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How can I prevent expense reimbursement fraud at my club?

Q How can I prevent expense reimbursement fraud at my club?

Expense reimbursement is just one of many areas in a club environment where fraud can occur. Although no system is foolproof, sufficient controls can be put into place so that the opportunities to commit expense reimbursement fraud are minimized. The cornerstone of any system of internal controls is segregation of duties—an effective structuring of checks and balances. Fewer people in the accounting office may result in a weakening of controls because fewer tasks can be done by different people. Conversely, more bodies in the accounting offices allows for a greater degree of segregation of duties. For clubs that can’t dedicate the financial resources to accomplish this, adequate controls can still be established using alternatives. The following are some of the basic procedures that a club should implement:

Expense Reimbursement Policy – The club should have a detailed written expense reimbursement policy that both employees and board members can fully understand.

Expense Reimbursement Report – The club should have a pro-forma expense reimbursement report that all employees should be required to sign and complete when seeking reimbursement.

Business Purpose – The business purpose of each reimbursed expenditure should be documented. It should include: who, what, when, where and why.

Receipts – Original receipts should be attached to the expense report. Photocopies of originals should not be accepted.

Approval – Expense reports should be signed and dated by an individual above the level of the person seeking reimbursement. The general manager’s expense report should be approved by an officer—typically either the treasurer or president.

Payment – Once the expense reimbursement report has been approved and processed for payment, the check with the report and supporting documentation attached should be presented to the check signer for signature. The GM’s reimbursement check and report should be presented to the appropriate officer for signature. Depending on the club’s check signing policies, the appropriate officer may sign or co-sign the expense reimbursement checks for other employees.

Cancel All Information – Expense reimbursement reports and all supporting documentation should be properly canceled in some manner, such as with a “Paid” stamp at the time of payment, to avoid them being submitted for payment more than once.

Daniel T. Condon is a founding partner in the accounting firm of Condom O’Meara McGinty & Donnelly LLP, which currently serves as auditors, consultant and tax advisors to more than 325 clubs in 14 states. He has practiced in the area of private membership clubs for more than 30 years. He can be reached at 212-661-7777. Learn more about COMD at