A little story about doctored meal receipts...

Back in the early 80's I was part of a team of financial auditors working for a large division, of a real large, Washington State based insurance company. An ex-employee "dropped a dime" about some expense account abuses that were occurring out of a Southern California office. However, we had little to go on, outside of the accusation.

My boss sent eight of us auditors to camp out at the office, and scrutinize every expense account for the previous two years. We were there for four weeks, before we knew what had gone down.

The sales staff of sixteen would submit credit card expenses for legit client meals (and in the type of business being done, two business meals a day was not extraordinary) on their expense account, in the month following the purchase. Also on this expense account, there were cash receipts for some of the meals. Usually these would be tear-offs, from the bottom of the bill (remember this was the 80's, and most restaurants had hand-written order systems). As these were better restaurants generally, the tear-off slip usually had the restaurant name pre-printed, along with a receipt number.

What we ultimately saw was the tear-off receipts were from the same restaurant that three or four months earlier, a credit card receipt had been sent through the expense account system. By creating a spreadsheet of all the restaurant expenses of these sixteen people over the two years, some patterns appeared.

After the fourth week of "auditing", we broke up into four groups of two auditors and started driving around to the restaurants which we had the cash, tear-off receipts. We would go into the restaurant and ask for the manager, and tell them we were auditors for "XXXXXX Insurance Company" and were investigating expenses. Maybe the restaurant managers were a bit deaf, or couldn't exactly comprehend who we were, but in 90% of the visits, they gave us complete assistance. We were joking amongst ourselves, that some of these people must have thought we were from the IRS.

By asking the restaurant manager to tie the tear-off receipt number to an actual food order, it became very clear that the tear-off's number was chronologically from a day that one of the company's sales staff had submitted a credit card receipt for that restaurant. While a number of restaurants' record keeping was lousy, those that kept decent records reflected a consistent practice of expense account abuse. We had the sales staff cold.

What wasn't clear was why this abuse was so wide-spread. Ultimately by confronting a couple of salespeople who we thought would "turn state's evidence", we learned that the sales manager set this scheme up to create a slush fund for expenses that the parent company would never agree to. These were such things as parties, trips, and Christmas gifts for clients. In reality, when the whole thing came out in the open, it did not appear as if any of the sales staff actually pocketed any of the extra reimbursement money. It all went into the slush fund (which was a checking account at a local credit union, we eventually found).

When the dust cleared 14 people (including high local management level) were terminated. While many of the sales people were just doing what was ordered by local management, they violated the corporations clear written policy on the subject, and lied to us auditors during initial interviews.

Lesson learned... don't assume your company accounting people are dense...