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I found out about a worker getting fired because of this at one of the big 4 consulting firms. They used SAP Concur[0] software for travel & expense management and the machine learning algorithm flagged an irregularity in a recent expense reimbursement. But she wasn't actually fired for that one bad expense. What happened was that the SAP Concur raised management's suspicions which prompted the human accountants to go back into the old archives of T&E submissions from 5 years ago before SAP Concur was installed. They manually looked at her past reimbursements and discovered a long history of fraudulent claims. (E.g. incorrect hotel amounts.)
After the investigation, she was promptly fired without severance and also lost her flexible medical benefits (worth at least $10k).
Fraudulent expenses are no joke. Consulting companies are very sensitive about it because many consultants' expenses are included in the invoices and directly passed onto the clients. If you let clients discover a fraudulent expense instead of your internal auditing team finding it first, it is extremely embarrassing and taints all your other invoices. Integrity has to be maintained and you don't want clients questioning all the other billable hours and expenses.
There was the old "raincoat expense report" urban legend back when I was in Big 4.
Consultant left raincoat on subway while traveling for business and ran replacement cost through on expense report. Admin rejected the expense.
Consultant submitted second expense report with exact same total without the raincoat expense line item and the cost just absorbed into the other untraceable per diem and incidental categories. "Find the raincoat now" as a comment.
Wait, why should she lose her flexible medical benefits? Shouldn't recovery of the expense fraud be a separate legal process from taking of personal medical accounts?
Why do we connect medical benefits to employers?
A lot of expense procedures are fuzzy for a reason (no experiences with consulting companies).
Fraudulent expenses are the first and easiest way on the manager level / c-level to check if you want to get rid of someone. If everything is ok you need to look somewhere else.
> incorrect hotel amounts
What does this mean?
These people seem to have a strange definition of "fraud". In the first two paragraphs, they list three apparent "frauds" and then note that they were detected by analysing the receipts that the employees submitted. In other words, the employees freely disclosed what they were expensing, by the article's own admission. There's no explanation given of why the three expenses listed were illegitimate in any way; it seems reasonable to charge for the cost of having a kennel take care of your dog while you travel, and I assume the yoga and strip club were client entertainment for sales or marketing purposes. You can very reasonably disapprove of taking clients to strip clubs, of course, but doing so and then openly disclosing it isn't dishonest.
The only example of employees committing fraud - that is, gaining a personal economic benefit through dishonesty - is in the final three paragraphs. In that case, somebody billed steak as food for the office python when really they were taking it home to barbecue for their family. The rest of this article is deranged; these auditors, at least as they are portrayed by Bloomberg, seem to think that submitting an expense claim that they don't approve of, entirely honestly, is somehow magically "fraud". What the hell?
Slightly OT, but I wonder if you should be able to claim yoga/gym or even clothes as an expense. If being a consultant means projecting a certain image (fit, well-dressed), shouldn't you be paid for maintaining that image?
>You can very reasonably disapprove of taking clients to strip clubs, of course, but doing so and then openly disclosing it isn't dishonest.
Doing so and then submitting the expense as a steakhouse is dishonest at the _minimum_.
The initial examples clearly list that the employees pretended the charge was for something else. One can reasonably argue the employer should consider covering those things, but the process should be honest on both sides. (Clearly tell employees what's covered, how to submit it and how to ask for clarification/extra consideration, in exchange for accurate claims)
I think you misunderstood.
> One employee traveling for work checked his dog into a kennel and billed it to his boss as a hotel expense.
I read this as "employee pretended that the kennel expense was a _human_ hotel expense". (And, presumably, the employee stayed with friends/family)
> by analysing the receipts that the employees submitted.
The article implies that at least some of those receipts were faked.
>According to Oversight, 30 percent of employee expense claims are risky, wasteful and potentially fraudulent.
Seriously? 30 percent? That seems quite unbelievable unless you're defining your terms to include reimbursements that are within most normal travel policies. EDITED e.g. employees book their preferred airlines, hotel chains, etc. even if they're not the absolute cheapest.
