Is the company asking me to commit fraud by asking me to apply for reimbursement of half of trip expenses paid entirely by my colleague?

Question

Recently, I traveled on company business with a colleague. To save money, we agreed to share a hotel room. My colleague booked and paid for the accommodation in its entirety. I paid nothing for the room, or the rental car that they also booked.

Now that we are back, the company is telling me that I need to request reimbursement for half the cost of the hotel room. And, when I get the reimbursement, pay that to my colleague.

Does this sound correct? No other company I've been with would think it's correct to apply for reimbursement for something that the employee didn't pay for.

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Even curiouser: the company has now said it wants to authenticate that I paid my colleague, and to do that they require a cancelled check to be presented to them once the whole fiasco is over.

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Addendum

The travel office eventually decided that they wouldn't pay either of us until I had paid my colleague, and they had received a copy of the cancelled check to validate that I had paid. I refused to give in to this insanity, and deleted both my expense report and my original travel request, saying that I wouldn't be claiming my airfares or per diem allowance for meals (nor paying for "my share" of the accommodation that the company was eventually paying for in full).

Then, magically, they found a way to pay both me and my colleague what we had spent without involving me in the accommodation transaction at all.

My advice: DO NOT GIVE IN TO INSANITY IN ACCOUNTING.

Answer 1

It does not sound like fraud, if your colleague is also told to expense only half the room cost despite originally paying all of it. The company's position seems to be that since two employees benefited equally from the room, its cost should be allocated equally for tracking purposes.

Otherwise, it would be potentially unfair (though not illegal) if your colleague did this a lot and looked like they were "blowing their travel budget" when they were actually sharing the room (and/or car) with "free riders" who didn't take a hit to their travel budgets. So, the two of you "should have" split the hotel cost, and by giving your half of the reimbursement to your colleague, it will be as if you did so. The same argument could also apply to the rental car.

Some companies might not care or might assume that shared expenses will "even out" over time for corporate tracking purposes. Regardless, the principle is strictly upheld that each employee is "made whole" for their out-of-pocket and no one profits or loses.

Answer 2

I don't understand how you can claim half the expenses. Every company I work for requires receipts, invoices, bills or statements of account or similar proof of having made the expense. You don't have a bill from the hotel, ergo you can't claim an expense made on the company's behalf. Your colleague has the bill for the room, if he claims only half of it then he's losing out on half the repayment.

If you can claim without a receipt then you are leaving yourself liable to the tax authorities for tax on the non-salary payment the company made to you for monies you can't prove you spent. If that weren't the case most contractors would be putting in expense claims for spurious large amounts to avoid paying tax.

The other possibility is that the company has a per-diem payment for miscellaneous costs incurred (one company I worked for provided a company flat and paid an amount per day to non-local workers using it to cover things like purchasing food. But that was approved by the tax authorities and was way less than the cost of (even) half a hotel room. If I remember, it was something of the order of £20 / $20 a day and meant meals couldn't be explicitly claimed). These are usually only acceptable to the tax authorities if for sensible amounts to cover small transactions that getting receipts for may be not easy.

The company expensing system appears to be very peculiar. I'd want to have a written guarantee that the procedure is following company policy and that any liabilities that this highly unusual way of claiming expenses incurs are down to the company. Otherwise you end up at risk of tax or fraud liabilities.

Answer 3

In such a situation, I'd write on the expense claim something like:

Paid for by [Other Employee Name] - receipts for full amount will be attached to [Other Employee Name]'s expenses claim. Please re-imburse directly to them.

However the other employee fills in their claim (full amount, or "only their half"), it makes it relatively easy for the accounts department to reconcile, and it can't possibly be misinterpreted as you trying to defraud your company.

If the accounts department can't cope with that and insist on paying you "your half", you would of course want to promptly forward that to your colleague (by means that leave a paper trail).

Certainly it seems unusual to me for a company to refund one employee's out-of-pocket expenditure by paying it to a different employee than the one who paid; the onus is then on you to obtain adequate documentation that the other employee was in fact re-imbursed for the expenses they paid on your behalf, and you can't reasonably be expected to already have the other employee's bank details etc.

It's possible, however, that the company just needs some written records that will unambiguously confirm that they've paid all the expenses relating to both employees - to protect them from later accusations that they didn't re-imburse some employees' expenses.

If sharing expenses in the future, given the implied policy, you might do better to ask the supplier (car hire company, hotel, etc.) to split the receipt so that each of you pay half the full cost of the service, and each have a receipt for half the amount to attach to your expenses claim.

