recognize expense fraud in your organization.

1. Identify employees who make expense claims that are out of line with those of colleagues in similar roles. Note the salespeople who spend significantly more on entertaining customers than their peers to generate the same amount of sales.

2. Look for an unusually high proportion of travel expenses or meal expenses compared with those of peers. This might indicate fictitious expenses. You should also note transactions that fall just under approval limits. If an individual has a large number of these, that might suggest a particular abuse of an opportunity to make undocumented claims.

3. Conduct your analysis of expense report fraud over a long period of time. Typical expense fraud lasts two years before it is discovered.

As for the increase in fraud losses, Bishop comments that although it may reflect an increase in the willingness of employees to commit fraud against their employers, at the same time, it’s important to remember that expense reimbursement fraud can be annoying but tends not to be catastrophic to the organization. It’s important to control it and put resources into detecting it, but at the same time, it needs to be balanced against the need to protect the organization against less frequent but more dangerous types of fraud such as financial statement fraudwhich can destroy companies overnight.