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Management

Everything you always wanted to know about fiddling expenses

Written by David Vine, Managing Director, GlobalExpense

Wednesday, 30 January 2008

Fraud at work maybe more common than you think, particularly when it comes to employees submitting inappropriate personal expenses for reimbursement.

Most people would not consider themselves to be a fraudster either in the workplace or outside the office walls.

Yet in recent months we have seen the Metropolitan Police Force accused of abusing their credit cards, the Auditor General criticised for his ‘luxury’ expense claims and Conrad Black receiving a jail term for six and a half years and ordered to pay back the $6.1 million that was stolen.

Specific guidelines

If highly respected figure-heads of well known organisations are willing to take the professional reputation risk, never mind the possibility of jail, other companies should not be surprised if they also discover they have a fraudster within the ranks.

If those at the top are putting all sorts of extras through as expenses, word quickly spreads through the office grapevine. “If it’s good enough for them, its good enough for me” tends to be the motto.

Are we really a nation of fraudsters trying to make a quick buck at work though? It depends on whether the company’s expense policy stipulates what is and isn’t allowed.

If a company has no policy with specific guidelines, or it is at best loosely worded, then staff may make fraudulent claims unwittingly.

Unaware of policy, staff view the padding of expenses as simply part of their company benefits.

After all, the executive who has to travel on frequent business trips expects to be “compensated” because of time taken out of office and away from family.

Second largest controllable expense

If employers and managers continue to refuse to take expense fiddling seriously and do not introduce an appropriate and workable policy on the claiming process by thoroughly scrutinising each claim, this kind of humiliating scandal will continue to occur.

With employee expenses more often than not making up the second largest controllable expense, employers must take greater care if they are to know exactly how their cash is being spent.

In a recent YouGov survey commissioned by GlobalExpense it was revealed that over three quarters (76 per cent) of British employees that claimed expenses in the past have never had an expense claim queried or rejected by their boss.

Is it any wonder then that 15 per cent of claims submitted (worth around £800 million) are ‘out-of-policy’ yet more than 99 per cent of them are approved by managers?

Approved employee expense claims include lap dancers, cat food, lingerie and even Valentines Day gifts.

Out-of-control costs

Not all expense claims are small though. In 2006, the largest single approved claim by an employee was for £30,781 to cover training and conference costs for a team.

The largest total claimed by an individual during 2006 was £142,709, more than six times the national average salary of approximately £22,500.

Add to this mix the fact that 30 per cent of British employees admit to exaggerating their expense claims and you have a recipe for out-of-control costs. Explain that to the audit committee!

It is therefore up to management to communicate the company expenses policy clearly and reinforce it regularly, especially with managers responsible for authorising claims.

Many staff have no idea what their company’s expense policy is. They simply submit a claim and see if it will be paid.

Many directors - especially those in sales - see allowing generous expense claims as a way of covertly rewarding some employees, but it is up to authorisers to ensure they understand and apply the expense policy.

No effective controls in place

Employee expenses are a black hole for many organisations and on the face of it businesses could not care less.

Senior management may worry that tightening expense procedures may appear too draconian for employees. The fact that many employees who claim expenses think that exaggerating their figures is acceptable, however, should be sending alarm bells to British industry.

Most companies have no effective controls in place to analyse employee spending patterns or judge if too little, or too much, is being spent on any one area or by any one employee.

It is high time that those responsible pay a lot more attention to this overlooked area and put their houses in order.

If managers continue to turn a blind eye then the loss of revenue will just get bigger and a negative culture of theft in the workplace will continue to prevail for years to come and employee expenses will be hitting the headlines again in 2008, and for all the wrong reasons.

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