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Business under threat from expenses fiddling

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23rd Jun 2009
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Fleet Street hacks have a reputation for doing it, City bankers and some notorious company bosses (think Conrad Black and Maxwell), too. Treating expenses as a second salary isn’t exclusively the domain of MPs.

On Monday 15 June 2009 the BBC reported that over 300 Metropolitan Police detectives are under investigation on suspicion of misusing corporate credit cards. On 11 June, 2009, the well-respected head teacher of a Catholic school in London, who was acknowledged for delivering good results, was suspended on suspicion of expenses fraud. These might be the first examples outside of Westminster of a new intolerance towards previously accepted lax employee expenses behaviour.

A significant number of directors and senior managers in business as well as the public sector will have been quietly reading the details of MPs’ expense claims with a touch of shame, urging their PAs to keep schtum about their own expenses habits.

In a YouGov survey looking at expense fiddling, 41% of employees said that their boss definitely or probably fiddled their expenses. The problem is clearly widespread and the significance of this is two fold. Fiddling your expenses could be career limiting as well as potentially damaging to the reputation of your employer.

Growing intolerance
Despite members of the public claiming that they would have been sacked had they been caught fiddling their expenses in the same way as MPs, the truth is that a rap over the knuckles from the finance director is all that most senior management would have received…until now.

Directors and managers that get caught with their fingers in the till can now expect to face the wrath of their clients, colleagues, CEO, shareholders and other investors. In 2008, around a third of British people thought it was acceptable to exaggerate expense claims. As a result of the MPs’ expenses scandal, awareness and sensitivity to expense fiddling has increased and today that figure would be significantly reduced. Managers that fiddle their expenses should take the hint and change their behaviour.

Lead from the top
The other reason for senior management to clean-up their act is to set a good example to the rest of the staff. Experience shows that the key to a successful and efficient expenses system is senior management buy-in. Executives must set the tone from the top if they want to change a culture of fiddling that goes from the top to the bottom of their organisation.

Tighter policies that are imposed on junior staff whilst senior employees continue to waive the rules are doomed to failure. It is entirely natural that employees will emulate more senior staff and bend the rules to suit their personal circumstances.

Recession fiddling
The fact is that in most organisations, if an employee wants to fiddle their expenses, the door is open, and there are plenty of reasons why an employee might be tempted.

GlobalExpense research shows that one fifth of expense claiming employees admit to exaggerating their expenses. The recession adds to the problem: 13% of these employees said that they are likely or very likely to exaggerate expenses in the future if they find themselves in economic difficulties and think they can get away with it.

Since 95% of employees say that their employer has never queried or rejected an expense claim for being too high, the chances are they will almost certainly get away with it.

Other reasons which are seen as acceptable justifications for fiddling expenses include when pay has not risen in line with inflation (40%); when an employee feels they are not paid a fair salary (28%); when the employer is slow at paying back expenses (29%), and when the mileage rate paid by the employer doesn’t cover the actual car and fuel costs (76%).

Senior management need to lead from the front on this issue not only to protect their own careers and reputations, but to drive a cultural change towards greater honesty, accountability and transparency in the expenses system.

David Vine is managing director of GlobalExpense, the UK’s largest employee expenses service provider.
www.globalexpense.com
Email: [email protected]
Tel: 020 7298 5732

 

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By User deleted
24th Jun 2009 11:23

At the Top
You hit the nail right on the head when you say that behaviour at the top sets the standard for everyone else.

I am a public sector employee. Who sets standards for me? Parliament? The royal family? It's not just expenses, it's also obscene overspends on projects like the Scottish Parliament and almost anything the MoD does. The people responsible for these have mostly just carried on as if nothing has happened.

If we are really interested in controlling public spending - and I think on the whole that we should be - then someone should get a grip on this. But I honestly can't see who has the will, and let's face it the integrity, to do it.

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By douglascollier
24th Jun 2009 12:27

Expenses fidlding
"The problem is clearly widespread and the significance of this is two fold. Fiddling your expenses could be career limiting as well as potentially damaging to the reputation of your employer."

Your article appears consistent with the amoral attitude of some MP's. If a consequence of fiddling expenses is that it is "career damaging" then out of self interest the individual may refrain. The reputation of the employer is presumably of little consequence when forced to shed staff, go into administration etc. due to having illicit funds extracted by dishonest employees.

Surely the most significant consequence of fiddling expenses is that it is theft. Theft is wrong.

Some of the consequnces of theft include:

(i) The additional internal controls that the employer / society has to resource to thwart / catch/ punish the thief.
(ii) A climate of distrust and suspicion.
(iii) A loss to the public purse as Income Tax and National Insurance are evaded.
(iv) The possibility of the employer becoming damaged by the financial loss.

Please reconsider the emphasis of your article.

regards

Douglas Collier

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By mickeyparish
25th Jun 2009 12:17

Expenses
What drives expenses fiddling, both for private and public sector managers, is high marginal tax rates.

Take the ( perfectly legal ) £5 per day that HMRC allows you to claim for incidental expenses while out of the office.

Too small to bother ? that's been my view hitherto. But at 51% tax + 12.8% NI, that £5 per day becomes £11.06 per day.

If I'm out of the office on business2 days a week, that becomes over £1000 per year. At this level, you can't actually afford to igneore it.

Any one who doesn't max what they can legally get on expenses is a fool.

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By User deleted
30th Jun 2009 17:44

Police action
A director at the company I work for fiddled expenses, it was blatant theft.

The Police were brought in and the person was charged and convicted.

The issue I then had, was, as the person 'selected' the instances of theft for the purpose of the court case, to admitt to and I understand is common place, and as this was considerably less than the actual theft, do you treat the balance as benefits on a P11d? Though the company would not want to compound the loss by paying Class1A!

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