How to Confront an Employee about Expense Fraud

Maybe it’s out of frustration. Maybe it’s because of the down economy. Maybe it’s because the employee really hates business travel. Or maybe it’s an honest mistake. Whatever the motivation, people submit fraudulent expense reports. Some people go to extremes to file a fraudulent expense report. Some people get wrapped-up in schemes that impact the community. And, some people’s instances of fraud are very public.

No matter how great or small the fraud is, one thing’s for sure: you need deal with it. Whether you work for a small business and act as your own human resources department or you’re employed by a big company with access to experts who will support you in such matters—you have to figure out how to confront the employee in question and handle the situation.

What action will you take with your employee? Before you make a decision, you’ll need to weigh a handful of things. Here are a few factors to consider:

  • Severity. How much money in fraudulent claims was there? A few hundred dollars? Or thousands of dollars?

 

  • Duration. How long has the employee been filing fraudulent expense reports? Is it a one-time occurrence? Or has it been going on for months or maybe even years?

 

  • Performance. What’s the employee’s performance level—exceeding or not meeting expectations? Could the fraud be a result of low morale?

 

  • Impact. If you fired the employee, how quickly can you replace him/her? How important is the employee’s role in your organization? Would not having that person in that role negatively impact the growth and success of your business?

 

  • Trust. Can you move past the fact that your employee submitted fraudulent expense reports? Will you be able to trust him/her to manage future projects?

The answers to some of these factors may have more significance than others. For instance, in some companies, the impact of losing the employee may outweigh the severity of the fraud. In others, the loss of trust may trump everything else. Also, your company culture, communication of clear corporate policies and your own instinct on what the right thing to do will be contributing factors on your decision.

After you’ve weighed the significance of each of these factors on your business, you’ll need to confront the employee in question. Before you do, remember the following:

  • Prepare. Before you meet with the employee, determine the objective of your conversation. You may want to jot-down notes of things you want to discuss.

 

  • Set expectations. When the employee sits down, clearly explain to them why you’re meeting with them. Opening statements like, “I’ve discovered some questionable expenses in your last five expense reports. I’d like to use today to better understand the pattern.”

 

  • Listen. Give the employee a chance to share his/her side of the story.

 

  • Be direct. Reiterate your company’s values and tolerance level for instances of fraud.

 

  • State the facts. Do not share your opinions or accuse the employee of fraud. Rather, keep your conversation to the point and fact-based only.

 

  • Action. Share with the employee next steps and how you plan to handle the instance(s) of fraud. Again, be direct and to the point.

 

  • Document. After your conversation, document everything discussed. This will be necessary if you need to take legal action.

So, whether you decide to fire the employee, take legal action or simply have the employee reimburse the company, go into your conversation with the employee with a plan beforehand. And, at the end of the day, be assured that what you’re doing is what’s best for your business.

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You’ve Found Fraud in Your Company. Now What? Identifying Expense Fraud in Your Small Business Is Expense Fraud Affecting Your Company?

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