As accountants and auditors, we have all been taught that there needs to be a paper (or electronic) trail to substantiate everything. This is most applicable to the supporting documentation for payments made by an organization. This includes vendor payments, credit card payments, and expense reimbursements. However, I am going to focus on credit card charges and expense reimbursements.
What if I told you that we could no longer simply rely on the presence of a paper receipt as evidence that a charge is legitimate? In the past few years there has been a proliferation of websites that allow potential fraudsters to generate fictitious business receipts. These sites advertise themselves as a way to solve the problem of having lost a receipt – they are simply helping innocent travelers who misplaced a receipt and can’t get reimbursed without it. I think we can all see through this façade and realize that the true service these websites are offering is the easy ability to create fake receipts.
These sites go so far as to specialize in the type of fake receipt they can generate – there is one that specializes in hotel folios and another that can produce authentic looking gas receipts. The gas station receipt site is especially tricky – one such site allows the individual to simply enter the “purchase price” and the website will calculate the number of gallons purchased based on the average price of gas in the area. There is even a site that allows you to enter specific items purchased so the fraudster will have a nice itemized receipt to submit as support with the expense report.
The obvious next question is what can be done to mitigate the risk associated with fake receipts? While it can be very hard to spot these, the key is to have a strong policy on expense reimbursement and multiple levels of review. This review should include not only ensuring that all charges are supported by receipts but also on verifying that the expense is necessary and reasonable given the person’s job responsibilities. This type of review may have to be done by someone outside of accounting – such as the person’s direct supervisor. The policy should also include limits on the amount an employee can claim for reimbursement each day as well as guidelines on the type of expenses that can be submitted. For example, there should not be charges at electronics stores or other big box stores. These types of purchases should be handled centrally by the accounting or IT departments.
Lastly, performing periodic audits of mileage charges will send a strong message to anyone that is considering submitting fictitious gas receipts. These audits should focus on a comparison of the mileage claimed to the actual mileage on the car’s odometer, as well as reviewing the mileage claims to ensure they are reasonable given the person’s job responsibilities.
As you can see, the use of technology is making it easier and easier for potential fraudsters to perpetrate their schemes. However, by being diligent and having strong policies in place, you can hopefully deter this type of fraud, or at least detect it in its early stages.
