Expense Reports – Should You Care?

What are expense reports? Expense reports are forms that are submitted by employees requesting that they be reimbursed for business related expenses paid for personally. Expense reports should include the following characteristics:

  • The employee should provide proof of the purchase via a source document (i.e. – an official receipt). The exception here is for mileage, tips, or one-off cash payments. In the case of mileage, many companies require that you provide a copy of MapQuest or Google driving directions to validate your travel distance in miles. For tips and cash payments, the Company probably has a policy regarding whether they will reimburse these at all or what the dollar value reimbursable limit is.
  • The expense should be approved by an authorized individual to validate that it is in fact a business related purchase and is in compliance with company’s Expense Report Policy & Procedure Manual.
  • If the expense was incurred via a company credit card, it should be validated that the cardholder is responsible for paying off the balance monthly.

Now that we understand what characteristics expense reports should have, let’s take a look at why these are important and some risks to be aware of.

  • In large corporations across America, expense report audits, especially at the executive level, are ongoing and pervasive. Expense reports are one of the most common ways employees’ take advantage of and defraud a company. These losses can be significant and can have a seriously negative impact on your company’s reputation.

Things to look out for:

  • If your company does business in another country and is reimbursing employees for expenses incurred in another currency, validation of the currency conversion is imperative to avoid over reimbursement.
  • If your company is providing special benefits especially to executive employees as a reward for performance, someone needs to be validating the method to which these are paid out. For example, if an executive is awarded a trip abroad for Q3 Sales, this payment should be processed through payroll as compensation or a bonus – not through an expense reimbursement where taxes are avoided, as this is illegal.
  • Review source documents to see if employees are treating other individuals on the Company’s tab.
  • Make sure expenses are not submitted for reimbursement that were already paid for by the company. This can happen when company credit cards are used by employees, but the company is still responsible for paying the monthly balance.
  • Unsupported expenses that are not for business purposes. All companies should have a Policy & Procedure Manual for Expense Reimbursements that detail the rules and regulations employees must follow. This should include clarification on what qualifies as a source document, what reasonable dollar values are for Hotel, Travel, and Meal expenses, etc.

Don’t be a victim of Expense Reimbursement fraud! While it may seem tedious and untrusting to review your employee’s expense reports, it is not something to be taken lightly.

Written by:
Andrea Murray
TGG Accounting

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