Fraud Prevention Tip #37: Approving Travel and Entertainment Expenses – Good Questions to Ask
Many employees, contractors and consultants incur travel, entertainment and other out of pocket costs while on business trips. And fraud and abuse in out of pocket reimbursement is a well-known concern.
We’re expected to know the details of these trips in sufficient depth to be able to competently review the expenses submitted for reimbursement. That’s great in theory, but the process breaks down when supervisors, managers and executives aren’t taught what to look for at the moment of approval.
Here’s a list of questions to get you started. It comes from a survey of over 300 auditors and fraud experts who attended a recent conference presentation I provided.
Take a quick look at this long list and pick out the eight or ten items that relate to your unique business environment. Consider creating a checklist to keep close at hand the next time you are tasked with approving someones expenses. And share your checklist with others.
1. What is the business purpose of the expense? Is it reasonable for the person claiming the expense?
2. Are original receipts or other support attached for every item claimed (as required by policy)?
3. Is the expense allowable under organization policies?
4. Are the costs claimed ‘reasonable’ considering organization culture, policy, locations, etc?
5. Does the type of expense make sense given the type of travel?
6. Is per diem being abused (compare with dates and times of travel)?
7. Is there an unusual volume of ‘cash paid’ transactions normally charged to credit cards?
8. Are hand written receipts appropriate and reasonable (taxis, minor meals, supplies)?
9. Is this a duplicate expense (check prior expense reports and direct bill items such as conferences)?
10. Are meal receipts itemized (showing food, alcohol and entertainment charges separately)?
11. Were items claimed for reimbursement that are specifically prohibited by policy (alcohol, dry cleaning, hotel room movies, cover charges at clubs, first class air)?
12. Is the expense report ‘sloppy’ – a possible sign of attempt to mask unreasonable or unallowable charges?
13. Is the stated business purpose valid?
14. Is normal commuting mileage deducted (if required by policy)?
15. Were any costs split to avoid allowable maximum?
16. Where appropriate, verify that the place of business actually exists (for example, call the phone number printed on the receipt).
17. Recalculate tips and taxes on meals. For unreasonable low tips or taxes, ensure that the base amount of the receipt has not been inflated.
18. Verify charges for entertainment, checking who was entertained, business purpose and actual type of entertainment provided.
19. Spot check charges that fall below the threshold where receipts are required.
20. Verify that cash advances are reconciled to actual expenses on a regular and timely basis.
21. Compare dates with weekend days, local holidays and special events (Super Bowl, NASCAR, Wimbledon, World Cup, other sports playoffs, football bowl games).
22. For attendance at conferences and all day meetings where per diem or meal charges were also claimed, verify whether meals were provided directly by the host organization.
23. Compare date, time and address on machine printed receipts – compare to person’s calendar or electronic meeting schedule (air, hotel, time-stamps on parking receipts, tolls and taxi receipts).
24. Tie mileage to vehicle logs (where applicable) or map programs (MapQuest, etc.).
25. Were preferred travel partners utilized? If not, why not?
26. Are the charges allowable and properly reported under FCPA and international gift and entertainment regulations?
27. Are currency exchange calculations accurate and consistent with organization policies?
28. Has anything on the receipts been altered or ‘whited-out’ (dates, amounts, vendor name, other fields).
29. Review the detailed bill (restaurant receipt evidencing what was ordered), not just the credit card slip.
30. Verify tolls. Insist on statements for ‘EZ Pass’ and similar toll transponders.
John J. Hall, CPA
John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”