Reimbursement Fraud Prevention Steps For Family Employers

An Ohio man worked as a project manager from 2006 to 2017 for California-based Natus Medical, Inc.

In 2016, he began submitting false reimbursement requests to his employer on which he claimed he had travel expenses that he paid for out of pocket. According to investigators, the employee frequently requested reimbursement for fake airline tickets he created using editing software.

The employer deposited reimbursement money directly into the manager's bank account until the fraud was discovered. Court documents show that he requested reimbursement for more than 1,000 fraudulent expenses totaling $517,737.

The employee also used his company card's credits for personal expenditures, paying for his side business, and transferring money to his spouse's PayPal account.

According to the U.S. government, the employee did not include the embezzled funds as income or report the gross receipts from the side business he formed. In total, he failed to pay $175,774 in taxes from 2013 through 2017.

The IRS-Criminal Investigation Unit's investigation found the 39-year-old man had committed tax fraud.

The defendant recently pled guilty in U.S District Court to filing a false income tax return and wire fraud. He faces a maximum penalty of three years in prison and a fine not to exceed $250,000 for filing a false income tax return as well as a maximum penalty of 20 years in prison and a fine not to exceed $250,000 for wire fraud. "Hamilton man pleads guilty to embezzlement, tax fraud" www.cincinnati.com (Jan. 05, 2022).

Commentary and Checklist

False reimbursement requests are a common form of embezzlement.

To help avoid this, let staff know in writing what types of purchases they are, and are not, authorized to make upon hire. Require staff to receive prior authorization before making purchases over a certain amount and submit contemporary receipts for purchases.

Importantly, confirm the items were purchased and implemented for family purposes.

If a staff member must make routine purchases as part of their job duties, it is best to provide a credit card with a limit tied to the family organization. Choose a credit card company that provides protection against fraudulent purchases.

Here are some additional tips to help prevent staff fraud:

  • Have a policy of financial oversight in place and train all new staff on your policy, notifying them that fraud is grounds for termination.
  • Employ a third party to audit your finances on a routine basis.
  • If you do have one person who oversees the majority of your finances, make sure that person takes vacations periodically, and have another person look over the financial record in their absence.
  • Make sure that staff knows that no one is exempt from your financial oversight policy, and that financial review is standard practice in the organization, not a sign of distrust.
  • Have a safe, third-party reporting mechanism in place and make sure that staff knows who they should talk to if they suspect that fraud is occurring.
  • Encourage staff to report suspected fraud by keeping the identity of informants confidential and investigating any reports of financial wrongdoing.
Finally, your opinion is important to us. Please complete the opinion survey: