About a month ago, Peter Millar, the director of technology application at ACL Services wrote a guest opinion for us on the importance of keeping an eye on employee expense reports and other internal reports for fraudulent activity. Tiny discrepancies can add up quickly if they go undetected for any length of time, which they may if they're backed up with phony invoices.
Some of the examples he shared were rather outrageous. He writes:
One prominent company recently identified charges to Victoria's Secret, hair salons, and other establishments that have nothing to do with the business, while another firm found employees using corporate credit cards to buy groceries and over $12,000 in tarot card readings.
Tarot card readings. Seriously? But it gets better. Look at this one:
One New York-based company allowed staff who worked late to take a town car home, paid for by the employer. While this perk was designed to compensate overtime hours, an analysis of swipe card entry and exit times in the company gym revealed that employees were staying late in the gym and then catching a free ride home. Other staff stayed downtown to eat dinner out, then charged the meal as a business expense and took a town car home.
People are going to try stupid things like this as long as they think they can get away with them. And some may get away with them for awhile. But I wanted to know why some companies seem to be more susceptible to this kind of fraud than others, or why we're seeing more coverage of these issues now than we have in the past. So I asked what he thought. Here's what Millar told me:
I believe that the economic downturn really focused people's attention on the ongoing survival, profitability and efficiency of their organizations, because all of a sudden they are at risk. So people are terribly incensed when these types of fraud pop up. They're all in the same boat together in the organization, and to have people essentially doing wrong things and causing it to be a leaky boat -- it really ticks them off.
Thus, companies are paying closer attention to expense reports and time and attendance records and the "smaller" less-obvious areas in which fraud can occur. That's not to say Millar would suggest a company spend an inordinate amount of time reviewing those areas if they pose little risk to the organization, but for larger companies that entertain clients or require travel and payment card use, putting technology in place to maintain oversight and then communicating that capability to employees goes a long way to reduce employees' tendencies to fudge.
As Millar said,"If people know that someone's looking, they're more likely to toe the line."