Employee theft occurs in all organizations. It can range from taking home company supplies to embezzling money or falsifying documents. Two areas where occupational fraud is frequently committed is the use of company credit cards and employee reimbursements. As with all fraud, an employee is motivated to commit the crime when he or she:
- Has a financial need that cannot be solved
- Has a perceived opportunity to commit the act and believe that it will go undetected
- Rationalizes that somehow the act is justifiable
Out of these three factors, the only factor that an organization can defend against is to stop the perceived opportunity to commit the act in the first place.
Guarding against the opportunity to commit employee credit card and expense report theft begins with a strong policy that clearly defines the expectations that must be followed when using the organization’s credit card and/or submitting a request for an employee expense reimbursement. The policy should contain the following specific guidelines:
- The responsibilities of the cardholder
- The types of expenditures allowed
- The requirement that all supporting documentation for the expenditure be turned in on a regular basis and that cash advances on the card be strictly prohibited
It may also be prudent to set a dollar limit, where pre-approval is required before the purchase is made. The policy should also clearly state the consequences for any type of abuse. The policy should be signed by the employee to acknowledge that they have read and understand the content. The signed policy should be kept in the employee’s file.
Management should also review and assess the need for the employee to have a company credit card on an annual basis and set limits on the card that are appropriate for the employee’s duties.
A reconciliation of the credit card statement to all purchases should occur monthly and any discrepancies should be investigated and resolved timely. Someone who holds a credit card should not perform the reconciliation process. The reconciliation should be signed, dated, and reviewed by a member of management.
A similar process should be performed for employee expense reports. The report should be turned in timely with all supporting documentation. It should be signed, reviewed and approved by the employee’s superior. Any discrepancies should be investigated quickly and missing documentation should not be reimbursed. Someone who is requesting or approving the report should not be the person who reconciles the reports.
As with all policies, to be effective, the importance of it must be regularly communicated, monitored and enforced.