Over recent years, expense entitlement scandals have plagued Australia’s political landscape. In January 2017, Health Minister Sussan Ley joined a growing list of politicians who have been taken to task for their abuse of parliamentary entitlements. Ley subsequently stood down from her position.
Responsible spending is not an expectation we restrict to our parliamentarians or to the public sector. Private sector employers are also entitled to expect their employees spend carefully and ethically, and that they be accountable for their actions.
So, while the government responds with cabinet shuffles and the establishment of an independent authority to assume control of all expense claims, employers would be wise to review their own policies and procedures for business expense claims.
Here are 10 tips to ensure good governance:
First and foremost, your business should put an expense reimbursement policy in place. That way, there will be no uncertain ambiguity about what constitutes a valid business expense, and in the approval and reimbursement process.
Expense management platform Concur has produced useful guidelines about what to, and what not to, include in your policy to ensure it is appropriate and enforceable. These include:
• The limitations of authority that apply to each employee category
• How an issue is to be escalated within the business
• Who is responsible for the policy
• The mechanism for reviewing the policy
• How often the policy is to be reviewed
Once you have established your expense reimbursement policy – and then, each time you amend it – you will need to communicate it to all staff. Make sure you take into account your employees’ format (for example: print, pictures, video) and channel (for example: email, intranet, mobile application, enterprise social networks) preferences.
Also, consider how you will reach on-site, off-site and remote workers, noting that you will need to make the policy available and accessible.
It’s one thing to tell, quite another to teach. Your employees need to know how the policy will work in practice.
Provide practical examples that your people can relate to. Nominate someone, or a team of people, who they can contact for support. Schedule automated reminders of key dates (for example: cut-off dates for monthly expense processing) and circulate tips and tricks, and cheat sheets to help people learn the policy and procedures.
4. Limitations of authority
To aid operational efficiency, most businesses will delegate authority to purchase items or services on behalf of the organisation. The number of delegates will vary, depending upon the size and structure of your business.
The key is to ensure the individuals who delegated authority are adequately trained, competent and responsible, and also put controls in place to ensure appropriate checks and balances. These might include establishing appropriate self-approval limits, and separating responsibility for initiating and approving expenditure.
5. Corporate credit card versus reimbursement
To streamline your procedures, you may elect to issue corporate credit cards to individuals who have the authority to purchase. This will reduce or even eliminate the need to reimburse employees.
However, measures will need to be put in place to protect the business in the event of a lost or stolen card, and to ensure there is an appropriate level of oversight prior to the organisation incurring an expense.
Ultimately, you want your expense policy to be efficient as well as robust. If your process is manual, it will necessitate a heavy amount of oversight and be time-consuming to manage.
Manual processes also increase the risk of human error and lapses in governance.
By automating the majority of the authorisation process, the only requests for management intervention are those that are exceptional or fall outside the policy.
This means your finance team will spend less time looking at routine reimbursement applications, and more time scrutinising those that do.
7. Personal expenses
Majority of credit card abuse stems from charging personal items to the business.
In addition to a written policy, you should implement controls to ensure credit card payments and reimbursements are made for legitimate business purchases only. These may include performing initial and annual credit checks on all employees issued with a credit card, and prohibiting cash advancements from credit accounts.
It is critical to ensure that no employee is able to approve his or her expenses, and that all authorised approvers have first-hand knowledge of the business and its operations.
Simply having a policy and process in place doesn’t mean your system is bulletproof. To catch breaches of your policy, you also need an audit process.
That process should be documented and should specify who is responsible for the audit, when the audit is required to be carried out, how the audit will be conducted, what reporting is required, and how discrepancies will be treated.
Ideally, the audit process should be carried out by automated workflow software. Software such as Nintex or K2 can be easily programmed to self audit and notify those responsible of a potential breach.
Reviewing a random selection of reimbursement claims manually is sufficient if you don’t have access to process software. It all depends on your appetite for risk and the likelihood for discrepancies occurring.
There is no guarantee that your policy, authority limits, layers of approval, audit, education and communication will stop a worker from stealing from you. Your business needs a policy and process for dealing with fraud, in the event it is detected.
You should speak with a forensic accountant about how you would investigate the fraud and the process for acting against an employee, should you uncover foul play.
10. Corporate accounts
An obvious way of reducing your risk is to have established accounts with your regular suppliers. That way, the supplier will have on record details of authorised personnel, limitations of approval, negotiated discounts and purchase history.
The relationship that you have with your suppliers should also extend to them alerting you if they detect abnormal behaviour or a breach of your business’ policy.
Daryl Corpe is a partner and chairman of accounting firm, Ulton, which operates a network of offices in Queensland’s Wide Bay-Burnett region.