By Shell Fleet Solutions on Nov 10, 2021
Mileage fraud, or fuel fraud as it’s sometimes referred to in the US, is giving a false account of business miles or kilometres travelled and is one of the most common types of employee theft. In Australia, a survey found mileage fraud was the most common form of expense abuse with 52% of respondents added ‘just a few dollars for extra kilometres’. US employees committed $2.4m of fuel fraud using government-issued payment cards. Since 2016, there has been an ongoing uptick in fuel card fraud. In light of this, it is important for companies to develop a fraud prevention strategy addressing misuse, slippage, and outright fraud.
With fuel making up roughly a third of overall fleet costs, simply overestimating a short, 10-mile (16-km) journey by a further mile on a regular basis can add 10% to fleet fuel costs and significantly impacting margin.
Here are our five top tips to recognising mileage fraud:
Tip One: Keeping regular
On regularly scheduled journeys, fleet managers should expect to see uniform mileage reporting. Similarly, any spend on a fuel card should be largely similar from one fill up to the next. Any sudden changes can be noted – these discrepancies may be down to roadworks and diversions, but it’s important to red flag.
For grey fleets using their own vehicles and claiming fuel expenses, tax authorities estimate that business mileage versus personal use should be in the ratio of around 60/40. If it appears the vast majority of driving seems to be done on the company dime, it may be worth investigating.
Another pattern to recognise is Friday fill-ups which might indicate a weekend driven on company money.
Tip Two: easy maths
If reported mileage is regularly coming through ending in five or zero, the figures are at best lazily reported or at worst entirely fraudulent. Keep a lookout for regularity in the figures of a driver whose routes are largely irregular, or oddly similar round numbers.
Tip Three: sudden leaps
Company expenditure can jump (or drop) suddenly for a number of reasons. Fuel prices fluctuate, sometimes quite widely. A significant diversion on a major route can add a large number to the total kilometres travelled by a fleet. Business expansion will also naturally drive higher spend.
It’s important to keep an eye on the spending trends during these times as periods of change are an excellent opportunity to mask mileage fraud. It is possible to project what impact these changes might have on a fleet, so vigilant managers should model different scenarios to reveal any interesting gaps.
Drops in expenditure are to be welcomed but, again, understand how they have happened. Perhaps a driver has been replaced and the new employee is using far less fuel than their predecessor. Collusion among employees is not unheard of and mileage fraud may be masked if a large number of people are taking part.
Tip Four: time and motion
With the range of GPS devices and mapping apps available, fleet managers should be able to understand exactly how far their drivers have to travel to accomplish tasks. Mileage fraud commonly happens through misreporting the distance travelled, to the extent that some journeys can be made up altogether.
Create basic route plans to correlate with actual mileage to see if they broadly match (clearly, fleet managers need to account for fuel stops, diversions and so on). Drivers should be able to easily justify why they have taken a particular route as well as account for any changes.
Telematics is a more accurate way to capture mileage and allows companies to track private as well as business mileage. Telematics can show the full route taken by a driver, along with the additional benefit of feeding the odometer reading back to the system, so drivers aren’t able to deviate from the vehicle’s actual mileage reading.
Tip Five: necessary miles
Most mileage fraud refers directly to using fuel allowances for financial gain but travelling the miles reported can also be fraudulent.
In this situation, usually in the case of contracted drivers, journeys are either unnecessary or unnecessarily long. In this way, drivers can charge for more hours worked and boost their income.
Fleet managers can spot if drivers are inflating their work routes by making reasonable estimates of the time each job should take, the best route to use for it and also comparing it against previous similar journeys.
This is another area where telematics can play a key role, but as good as technology is, driver behaviour should indicate any issues. Necessary journeys should need no elaborate justification.