Auditing for Expenses Under $25

[jnoble99]

Does anyone have recommended report filters that audit for expenses that do not require a receipt?  While I can create a report and filter down to those dollar amounts where we do not require receipts, we are trying to zone in on fraud happening.  Employees are entering expenses from $22 - $24.99 that  never took place for breakfast, lunch, dinner.  Receipts are not required under $25 and management is not changing this. I need to start running reports to attempt to pick up fraud for items that cannot be audited.  Asking for receipts is not working as I receive the runaround and we have over 2000 employees traveling so it is quite difficult to pick up on these cases during the process/final approval stage.  My thoughts are running reports by department and for expenses under $25 to try and narrow this down.  I wasn't sure if anyone else had a better report or controls to hone in on this.  Once we create a valuable report, we want to run them for our managers to review and then put in an escalation process.  For instance, first offense where fraud may be taking place, the employee is spoken to.  Second offense the Manager is involved and then lastly we escalate to either Cost Center Manager or CFO.  Any feedback on this would be valuable.  

[KevinD]

@jnoble99 a few questions for you:

1. How do you know that those meal expenses never took place? What data/evidence are you using to determine the meal never took place and is fraudulent? Won't it just be a case of he said/she said? Their word against yours? 

2. What will building a report do for you that what you are currently doing isn't? Just that you can have all the data consolidated into once place/document? 

3. How will this report show/prove these meals never took place? 

I know my questions might sound like I'm siding with the employees, but I'm actually not. I'm just posing them as things to think about when trying to solve your issue. 

In all honesty and in my opinion, I'm not sure how a report will prove the expenses are fraudulent. Maybe you can explain what evidence you are using today to catch someone being fraudulent so I can understand a little better.

One thing you can do is create an audit rule that would flag certain expense types that are below a certain threshold. It doesn't have to be a hard stop, but the message can say something like, "Your report contains xxx expense that is under $25 and is now flagged for additional auditing". This lets them know the report will be more closely looked at. And, if I understand your post correctly, you require receipts for expenses $25 or more, so now they cannot increase the amount of the expense because they will then need to provide a receipt. 

You can certainly build a report, but as I mentioned, what in an expense entry are you seeing that leads you to believe it is fraudulent? If you provide some explanation, I can possibly provide more options. 🙂

P.S. Your options for a warning, escalate to manager, then escalate to CFO is pretty lenient. These employees are technically stealing from the company. A lot of other companies might deem this a fireable offense. 

[jnoble99]

Hi Kevin, thanks for your response.  I appreciate the questions. Other than requiring receipts, I don't think the report will do much other than start to narrow down to those employees constantly submitting charges under $25.  I am approving close to 700 reports weekly so to pick up on fraud charges for certain people/depts is too difficult.  Running reports through for a particular person or dept over a course of time will start to show if they are constantly submitting expenses within $22 - $24 amount.  We know fraud charges are taking place as employees have witnessed it and have been told by those less honest to do the same since we really can't audit it.   We have termed some employees as they have admitted to this after we confronted them. We are trying to bring more light to this now and find a way to narrow down the expenses to show helpful data.   Management is requesting a monthly report of some sort to show snippets by department and then further audit by questioning employees showing a lot of charges right under the $25 mark.  I REALLY like your auditing rule thought. I have not thought of this angle before and might discourage submitting the expenses in the first place which I prefer in being more proactive vs reactive.  Does this additional information help?  I definitely will be implementing the audit rule.