BusinessCorporate FinanceEmployee expenses: a needless claim?

Employee expenses: a needless claim?

Accountants are letting employees' expense claims go unchecked

In the past few months we have seen a trainee from Pricewaterhouse-Coopers
prosecuted for expenses fraud, Metropolitan Police Force employees accused of
abusing their credit cards and the auditor general criticised for his ‘luxury’
expense claims.

Then on 10 December, Conrad Black is due to be sentenced for fraud offences,
which include hiring private planes and taking exotic holidays on the company’s
tab.

Companies are reaping the results of their own poor practice. If heads of
finance are happy to let bumped-up taxi fares go unchallenged, they shouldn’t be
surprised when 20 years down the line that same employee is claiming business
class tickets to fly to exotic locations with spouse in tow.

If accountants continue to refuse to take employee expense wastage and
fiddling seriously, then they should at least sit up and take notice of the
reputational risk it represents.

More often than not, employee expenses are the second largest controllable
expense for a business. This kind of humiliating scandal shows the world that
you don’t know how your cash is being spent.

A recent YouGov survey revealed that 76% of British employees that claim or
have claimed employee expenses in the past have never had an expense claim
queried or rejected by their boss. That’s a disgrace.

Is it any wonder then that 15% of claims submitted (with a value of about
£800m) are ‘out of policy’, yet more than 99% of them are approved of by
managers? Approved employee expenses claims include lap dances, cat food,
replacement lingerie and Valentine’s Day presents.

But not all expense claims are small. In 2006, the largest single approved
claim by an employee was for £30,781 to cover training and conference costs for
a team, and 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% of British employees admit to exaggerating
their expense claims and you’ve got a recipe for out-of-control costs. Explain
that to the audit committee.

For many organisations, employee expenses are a black hole and on the face of
it businesses could not care less. It’s high time those responsible paid a lot
more attention to this overlooked area and put their houses in order, otherwise
we will see employee expenses hitting the headlines again in 2008, and for all
the wrong reasons.

David Vine is managing director of GlobalExpense

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