Fictitious Employee Expenses Fictitious Expenses Have Costs

Fictitious Employee Expenses

Fictitious expenses have costs organizations billions of dollars every year. They come in the form of charging for items used for personal reasons, billing for travel or other expenses that never materialized, seeking reimbursement for items never purchased, collusion among employees who both bill separately for travel or mileage reimbursement when they traveled together, or outright falsifying or manipulating receipts (Marasco, 2011). They also include high dollar items paid in cash, consistently rounding off expenses, submitting receipts over extended period of times, or the receipts do not look professional or lack information (2004 ACFE Post Conference Chapter 7, 2004). Fictitious expenses often get submitted multiple times and to multiple budgets and could be in the form of submitting personal credit card bills instead of the original detailed receipts.

The case, "Fashioning A Fraud" (Kessler, 2007), is a good example of fictitious employee expenses. Employees were submitting credit card bills instead of original, detailed receipts that showed patterns with late fees, current charges, and old charges added into the total due. They were also submitting the same receipts twice with alterations of tips and total amounts. Even though, it could not be proven in this case, suspicion of collusion was present with taxi receipts from the same taxi showing sequential trip numbers with small amounts of time lapses between the ending trip and the start of the next trip.

The business department manager, Bobbie Jean Donnelly, was the major fraudster in this case. The majority of the expenses she submitted were for samples she was not authorized to make and used for personal reasons, such as a work wardrobe. There was also a business trip to Italy to recruit interns, when in reality, it was a personal vacation trip she spent $6,000 for.

Donnelly committed the fraud by manipulating the department budget and forging her boss' name for authorization purposes. The company policy for reporting expenses required a written description of the business purpose and a manager signature for authorization of the expense. Donnelly was over the department's budget. By monitoring budget to actual variances, she could submit fraudulent expenses under the "other" or "miscellaneous" categories that were under their budgeted amounts. In order to pass it through for payment, Donnelly learned how to forge her manager's name on the expense reports well enough that it was hard to tell if he was the real one that signed them.