100% - I can’t recall working anywhere where the expense policy was that well defined, usually it was “keep it reasonable” or “don’t raise eyebrows” (obviously not including fraud)
Additionally, in corporate America there used to be somewhat of an understood agreement that when traveling for work (and being away from your family, not getting paid for a 24hr day, etc) that that burden would be partially be made up for by nice hotels, meals, etc.
If 30% of your employees are committing "fraud" on expense reports you either work for a criminal organization or your expense reporting system is broken in some way.
I wouldn't be surprised if a lot of what they are counting as fraud is simple errors due to a badly designed expense system. For example, when you reimburse a hotel you have to manually create a second category with an obscure label for the taxes, and anybody who hasn't been told about it never knows, so they put the whole cost of the hotel room in the hotel line and suddenly are both overbilling (the room charge) and underbilling (the taxes).
Another easy way to commit fraud is to forget to include your travel hours in your expenses. So you aren't charging them for the time sitting on the plane, which is a violation of reporting guidelines and expense charging guidelines.
There are tons of ways an ordinary employee can screw up their expense report without realizing it. This is why they are supposed to be checked by a knowledgeable third party before being committed. If the person in the example was blatantly overcharging for hotel rooms for years without being caught then that's a failure of the expense reporting system.
I got chewed out when I expensed WiFi at a hotel once because "it seemed unlikely that I was using it for business." The funny thing is that I spent way less than everyone else on that trip, to the tune of maybe $400 over the course of 6 days (I rarely take cabs because I prefer to walk places, and I find large fancy restaurants in major cities to be bland to the point of interchangeability, so I typically eat at smaller local places), but the fact that I spent $40 on WiFi was a huge problem.
I'm sure this is the kind of fraud that this thing would detect. "Ah, you split your meal between two different food stands! That is fraud!"
Anti-fraud software salesman has discovered that fraud is rampant! News at 11!
Does anyone else feel like the entire system of expensing is kind of bizarre? This is kind of a tangent, but I feel like a few examples of expense fraud are less interesting than the fact that we're all using this deeply ingrained system that incentivizes cheating.
I'm thinking just about travel expenses here, obviously taking out clients is somewhat different. But most companies will have a per diem for travel but you still have to itemize every cost within that range. It's a pain for employees, and they are forced to lend the company sometimes thousands of dollars for a month or two at 0% interest. I think you could also argue that it's a pretty regressive cost as I'd imagine it could be hard in some cases for lower-income employees or people with extenuating circumstances to front the cost of their work travel before getting reimbursed. There's also the constant effort of deciding what should and should not qualify as a valid expense, which isn't always black and white.
Why not just pay the per diem in cash? Even aside from any actual fraud, I'm sure everyone has seen a lot of wastefulness when it comes to work travel, like going to relatively fancy restaurants every night or ordering extra rounds of drinks because you can expense it. Why should it matter to the company whether I'm doing that stuff or eating cheaply and pocketing the money? Why should it matter to the government for tax purposes whether I'm doing one or the other?
I have no idea what a different system would look like, since this is a pretty fundamental part of how individuals and businesses are taxed. But it seems like there should be a better way.
>Why not just pay the per diem in cash?
It's sometimes done. But, when there's a system like that, the per diem amount is usually low enough that you'd have to stay at a low-end hotel and eat fast food if you don't want to be out of pocket.
>I'm sure everyone has seen a lot of wastefulness when it comes to work travel, like going to relatively fancy restaurants every night or ordering extra rounds of drinks because you can expense it.
You call it wastefulness. I call it a small compensation for being away from home, dealing with airports, and otherwise living out of a suitcase.
Per diems can be paid up front, or after the fact. My workplace does both, since we send a lot of employees overseas very regularly. The itemizing requirement for per diems is a feature of the tax code, which requires expense reports to be itemized or else treats the per diem as income to the employee. (These same rules also provide daily caps on the untaxable portion of per diems, divided between food & incidentals, and lodging.)
For the most part, employees paid per diems choose the cheapest option for food and pocket the difference. The people eating fancy are the ones, like the C-suite, that get to expense their meals since the per diem limits don't apply to those expenses.
And let's face it: if your company is making you travel away from home for work, they need to provide a little something to make up for it. Letting the employees eat fancy meals on company dime is just part of it.
