Fashioning a Fraud Case Study

In this article, Bobbie Jean Donnelly was a fraudster who used Travel and Expense reimbursements to defraud her company. Donnelly figured out how to manipulate her travel and expense reimbursements to eventually defraud her company of about $275,000. Had her company had proper controls in place for travel and expense reimbursements, wouldn’t have occurred to this magnitude. Donnelly was targeted in an internal investigation because she was one of three employees with the highest amounts of travel and expense reimbursements hers totaling, $115,000.

One of the red flags in the case was the fact that Donnelly’s supervisor had only submitted $40,000 in travel and expense reimbursements that year. It turned out that Donnelly had been using several different schemes to accumulate such an outrageous amount of travel and expense reimbursements. The first of these schemes would be the mischaracterized expense reimbursements scheme. The flow of fraudulent behavior follows Exhibit 7-4 in Wells text. Donnelly incurs a non-business expense such as a personal flight to Italy.

She prepares the expense report for the flight and attaches the receipt to the expense report, which needs verification from a supervisor. She then forges the signature of her supervisor and sends the expense report to accounts payable. A check is issued to Donnelly to reimburse the expense and the expense is coded to “travel and entertainment. ” Without proper controls of which and for how much T&E expenses will be reimbursed with reasonable limits, it is easy to mischaracterize an expense.

Donnelly also used fictitious expense reimbursements schemes to defraud her company. This type of scheme follows Exhibit 7-6 in Wells’ text. Donnelly prepares a report claiming a fictitious expense such as samples. Donnelly would use a credit card statement as her supporting document and then again forge her supervisor’s signature to gain approval. The expense report is sent to accounts payable and a check is issued to Donnelly to reimburse the expense and the expense is coded to “travel and entertainment. Another type of fictitious reimbursement expense was also created using taxi receipts. When this scheme was used, Donnelly would also follow Exhibit 7-6 from Wells, and prepare an expense report claiming numerous taxi expenses. For supporting documentation she would alter or photocopy the original receipt and then change amounts of tip or total. These could have either been forged or given to the supervisor who at first glance may not realize that these are fictitious documents. This type of fraud is difficult to prevent but can easily be detected.

Fictitious reimbursements can be detected by; “expenses that are consistently rounded off, patterns in which expenses are consistently for the same amount, reimbursement requests that are consecutively numbered, or receipts that do not look professional or lack information. ”(Wells, 187-188) Preventing and detecting reimbursement expenses can be very challenging and time- consuming for companies. However, in order to prevent these schemes, a company needs to have explicit policies that clearly convey to each and every employee what will and will not be reimbursed.

Donnelly was able to defraud her company out of a quarter of a million dollars in a short two-year period. In order to prevent these schemes and not use up so much time, Kessler points out that there are “tools that could be used to examine and parse such data [which] include IDEA Data Analysis Software, Audit Command Language (ACL), Excel, Access, SQL, SAS—generally any database or query software. These programs can be very helpful for any company. Works Cited Kessler, B. (2007). Fashioning A Fraud. Journal Of Accountancy. Wells, J. (2008). Principles of Fraud Examination. New Jersey: John Wiley & Sons, Inc.