Answer 4

Is this fraud (i.e. a crime)? It depends. What is the source of the reimbursement? And is your colleague requesting a full reimbursement?

If your colleague only requests 1/2 reimbursement, then that is just stupid accounting. But, maybe your companies accounting system is setup to force this lousy solution.

If your colleague requests a full reimbursement, and it is a US government contract, or related to anything funded by the government, then that is fraud. Don't do it.

If your colleague requests a full reimbursement, and everything is completely funded by the company, then it is cheating, then you and your colleague could be fired.

For the last two cases, cover yourself with an email. Document that you are assuming that your colleague is only requesting reimbursement for 1/2.

My opinion only, I am not a lawyer.

And now that I am done, this should probably be in Workplace SE.

Answer 5

 Does this sound correct?

Can be correct, but where I am it would be awkward. More for the company than for your or your colleague. (see below)

No other company I've been with would think it's correct to apply for reimbursement for something that the employee didn't pay for.

That is correct. The solution is that your colleague invoices you for your share of the accomodation (or gives you a receipt that you did reimburse them). That paid invoice is the proof that you did pay, and it is the basis for your reimbursement claim against your company.

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Legal details may be different depending on legislation, but here in Germany, a private ("natural") person can write an invoice just like a [small] business. The only thing is: as they don't have a VAT number (like small businesses), there will be no VAT decared on the invoice, i.e. it gives the gross amount only.

I've had a similar request from an employer's accounting/travel reimbursement office: my car was parked at their hotel parking lot so the fee ended up on their hotel bill. My accomodation was somewhere else and didn't have a parking. Accounting said that for the sake of consistency they reimburse all car-related expenses to the owner of the car, as they don't like to have a "loose" parking fee without any other indication that the collegue has a car.

The invoice/receipt in this case was a letter written and signed by colleague and me explaining the situation, giving everything that needs to be given on an invoice (in that case: small amount invoice only), and my colleague signing that they had received the amount due. We also attached a copy of the hotel bill "just in case" (administration is best faught with their own weapons: paper).

With that, you, your colleague and your company have all the paper trail needed for proper accounting, and you should also be fine tax-wise.

What makes this awkward for the company is: as the invoice your colleague gives you has no (cannot have) VAT on it, the company looses its ability to get VAT reimbursement which is a totally unnecessary expense/loss as it could be avoided by reimbursing your colleague for the full amount, and then internally splitting the expenses as appropriate to different projects or internal accounts (which again needs a bit of paper, e.g. you declaring on your reimbursement request that you shared accomodation with was paid by colleague.).

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• In future, if you want to become friends with the accounting department, you try whether the hotel can give you separate bills.

• There may also be a bit of administration psychology going on here: the accounting department trying to teach you a lesson that you better immediately do what they say and how they say - otherwise they'll create lots of unpleasant work for you.

Answer 6

I am not a lawyer, not an accountant, not a tax lawyer. This is not legal advise. It is what I would do to cover my own personal liability. I can't be sure it would stand up if challenged.

In the United States, to keep yourself safe in the event the IRS audits your taxes, you would need to show that the money you received as "reimbursement" from your company is, in fact, reimbursement of actual expenses. Otherwise, it could be considered to be ordinary income, which would be subject to withholding taxes of all the normal kinds.

To demonstrate this, I would want a receipt from the co-worker for the funds you give to them, indicating that this is payment to him, reimbursing him for expenses you incurred for hotel, car, meals, and whatever else. This should be as itemized as possible.

All this seems like the company is exposing you to awkward conversation with the tax authority.

Of course, if you are outside the US, the rules may be completely different.

Answer 7

I don't see any reason to think the company is committing fraud. I guess it's possible that your colleague claimed an expense for the full amount, and now the company is going to get you to claim an expense for half the amount, and then they will use this documentation to claim 150% of the actual amount as a deduction on the company tax return. But if your colleague was also instructed to claim only 50%, then I don't see anything dishonest about it.

This seems unusual. Any company I've worked for, the person who paid the bill claimed it on his expense report so he could be reimbursed. I've never shared a room on a business trip but I've had many times I shared a rental car, and in such cases one employee was picked to pay for the car, and then that employee claimed it on his expense report and everyone else claimed zero.

But maybe your company has some reason why they want to accurately track travel expenses for each employee. Like expenses get billed to different departments or different clients. Or employees who have excessive travel expenses get dragged into the boss's office and yelled at. In such a case, it would make sense for them to want to accurately allocate expenses between employees. If the two of you shared a room, then presumably half of the cost of that room is fairly applied to each person.