Expenses fraud: Haven’t we heard it all before?

Here, Melanie Guy discusses the importance of an appropriate and up-to-date expense policy which your employees understand.

The topic is of expense fraud is nothing new. It’s approximately eight years since the MP’s expense fraud first hit the headlines and as recently as March of this year the media reported that Labour MP Simon Danczuk has been ordered to repay £11,000 in previously-claimed expenses.

When reading about these high-profile cases, the resulting resignations and, in some instances, prison sentences how many of us have stopped to think about how a similar situation would be practically dealt with in our own organisations? In most businesses the sums claimed are generally much lower and for less elaborate items; it would be very unusual to find a duck house or high monthly mortgage costs on the average expense claim for example.

However, a fraudulent claim is a fraudulent claim whether it relates to £12,900 of fake receipts (as reported in the case of Rotherham MP Denis McShane who received a six-month prison sentence in 2013) or mileage for a 50 mile round trip to a non-existent client meeting.

Expense claims subject to human error

In many organisations the checking and processing of expense claims is still very much a manual process and is open to human error. When checking through a large pile of receipts and claim forms it’s not unreasonable to expect that there will be times when strange items go through unnoticed. Let’s face it, we’ve all been up against a deadline at some point and it’s often then that things will get missed.

When thinking about how you would practically manage expense fraud in your own organisation, firstly you need an appropriate expenses policy which is both easily accessed and which all relevant employees are fully aware of. If your policy states that the employees’ line manager is responsible for authorising expenses then they should be properly trained to understand what they are looking for, before they authorise and pass to finance who will generally be the final check point prior to payment being made.

Once an unusual claim or claim patterns have been noticed, and as a result expense fraud suspected, don’t underestimate how much time the organisation will need to invest or how many people should be involved. Dependent on the size of your business the point of escalation is likely to be your HR team and as an HR professional I am all too aware that it is at this stage that the investment in time really starts.

Another important factor is to ensure that your business has a robust disciplinary process because once potential fraud has been brought to your attention you will need to commence an investigation. Speaking from experience this involves reviewing each claim item, date and receipt for all the claims in query and cross referencing with individual’s calendar. That is a process which takes time and requires attention to detail. Following the investigation, and where a recommendation to proceed to a disciplinary hearing is made, you next need a hearing manager and a different HR representative to manage the next step in the process.

Your hearing manager should be properly trained to hold a disciplinary hearing and be fully briefed on the facts by the person who conducted the investigation so that they may fully prepare for and conduct the hearing, and reach a decision. This decision may result in a disciplinary sanction, in just the same way as any other disciplinary hearing and in line with your policy.

How to submit a claim

Re-educating the employee in how to submit a claim and what they can claim for may be a next step upon conclusion of the process. This may also include re-educating the line manager who verified the claims in the first instance, if they are not spotting potentially fraudulent claim items or patterns.

Potentially fraudulent claim items could include:

  • Claiming outside of policy for meals
  • Excessive mileage
  • Out of date receipts with the date manually amended or ‘damaged’ receipts with dates missing
  • Mileage claims for days the individual was absent from the workplace
  • Personal items of shopping being included on receipts with items which are allowable
  • Odd patterns for taxi journeys during the course of a day.

The ongoing process of checking, verifying against policy and authorising or declining claim items should then continue, and in order for it to be a fair and transparent process should be ongoing and take place across the board, in line with both your expense and disciplinary policies.

In summary your business should have an appropriate and up-to-date expense policy which your employees need to understand how to submit a claim and what is allowable within the boundaries of your expense policy to avoid any perceived misunderstanding. You need a robust disciplinary policy and process, both of which are readily available to your employees. You also need to train your managers in regard to verifying expense claims and to have a number of trained disciplinary hearing managers. Your employees need to understand how to submit a claim and what is allowable within the boundaries of your expense policy to avoid any perceived misunderstanding. You will also need support and guidance from your HR team throughout the process.

Melanie Guy is HR manager of Webexpenses.

Further reading on expenses

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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