I've understood expense reports to be buisness expenses that were first paid for by the employee and the employer compensates them for it. In that case it's not taxed as income as it was never really anything the employee "got".
It all depends on how your company accountants do it, they could be doing something unusual, but the way you've described it sounds like tax evasion.
I dont really care, but if you like the benefit you may not want to bring it up in public forums.
