How Fraud-Ridden Is Your T&E Policy?
This nine-step plan ensures a strong policy and admonishes sticky fingers from getting into the T&E cookie jar.November 3, 2011
by Mary Schaeffer
The loosey-goosey approach to travel and entertainment (T&E) spending while acceptable in some companies is fast becoming unacceptable. Although employees who have enjoyed and benefited from a relaxed policy, it has been bad for employee morale and the bottom line.
The first strike in the free-spending reimbursement policies was caused by the likes of Enron and WorldCom. Strike two came with the passage of the Sarbanes-Oxley Act, which prompted many organizations (both public and private) to take a second look and rein in their policy. The economy was responsible for the third strike. Many companies needed to conserve every last cent and wasteful entertainment expenditures had no place. Uncontrolled T&E spending struck out. But that does not mean that the current practices will die easily, should a company decide to rein in free-wheeling spending.
Once the decision to tighten enforcement of the policy has been made, you need to take action. Below is a nine-step plan that your firm can use to change its T&E policy to a more stringent one:
There are a few other tactics financial firms with tight T&E policies use. For starters, no employee should be able to approve expenditures for any event in which he or she was one of the guests. This means that the highest level person should pick up the bill. If this is not possible the T&E report should be forwarded to the next highest level person for approval. While many companies already have language to this effect in their policies, others don’t. In fact, in some organizations it is a common tactic for the lower-level person to pick up the tab at questionable functions, such as regular Friday afternoon lunches with no real business purpose.
Additionally, some organizations are taking the step of having a second approver on all reports. This approach tends to make the first approver a little more conscientious. Many companies have now started to require a second approval on reports over a certain dollar level. The exact level will depend on the nature of your business. Some firms with heavy international travel have set this limit at $10,000, with airfare easily eating up half of that amount. Firms that adopt a second-signature-over-certain-dollar-amounts policy should expect to see a rise in the number of reports submitted as some employees attempt to avoid that second level of scrutiny by submitting multiple expense reports for lower amounts.
We haven’t discussed automation yet. There are numerous wonderful products on the market today that streamline the process of checking for policy compliance and automate the approval and reimbursement process. Some are available on a very reasonable pay-as-you-go basis. Where it is possible to include an automated review, policy compliance is likely to improve.
We’re in a whole new business world and T&E is no exception. Utilizing safeguards such as those discussed above will make your program more effective.
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Mary S. Schaeffer is the author of over a dozen business books including Controller & CFO’s Guide to Accounts Payable and Fraud in Accounts Payable: How to Prevent It. She writes a free weekly ezine, e-AP News and is a frequent speaker at accounts payable webinars, seminars and conferences and directs the organization’s consulting practice.