Expense fraud costs businesses significantly more than most managers and owners realize, with the Association of Certified Fraud Examiners (ACFE) reporting that an average company loses 5% of its annual revenue to fraud. However, a specific type of fraud stands out as the most common - employee mileage reimbursement fraud.
Another study showed that this is indeed the case. Among the many forms of expense fraud in the workplace, inflated mileage claims are indeed the most common given how difficult it is to detect when managed by hand.
Mileage fraud occurs more frequently than inflated expense fraud, over-reported trips, falsified receipts, for returned purchases, etc. The reason is simple: unlike other expenses that require receipts or documentation, mileage reimbursement has traditionally relied on employee self-reporting with minimal capacity for verification.
Small businesses are particularly vulnerable since they often lack the internal controls and dedicated staff to review mileage claims thoroughly. According to the ACFE, expense reimbursement fraud was reported by 16.5% of small companies and 13.1% of larger orgs, making it a widespread problem across all business sizes and industries.
The financial impact can compound quickly when you consider that even just a few dishonest employees can cost a company thousands of dollars annually. At the 2025 IRS mileage rate of 70 cents per mile, over-reported mileage claims can add up fast.
Related: Top 5 Company Mileage Tracker Misconceptions
Common Types of Mileage Reimbursement Fraud
Exaggerating Distances
The most common form of mileage fraud involves employees rounding up the miles they’ve actually driven. An employee who drove 19 miles might report it as 20. Someone else who drove 48 miles may claim an even 50.
To the employee, it may seem harmless at first glance. What’s a dollar or two per trip?
But when you multiply those extra miles across multiple trips per day, multiple days per week, and multiple employees across your workforce, this can accumulate to significant amounts of money lost to your business.
Falsifying Trips Entirely
Some employees go beyond exaggeration and simply invent business-related trips that never happened. Without oversight or verification systems, an employee can submit mileage flames for completely fabricated drives and receive reimbursement.
This is less common than distance exaggeration because it’s riskier and harder to justify if questioned. Still, it does occur in organizations with minimal oversight where employees realize no one is actually verifying whether reported trips took place.
Related: Mileage Reimbursement Explained | How To Set Up a Mileage Reimbursement Policy for Your Business
Mixing Personal and Business Travel
A more subtle form of mileage fraud involves employees incorporating personal errands into their business mileage claims. For example, an employee drives from the office to a client meeting, then stops at the grocery store, then drives to another client meeting before returning to the office.
When reporting their mileage, they claim the entire journey as business travel, including the personal detour to the grocery store. The trip between the two client meetings did occur, but the additional miles for their personal errand shouldn't be reimbursement.
This type of fraud often happens without the employees viewing it as dishonest. They realize that they were generally conducting business that day and view the detour as small.
However, even those small detours across many employees can create significant unnecessary expenses for your organization.
Claiming Shared Journeys
When two employees carpool to the same business location, both might think to submit mileage reimbursement claims for that trip. In reality, only the driver using their personal vehicle should receive reimbursement.
Still, the passenger may submit a claim as well, reasoning that they could have driven separately. Without systems to identify when multiple employees are claiming mileage for identical routes and times, companies pay double for single journeys.
Related: Manual Expense Reports: The Hidden Costs
Why Manual Tracking Makes Mileage Reimbursement Fraud Easy
While intentional employee dishonesty is unfortunately something that does happen, the root cause of widespread mileage fraud is more so related to outdated systems. Many companies still rely on paper mileage logs or Excel spreadsheets that employees fill out manually, creating these opportunities for fraud, even among otherwise honest workers.
These manual systems provide zero verification of the miles claimed, placing complete trust in employee honesty and ability to not make mistakes without any checks or balances. Accounting departments receive mileage reports and issue reimbursement checks solely on what employees write down, with no way to confirm accuracy in any reasonable amount of time.
Manual logs also create memory problems where employees genuinely can’t remember exact distances traveled days, weeks, or even months earlier. When filling out monthly mileage reports from memory, employees naturally round up or estimate conservatively in their favor, leading to inflated claims even without intentional fraud.
Small businesses face additional challenges since they often lack dedicated staff to audit mileage claims or implement sophisticated fraud prevention controls. The administrative burden of manually reviewing every mileage report is simply not feasible for companies with limited resources.
Related: How to Prevent Fraud in Business
How to Prevent Mileage Fraud
Preventing mileage fraud comes down to eliminating opportunities for dishonest/fraudulent reporting. The good news is that implementing safeguards against employee mileage reimbursement fraud isn’t complicated at all.
You can start by creating a comprehensive mileage reimbursement policy that clearly defines what qualifies as business travel, what documentation is required, and the consequences for fraudulent claims. Your policy should explicitly state that things like personal detours and carpooling as a passenger are not reimbursable claims.
The most effective solution to eliminating employee mileage reimbursement fraud is to eliminate manual reporting entirely. Today, automatic mileage tracker apps like TripLog make this incredibly easy.
With automatic mileage tracking, employees simply start driving and the app immediately starts tracking their mileage, and stops the trip when they stop. With TripLog, these thresholds are adjustable, and easy-to-create rules (such as commutes and frequent locations) make automatic classification of trips as business or personal a breeze.
Automatic mileage trackers eliminate all forms of common types of mileage fraud at once. Employees can’t exaggerate distances because GPS provides exact mileage, can’t falsify trips because the app only records actual journeys, etc.
Plus, admins get consolidated reports so they can see all of their teams’ mileage and expenses in one place. All-in-all, your entire team benefits from automatic mileage tracking that’s both easier to use, secure, and compliant.
Related: Why Small Businesses Should Track Their Mileage
Employee Mileage Reimbursement Fraud Explained FAQ
Q: How common is mileage reimbursement fraud?
A: Surveys show that approximately 5% of employees admit to some form of expense fraud, with mileage fraud being the most common type. Even if only a small percentage of your mobile workforce is inflating claims, the financial impact can reach thousands of dollars annually.
Q: Is rounded up mileage considered fraud?
A: Yes, claiming miles you didn’t actually drive for business purposes is fraud, even if it’s just rounding 19.5 miles to 20. While individual instances seem minor, the cumulative effect across multiple trips and employees creates significant unnecessary costs for businesses.
Q: How can I tell if employees are committing mileage fraud?
A: Warning signs include consistently round numbers on mileage reports, unusually high mileage claims compared to job requirements, multiple employees claiming identical trips, and employees who resist switching from manual logs to automatic tracking systems.
Q: What’s the best way to prevent mileage fraud without seeming like I don’t trust my employees?
A: Frame automatic tracking as a benefit that makes mileage and expense reporting easier and more accurate for everyone. Most honest employees actually prefer automatic systems because they eliminate the hassle of manual logging.
Related: Expense Report Automation Explained | How To Automate Your Company's Expense Management
Employee Mileage Reimbursement Fraud Explained - In Conclusion
Mileage reimbursement fraud costs businesses significant amounts of money each year, but it’s largely preventable through proper policies and modern automatic tracking technology.
Implementing an automatic mileage tracker app like TripLog protects your business from both intentional fraud and honest mistakes, while making the reimbursement process easier for everyone involved.
Create a free account today and invite your drivers to start using TripLog! Join thousands of companies who’ve eliminated mileage fraud and streamlined their entire reimbursement process.
