How to Identify Travel Expense Fraud

Even the smallest instances of travel expense fraud can quickly add up to become a big problem. According to UK Finance reports, overall expense fraud losses in the UK equated to a colossal £374.3 million in the first half of 2020 alone.

It doesn’t matter whether you’re a large multinational organization or a small business with 50 people or less, having a less-than-clear travel expense policy in place for employees can leave any business vulnerable to expense fraud. The only real difference is that small businesses may be less able to comfortably absorb their losses.

While it goes without saying that the majority of employees are honest, it’s worth noting that any weaknesses in your travel expense policy can easily be taken advantage of by those in the minority, whether accidentally or on purpose, leaving you open to serious financial losses and the potential for legal consequences in both the long and short term.

Knowing how to identify travel expense fraud is an important first step in helping your business take action to prevent it. Here we outline the basics of travel expense fraud and teach you how to eliminate the threat of suspicious activity from your organization.

What’s in this guide:

  1. What is travel expense fraud?
  2. Why do employees commit travel expense fraud?
  3. Different types of travel expense report fraud
  4. Top tips to identify and prevent expense fraud

What is travel expense fraud?

Travel expense reporting fraud is the act of deliberately submitting incorrect expense claims, and in some instances, altering the expense report to obtain a higher level of reimbursement from the company – and it is incredibly common.

In theory, the process of submitting expenses to reclaim money spent on work travel should be a fairly straightforward process. And yet, in reality, any system where money is paid out by a company can be subject to abuse – particularly when those payments are for something as broad and intangible as business travel. While, of course, you can request that employees submit receipts and travel tickets among other things, there are still a wide variety of scenarios where expense fraud can occur. These include but are not limited to the following:

  • Submitting claims for journeys that never actually took place (including cancelled trips);
  • Submitting separate claims when multiple employees actually travelled together e.g. shared the same taxi;
  • Submitting claims for non-reimbursable expenses such as parking tickets;
  • Inflating the cost of a journey, for example, by increasing the number of miles traveled;
  • Sometimes even going so far as to collaborate with a transport provider to create fake receipts.

A 2018 study by the Association of Certified Fraud Examiners found that fraudulent travel expense reimbursement accounts for a huge 21% of fraud that occurs in small businesses and 11% in large businesses. Such statistics really emphasize the severity of the problem faced by businesses of all shapes and sizes.

But why is travel expense reporting fraud so prevalent? Employees may think that because the amounts of money submitted for expense claims are often so small, slipping in a little extra here and there will go unnoticed. And like with everything else, it’s easy for employees to make mistakes when submitting expenses. Deliberate misrepresentation coupled with mistakes made through human error can soon add up, meaning your business could soon be paying out far more than necessary on fraudulent travel expenses.

What could this look like for your organization in the real world? Brace yourself; according to the ACFE Global Fraud Study, on average, five per cent of an organization’s annual revenue is lost due to fraud. This begs the question, if this was happening in your organization, could you really afford to spend 5% of your annual revenue on what essentially amounts to nothing?

Why do employees commit travel expense fraud?

And so, the big question: why does travel expense fraud occur? Knowing that committing fraud is a serious offence, as most of us do, employees must be aware that they are taking a big risk with every fraudulent expense claim submitted. So why bother? There could be several reasons, including:

  • Frustration due to exceptionally long and inconvenient reimbursement times, which could lead to employees believing they are owed compensation.
  • Dissatisfaction with company travel policies and the expensable purchases. Employees may think that certain purchases should be covered within the policy.
  • Envy over colleagues who get away with expense fraud can lead to other employees taking advantage. According to a study by webexpenses, 61% agreed that everyone exaggerates their expenses, making it appear more acceptable as a practice.
  • Dissatisfaction with employees’ salaries or lack of perks could lead to expense fraud, as a way of remunerating themselves in a way they think is fair.
  • Excessive traveling times or overtime may lead to employees committing fraud as a way of rewarding themselves for the extra time and effort they put into their work. In fact, according to webexpenses, 39% of people say they deserve a ‘little treat’ on behalf of their company to make up for the overtime they invest in their roles. This is a huge statistic that cannot be overlooked.
  • Confidence in their ability to get away with expense fraud can often result in employees manipulating their expense claims in companies that still use manual expense processes. According to webexpenses, “86% of global office workers have never had their expense claims challenged or declined”. This ultimately sets a precedent that says whatever the figure the employee submits for their expenses will be reimbursed without question.

While some of the above reasons may be viewed as easier to empathize with than others, it is important to reiterate to your employees that, whatever the reason, all acts of travel expense reporting fraud are viewed in the same way in the eyes of the company; that is, as an inexcusable and potentially criminal offence. 