I think one big difference would be taxes. A per diem over expenses would be considered compensation, and would involve both income and payroll taxes. Otherwise, I'd work for free, have the company give me a per diem of X a day and just not pay taxes on it and the company wouldn't pay payroll taxes either!
The government is strongly incentivized to make sure that employers can't give employees untaxed money.
> employees are forced to lend the company thousands of dollars at 0% interest
This may be technically true, but in practice people charge things to their credit cards and don't actually pay the expenses until a month later anyway. And my company reimburses me within a few days, I always assumed that was normal.
While the company doesn’t pay you interest, you can rack up significant amounts via credit card cash rewards and loyalty rewards. So, the ROI on that risk free loan can turn out to be pretty great.
How expensive (to a corporation) are the low-level-employee expenses, fraudulent or not? I mean, nobody likes to waste money on fraud or strip clubs or extra steaks, but is the cost of AI Oversight more than you'd retrieve?
How about expenses for directors/VP/Executive VP/CxO? Does this AI look over their expense reports, too? I would guess that even legit expenses from that level look a bit odd, but having AI audit employee expenses but not management expenses could contribute to a morale problem.
Another place that this AI oversight could help society as a whole is having corporations/companies get audited for wage theft. Wage theft is supposedly the largest dollar amount of theft in the US, and it probably exists because audits are so seldom done. AI wage theft audits could have a large beneficial effect for employees.
To answer the question about the value of "AI," it is a black box of pretexts you can use for leverage.
Expenses policies are usually grey enough that if you want someone out of the company without significant severance, using the expenses policy as a pretext imposes costs on the target they probably won't fight. If a company wants to keep someone, there is no end to the excesses they will tolerate barring any liabilities greater than the value they bring. If they want to get rid of someone, the mechanism and the true reason are usually very different.
Useful rule is to treat any company expense as a vulnerability that will be used against you in a severance negotiation.
Arguably, a more accurate Turing test would be one where instead of being indifferent as to whether we are communicating with a human or machine - we decide that a machine is sufficiently intelligent if it can provide us with pretexts for political leverage against other people.
Visited a lawyer friend in Hong Kong (pre takeover) where client entertaining frequently required visits to hostelries of ill repute - all claimable and signed off.
Knew someone who sold his company and agreed to stay on for X months handover period. The new owners tried to go back and prove from previous expense claims that fraudulent activity had occurred and that they shouldn't pay some amount previously agreed. You need to be careful.
A long time ago, a project manager was paid 3X per month for a flat in Germany because at their level that was what they were entitled to. Then new junior person on same project came in, and happened to take over same flat and claimed X (with receipts). At the time this was just ignored - different folks different rules.
I always remember how they used to nickel and dime me about hotels and flights (I couldn't even get the "comfort" seat on two 9 hour flights in a row), however the Director positions and up (about 20 people at my office) used to fly First Class everywhere. I had to fly from SF to Germany to India in the worst, smallest, most uncomfortable seat for 18 hours in a row, but they could spring for First Class from SF to LA!
Another issue is that many companies (and most governements), have policies prohibiting the acceptance of meals or other gifts in excess of certain amounts, that I would guess are routinely exceeded. Having too detailed a records on expense accounts attached to dealing with those types clients could lead to problems for the clients and the company.
This is one of those areas that I never "got" in that I just filed expense reports for what I spent and didn't see the advantage of getting an extra $10 or $100 from the trip. And I knew people who loved to push it as far to the limit as they could, like a manager who had a private table at a Sunnyvale restaurant and filed a huge reimbursement request for 'team lunches' and a baggie full of receipts. Betting that nobody would actually go and verify the receipts.
So at some point you have to be in a somewhat adversarial relationship with the company right? I suppose if you felt the company was taking advantage of you this would make sense as a way to 'get back', but wouldn't you rather be working somewhere else instead?
The only time I've done anything like this is when the company did their best -- using Concur -- to avoid paying legitimate expenses. ie we got into an argument over whether my taxi ride home from SFO was "too expensive". I was like, um, I got in the fucking taxi, told it my address, and paid the bill.
My employer used Concur and stupid rules to argue me into giving up and just paying the taxi ride out-of-pocket. I'm pretty sure that was the point, and many of the stupid expense "fraud" companies would notch that as a win. But I made my $57 back elsewhere, don't worry.
