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Manipulation of Imprest Funds, Advances, Expenses and Employee Reimbursement Claims Within Companies

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The management of imprest funds, advances and operating expenses gives rise to legal and accounting risks when amounts are disbursed without adequate supporting documents, employee claims are duplicated or settlements are delayed. A financial shortfall does not, however, by itself establish that an offence has been committed: it may result from an accounting error, differing approval procedures or a dispute over entitlement to an expense. This article explains how to distinguish disciplinary misconduct from breach of trust and forgery, the legal controls on recovering funds and making deductions from wages, and preventive investigation mechanisms for companies in Egypt.

I. The Nature of Imprest Funds, Advances and Expense Claims

Imprest funds: An amount of money or an asset entrusted to an employee or officer for use for specified work purposes, subject to an obligation to account for its use, provide settlement documents and return the balance, according to the true nature of the relationship and the conditions of delivery. A standing imprest fund allocated to recurring expenses differs from a temporary advance entrusted for a particular assignment.

Advances: An advance may be a loan or an advance payment of wages, or it may be a sum disbursed in advance to perform a work assignment and subject to expense settlement. This distinction affects the rules governing repayment, wage deductions and criminal characterisation: the term “advance” alone does not establish its legal nature.

Expense claims: Requests for reimbursement of sums spent by an employee for the company’s benefit, such as travel, accommodation and authorised hospitality. Entitlement is assessed under the expense policy, the contract, the supporting documents and the reality of the expenditure, distinguishing unintentional errors from deliberate fabrication.

II. When Does Conduct Constitute Breach of Trust or Forgery?

Breach of Trust Under Article 341 of the Penal Code

Article 341 of Penal Code No. 58 of 1937 penalises forms of misappropriation, use or dissipation that cause harm in respect of money and movable property delivered under one of the relationships of trust specified in that provision. Its application requires an examination of the actual delivery of the property, the basis of possession, the associated obligation and criminal intent. Not every debt owed by an employee, or mere delay in settling an imprest fund, constitutes the offence of dissipation. The acts involved and the evidence revealing an intention to misappropriate or dissipate the property must be examined.

Fabricated Claims, Forgery and Fraud

Claims supported by forged receipts or intentionally false information may involve offences of document forgery, use of forged documents or fraud, provided that the elements of the applicable provisions are satisfied, including the provisions concerning forgery of private documents and Article 336 of the Penal Code. By contrast, the accidental duplicate submission of a receipt, or the use of an incomplete document without the requisite intent, does not automatically constitute a criminal offence.

Keeping the Three Legal Routes Separate

  • Disciplinary route: An employee’s breach of spending policy, imprest limits or settlement deadlines, subject to the disciplinary regulations and safeguards governing investigations.
  • Civil route: Recovery of an advance that is due or unspent sums, and compensation for damage whose cause has been established, according to the nature of the contract and the applicable civil and employment rules.
  • Criminal route: This must not be pursued on suspicion alone; it requires a specific incident, appropriate evidence and the elements of the offence attributed to the person concerned.

III. The Egyptian Legal Framework

  • Penal Code No. 58 of 1937: Article 341 on breach of trust, Article 336 on fraud where its elements are established, and the forgery provisions relevant to the type of document.
  • Labour Law No. 14 of 2025: Articles 137–147 concerning disciplinary regulations, investigations and temporary suspension; Article 151 concerning employees’ liability for loss and damage and the limits on deductions; and the provisions governing loans made by employers to employees.
  • Civil Code No. 131 of 1948: The provisions applicable to contractual obligations, compensation and recovery of undue payments, according to the true nature of the relationship and the source of the obligation.
  • Information Technology Crimes Law No. 175 of 2018: Article 11 on the evidential value of digital evidence where the technical conditions prescribed by its Implementing Regulations are satisfied.
  • Tax legislation: Invoices and expenses must be assessed against the requirements for substantiation and tax deduction, without assuming that a breach of internal policy itself amounts to tax evasion.

