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Prevention Is the Road to Take
In the corporate world, employee expense fraud is occasionally regarded as more of a nuisance than a serious business issue. After all, according to a 2007 report published by the Association of Certified Fraud Examiners (ACFE), Detecting Occupational Fraud in Canada, the median loss of expense fraud is only $18,000.' However, in the public sector, the severity of employee expense fraud is much higher - though the median losses aren't larger, public sector organizations are under more scrutiny than virtually any other industry in the world.
In Canada, governments must disclose the aggregate expenditures made by public officials in their annual reports, broken down by expense type (e.g., meals and entertainment, mileage, travel, long distance costs, etc.). While federal MPs are not required to disclose their individual spending patterns, Canadian Auditor General Sheila Fraser began seeking full access to individual expense claims in early 2009 - several months before the British expenseclaim scandal that led to the resignation of the UK House of Commons Speaker in May.2
At the municipal level, the situation is potentially even more critical. Some jurisdictions mandate the publication of municipal councillors' salaries and expenses yearly. In some smaller municipalities, public officials face greater scrutiny than their largercity counterparts, as both citizens and media probe into their spending habits. In light of this intense public interest, municipalities in particular must take steps to understand the behaviours associated with expense fraud and put processes in place to prevent it.
Mapping the Municipal Expense Fraud Universe
The first step is understanding municipal expense fraud. There are three common types:
Intentionally circumventing spending controls - The primary conduct associated with this behaviour involves splitting receipts among several fraudsters so they do not exceed authorized spending limits.
Claiming personal expenses as business expenses - Although these claims may be as small as a dinner bill, they can extend to expensing personal vacations as business trips, charging unapproved purchases to a business credit card or expensing personal computers or other technology.
"Double dipping" by claiming legitimate expenses...