Common Types of Expense Report Fraud And How to Prevent Them

What Is Expense Fraud? 

Expense fraud occurs when employees submit inaccurate or deceptive expense reports for reimbursement. It may be intentional or accidental, but either way, it’s a threat to your bottom line. Thankfully, with the right systems in place, it’s preventable. 

With automated expense reporting and fraud detection capabilities like those built into ExpensePoint, companies can reduce the risk of error and fraud at scale. 

Common Types of Expense Report Fraud

1. Overstating Expenses

Employees may slightly exaggerate costs, such as rounding a $43 dinner to $60. Individually, this seems minor—but over time, the financial impact adds up. ExpensePoint’s policy enforcement tools help flag out-of-policy entries automatically.

2. Fictitious Expenses

Submitting expenses that never occurred such as a non-existent hotel stay or fabricated client lunch is serious fraud. With ExpensePoint’s AI receipt imaging and OCR scanning, it’s easier to verify the legitimacy of every transaction.

3. Duplicate Submissions

One of the most common fraud types. ExpensePoint detects duplicates by cross-referencing receipts, vendors, dates, and dollar amounts, automatically flagging duplicate claims.

4. Mischaracterized Personal Expenses

A vacation dinner disguised as a client meeting? ExpensePoint makes it easier to validate and categorize expenses correctly through line-item approval workflows.

5. Inflating Expenses

This includes exaggerating travel classes, hotel upgrades, or mileage. With real-time policy checks and multi-level approvals, ExpensePoint ensures questionable claims never slip through. 

Red Flags for Expense Fraud 

Be on the lookout for: 

• Inconsistent formatting or blurry receipts. 

• Vague descriptions of expenses (e.g., “business lunch” with no context). 

• Submissions outside of standard policy or limits. 

• Frequent rounding to the nearest $10 or $100. 

• Multiple expenses from the same vendor on the same day. 

How to Correct Overstated Expenses 

If you discover overstatement of expenses, here’s how to resolve it: 

• Use ExpensePoint’s report editing features to flag and correct issues. 
  
  
• Collaborate with the employee through the built-in comments or messaging system. 
  
  
• Adjust and resubmit the report with audit trail documentation. 
  
  
• Reiterate company policy with support from ExpensePoint’s custom policy rules. 

Expense Fraud Punishment: What Happens Next? 

Expense fraud punishment depends on the severity of the offense and your organization’s policy. Possible consequences include: 

• Written warnings or policy violations. 

• Requirement to reimburse the company. 

• Termination of employment. 

• Legal consequences, especially for large-scale or repeated fraud. 

Read more about how to confront an employee about expense fraud. Transparency is key. Employees should be aware of the company’s expense policy and consequences for violating it. 

How to Prevent Expense Reimbursement Fraud 

The best defense is a good offense: 

• Use automated expense management software to flag irregularities. 

• Require receipts for all claims. 

• Conduct regular audits. 

• Educate employees on proper reporting and consequences of fraud. 

• Limit expense reimbursement categories and amounts. 

Need Help Managing Your Company’s Expense Reports? 

Expense report fraud, whether it’s overstating expenses, submitting fictitious claims, or inflating receipts, can erode trust and cost your company real money. ExpensePoint expense management tools can help you implement clear policies, create powerful workflows, prevent abuse and protect your bottom line. 

Request your ExpensePoint demo today and discover how easy and efficient expense management can truly be.