And yeah, the fix was get an employer that wasn't ass.
How about better expense claiming software so employers aren't stealing from employees through unclaimed expenses!
I have done a tiny amount of business travel in my career but recently went to a conference in a far off land and had to wrestle with the expensing system.
First, I was required to loan my employer $3000 for a month by paying for all the expenses (including the unavoidable very expensive hotel rate) on my personal card.
Afterwards I had to fight with the expensing system for several hours to get everything lined up correctly so that I could have the privilege of having my own money returned.
I was scrupulously honest with my expenses and still felt like I was being eyed suspiciously by the system.
I never once considered misrepresenting my expenses but I definitely considered pounding my keyboard. :)
My mom got flagged by a system like this a few years ago. The state was in a financial bind, so they hired an algorithmic auditing firm to claw back public funds from medical professionals who billed Medicare/Medicaid. They had been lax about the documentation they accepted so, they were able to claim just about anyone was missing years worth of legally required documents. She did in-home medical evaluations for rural communities and worked long hours. The amount of hours and miles she billed set off red flags, so they sent her a bill for tens of thousands of dollars and threatened her with criminal prosecution. It took her months and who knows how much in legal costs to fight it.
What are the chances that they actually have effective AI doing this? I have a very strong suspicion, admittedly based on nothing at all, that they just have some simple rules based algorithms and mostly just hire cheap labor to look over expense reports.
if (expense_for_flight > 2 * average_expense_for_flight) {
flag_for_review()
}A.I. = Almost Intelligent
This is unnerving. I don't really have an issue with people who commit fraud being caught in the act. It still bothers me that we're closing out the 2010s and most of what we've achieved as an industry is make it easier for employers to surveil their people.
The story of the 20th century included a moon landing and ubiquitous personal computers. The 21st century's story seems to be about advertisers, health insurers, and employers using technology to get every edge on the common people that they can get.
Being able to find reference material, how-tos, self-paced, self-led education seems like a really good thing we’ve achieved as asiciety. Obvs this carries over from the last years of prev century, but it’s now uniquitous.
That was the story of the late 20th century. The story of the early 20th century was industrialized warfare killing 37 million people because a prince got shot.
I never really got it why people cheat on expenses. Apart from the fact that theft (at least in this case) is morally repugnant it's a sure fire way to get fired if your employer needs any reason at all.
Expenses, as implied in the name, are meant to reimburse employees for expenses fronted for their employers. It's not an enrichment scheme to pad your salary or to lay off unrelated expenses on your employer.
Bonus for those geniuses, which expense strip club visits. This seems the expense equivalent of surfing porn at work; stupid!
As remote employment grows, I sense a larger and larger amount of office business expenses being invisibly pushed to the remote employees, while the business saves on the expense of less or no office space. The entire area of "expenses" is ripe for an inspection revolution and formalization on all sides.
There is a similar project here in Brazil [1]. They analyse public records of government officials and detects discrepancies with their refound requests for their "official" expenses. It's a civil society totally open project.
> While the snake could be justified, the employee’s purchase of $1,200 worth of steak as snake food could not. Pythons only consume live prey.
How would AI solve / detect this anomaly? I am curious.
I hope it uses Benford's law as a signal.
I've used Concur as both a user and expense report approver, and I suspect these "AI" claims are overblown. What actually happens is that Concur can import transactions directly from a corp credit card and identify a lot of them (airlines, hotels, restaurants) automatically. From what I've been told, the auditing bit consists of looking for anomalously high charges in categories ($1000 flight OK, $1000 restaurant bill not so much) and checking against a blacklist of banned establishments (gambling, adult entertainment, etc).
this quote:
“The python was a legitimate business purchase,” van Drunen says. “But the steak was for his family barbecues.”
I just got a job with a corporate card, and we have SAP Concur, I assume that everything will be scrutinized by some kind of AI - as it automatically reads the receipts and essentially tells me that it is doing so. One steak dinner is not worth my job...
I don't think this is worthwhile. Most of the time employees are getting back their unpaid overtime and other unpaid work in their expense accounts.