IV. Deducting a Shortfall from Wages Is Not an Unrestricted Measure

Loss or Damage: Article 151 of the Labour Law

Where an employee, through fault or in connection with their work, causes the loss of or damage to equipment, machinery, raw materials, products or other property owned by or entrusted to the employer, the employee is required to pay the value of the property lost or damaged. Following an investigation and notification of the employee, the employer may begin making deductions from wages not exceeding five days’ wages per month. Amounts recovered through deductions under this Article may not exceed two months’ wages. The employee may lodge a grievance before the competent Labour Court, and any sum wrongfully deducted must be repaid within seven days of the judgment if the employer is not awarded the assessed amount or is awarded a lower amount.

Advances, Loans and Disciplinary Penalties

The rules on deducting compensation for loss or damage should not automatically be applied to every outstanding advance or disputed expense. If an advance constitutes a loan from the employer, the special provisions governing loan deductions and their limits must be consulted. If the amount is a disciplinary penalty, Articles 139, 140 and 143 of the Labour Law apply, particularly the limits on deductions from basic wages and the prohibition of impermissible multiple penalties. Where substantial sums are disputed, judicial recovery or settlement should be considered according to the legal nature of the debt.

Resignation Does Not Justify Withholding All Entitlements

An employee’s resignation during an investigation does not extinguish a valid debt owed by that employee or prevent the company from bringing a civil claim or filing a complaint where the elements of an offence are established. Nor does it give the company an automatic right to confiscate the employee’s entitlements or freeze their accounts. The legal rules on set-off, deductions and entitlements upon termination must be examined, and handover and settlement documents preserved.

V. Internal Investigations and Employee Safeguards

Article 141 of the Labour Law requires the employee to be notified in writing of the allegations, their statements to be heard, their defence to be investigated and the proceedings to be recorded in minutes placed in their file. The investigation must begin within no more than seven days of discovery of the breach and must not exceed three months from its commencement, with a possible extension of a further three months if new facts or documents emerge. The specified exceptions permitting oral investigations of minor breaches, the duty to state reasons for the disciplinary decision and the authority of the person conducting the investigation under Article 142 must be observed.

Article 145 permits an employee’s temporary suspension by written decision for no more than sixty days on full pay in the circumstances prescribed by law. The right to challenge the decision and procedures for seeking an extension under Articles 146 and 147 must be observed. Proof of a financial error does not automatically justify dismissal or deprive the employee of their entitlements; dismissal is governed by its own statutory conditions and procedures.

VI. Steps for Examining Imprest Funds and Expenses and Establishing the Facts

  • Establishing the actual balance: Prepare an opening statement of imprest funds, advances, disbursement orders and earlier settlements, and reconcile it against bank statements, cash balances and inventory.
  • Verifying the expense: Confirm the expense’s relationship to the assignment, the invoice issuer, travel and accommodation dates, assignment orders and approvals. A formally valid invoice alone is insufficient to establish entitlement.
  • Detecting duplicate claims: Analyse invoice numbers, dates, amounts and issuers, and identify claims submitted or split more than once or paid by more than one entity in the group.
  • Tracing authority: Identify who requested, approved, paid and recorded the expense, and review changes to beneficiary details.
  • Hearing the defence: Present discrepancies and documents to the person concerned, investigate alternative explanations and preserve responses before characterising the incident.
  • Final report: Separate established sums from estimates or disputed amounts, identify evidentiary sources and specify facts still requiring investigation.

Digital Evidence and Personal Data

Expense-management system and ERP logs, dates on which receipts were uploaded, modification records and electronic approvals may help expose duplication and manipulation if lawfully preserved with evidence of their source and the integrity of the copies. Verification of a travel allowance must not be turned into comprehensive tracking of an employee’s location or a search of their personal telephone without a lawful basis. The processing and retention of location data and correspondence are subject to the relevant legal safeguards.