Where the stakes are so high, it’s important that all travel expenses data is precise so that there can be no room for error or manipulation. Gett provides travel expense policies tailored to the specific needs of your organization – and a comprehensive suite of practical tools to ensure both parties remain compliant. Designed for ultimate visibility and control, Gett also gives you a simple consolidated view of travel expense data, helping you obtain valuable insights into exactly how much employees are actually spending on their travel across the entire organization.

What are the different types of travel expense fraud?

As we are dealing with one, very specific type of offence, according to the Association of Certified Fraud Examiner, most instances of travel expense fraud can be put in one of four categories:

  • Overstated expenses – An overstated expense refers to any instance where an employee uses a genuine expense, but over inflates the figure on the receipt with the intention to be reimbursed more than what they are owed. This can be achieved by increasing the tip amount or number of miles traveled. According to a study carried out by Oversight, of the 98 million expense report transactions and 50 million card transactions that took place in 2017, “37% of travelers had at least one case of waste and misuse, and 24% had two or more instances”.
  • Ambiguous expenses – Ambiguous or mischaracterized expenses can refer to any claim made for a personal expense and are a very common problem for organizations. It can be very difficult for accounts to separate the wheat from the chaff simply by looking at the submitted receipt. According to a study conducted by Webexpenses, an astonishing 85% of people admit to lying on an expense report to get reimbursed more money. Where is this money going? Oversight reveals that some of the most shocking expense claims it has seen have included drinks as office supplies, stag parties – and even treats and accessories for overly-pampered pooches!
  • False expenses – Fictitious expense claims using doctored or Photoshopped receipts, or false receipts obtained from the vendor directly.
  • Duplicate reimbursements – What happens if an employee submits the same receipt multiple times? If the same receipt is submitted on more than one occasion, the employee may receive multiple reimbursements. This can be really difficult to spot; according to the Oversight study, 10% of people surveyed had at least one duplicate expense.

Top tips for identifying and preventing expense fraud

Now that you understand what the different types of expense fraud are, it’s time to learn a) what to look out for, and b) how to minimize the instances of fraud you’ll need to look out for in the first place. Making just a few small changes to your travel expense reporting process can make a world of difference in helping your business eradicate travel expense fraud, saving you money in both the short and long term.

1. Create a clear travel expense policy

Travel expense policies should outline exactly what is expected of employees when booking and paying for business travel; it’s vital to ensure they understand expectations when expensing for travel costs. Your travel expense policy should be readily available to employees at all times, preferably on a cloud-based platform, where they can refer to the documents anywhere at any time.

2. Make expense claims simple for employees

Outdated manual processes can be cumbersome and inefficient. Incidentally, they are also ripe to be taken advantage of. By making the move away from manual expense claims and implementing a few well-chosen tools, you can make the entire expense claiming process better and more efficient for your employees – not to mention your business.

Working with a comprehensive travel expense platform like Gett provides the ideal solution, allowing employees to simply book their ride and receive an automatic invoice with no room for manipulation or error at either end. No lost receipts and no laborious forms to fill out. Travel expense reporting tools can also go a long way to help stop travel expense fraud in your business.

According to BTN Europe, companies that use manual expense reporting are twice as likely to be affected by fraud than those that use automated reporting tools. As an alternative, simply introducing a corporate card can help give your business far greater visibility on what spending looks like within its ranks.

3. Automate your travel expense reporting processes

Automation is here to make our lives better and easier. By automating your travel expense reporting, you are virtually eliminating the risk of human error and minimizing incorrect reimbursement and accidental fraud in the process. The Gett platform offers a comprehensive solution, including automatic invoicing and reporting analytics which provide a centralized view of all company travel expenses.

4. Audit your employees’ expenses on a regular basis

Auditing your employees’ expenses on a regular basis can help you spot any anomalies, perhaps selecting one colleague at random every month. Note that it is of particular importance to monitor new employees, as they may not yet fully understand the company policy or expense claim procedures.

5. Educate your team

It is important to set the right example and make sure employees understand what is expected of them. Be sure to offer advice on how to submit a travel expense claim, as well as the consequences of committing expense fraud i.e. fines or disciplinary actions which can act as a deterrent. All senior employees should follow company policy and encourage others to do the same, failure to do so can lead to a significant loss in profits and can result in dismissal.  

Help eliminate travel expense fraud in your organization and streamline your ground transportation spend with Gett. Save your business time and money with our simple, yet advanced platform. Request your demo today.