VII. Recovery of Funds and Handling a Criminal Complaint

Before initiating legal proceedings or filing a complaint, the company should compile a chronological dossier containing imprest handover records, disbursement orders, invoices, approvals, settlement and inventory records, investigation findings and the employee’s statements. The legal basis for recovery or compensation and the appropriate procedure must be identified, distinguishing established facts from inferences. The company cannot impose precautionary attachment or restrict dealings in assets by unilateral decision; each measure is subject to its statutory conditions and the powers of the competent authority.

If a settlement is reached, it should specify the amount, its legal basis and payment schedule, and whether the release covers damages and other claims. A civil settlement must not be assumed to terminate criminal proceedings: any such effect depends on a statutory provision permitting criminal settlement, its requirements and the position of the competent authority.

VIII. Special Considerations for International Companies

Foreign companies operating in Egypt should adapt global expense policies to Egyptian labour law and the rules governing wages and personal data, rather than automatically imposing deductions or penalties merely because they are permitted by the international group’s policies. The transfer of investigation files to a parent company outside Egypt, documentation of cross-border expenses, the body authorised to approve an imprest fund, the currency and exchange rate, and hospitality and gift policies should also be reviewed.

IX. Prevention and Internal Controls

  • Adopt a written policy specifying the types of imprest funds and advances, spending and approval limits, and the documents required for each category of expense.
  • Set settlement deadlines appropriate to the nature and location of an assignment. There is no general statutory fourteen-day deadline for every imprest fund, although such a period may be adopted as an appropriate administrative control.
  • Prohibit overlapping outstanding imprest funds except under a reasoned and approved exception, and issue regular reports on overdue settlements.
  • Separate approval, disbursement, settlement and review functions, and periodically audit a sample of small expenses.
  • Use corporate cards or digital tools where suited to the business, without assuming that they alone prevent fabrication or manipulation.
  • Provide a channel for reporting irregularities and investigating them independently, while protecting confidentiality and defence rights.

When Is Specialist Legal Counsel or Local Counsel in Egypt Necessary?

Legal intervention becomes important where an accounting discrepancy cannot readily be distinguished from dissipation, receipts appear to have been forged, a dispute arises over wage deductions, employee dismissal or discharge of an imprest fund, or a criminal complaint or civil claim is being considered. Coordination between legal counsel and the financial auditor helps identify the legal basis for each sum and the procedures for proof and recovery without exposing the company to further employment disputes.

How Can Specialist Legal Support Help?

El Rouby Law Firm advises companies and investors on policies governing imprest funds, advances and expenses; reviews settlement documents; provides legal oversight of internal investigations; assesses employment, civil and criminal liability; drafts settlement agreements; and prepares appropriate claims and complaints. The firm also provides Local Counsel services to international companies operating in Egypt.

Frequently Asked Questions

Does Failure to Return an Imprest Fund Constitute Breach of Trust?

Not automatically. The nature of delivery, the way the funds were handled, criminal intent and the requirements of Article 341 of the Penal Code must be established after verifying the actual balance and any settlements due.

May the Value of a Shortfall Be Deducted from an Employee’s Wages?

In cases of loss or damage falling under Article 151 of the Labour Law, deductions may be made following investigation and notification, subject to a maximum of five days’ wages per month and total recovery by this means not exceeding two months’ wages. The employee retains the right to lodge a grievance.

Does an Employee’s Resignation Extinguish Their Debt?

A valid debt is not extinguished merely by resignation. Recovery from the employee’s entitlements is, however, subject to statutory restrictions, and a civil claim may be considered according to the basis of the debt.

May a Company Dismiss an Employee Merely Upon Discovering a Fabricated Invoice?

Dismissal depends on proof of serious misconduct and compliance with the prescribed investigative safeguards, jurisdiction and legal procedures. Suspicion or an initial financial report alone is insufficient.

May Expense-System and GPS Data Be Used as Evidence?

Digital data may be relied upon where it has been obtained and processed lawfully and the requirements governing its integrity and attribution have been met, while respecting employee privacy and avoiding unnecessary collection of information.

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