Expense-Account Padding

There is a good life at the top through the expense account. Indeed, very few employees express much discomfort about the common practice of expense-account padding.

Modus Operandi

Most executives and managers of business organizations are usually authorized to spend certain amounts for entertainment and business meetings. Some companies set monetary limits for these expenses while others require supporting receipts. The expense account statement or report is oftenly padded with fictitious expenses. Restaurant invoices for personal lunches or dinners are sometimes saved and attached to statement to support false entertainment expenses. Some executives report regular and excessive service tips that never make it to the recipient's pockets. There is no evidence as this type of expense requires no supporting receipt.

A sales manager of a company was able to get hold of a booklet of blank hotel invoices through his cashier girlfriend and supported his fictitious hotel bills with them. There were instances also when the amounts of supporting invoices or chits were raised after the expense account statement had been approved. An executive was able to collect the cost of his airplane tickets used personally by having them approved by the top man (his close friend) to jump over the purchase order procedure of his company on the purchase of plane fares.

A sales supervisor of a corporation found it easy to make extra money by picking up discarded restaurant invoices and using them to support business meeting expenses on his expense account statement.

It is not unusual that fictitious confidential expenses are passed through the expense account statement to avoid scrutiny and supporting papers. Resourcefulness in extracting money from the employer through the expense account appears to be unlimited. For instance, a manager in one subsidiary used his credit card in paying the cost of his co-employee's birthday party and obtained reimbursement through his expense account by reporting it as entertainment of a customer. Later, the birthday celebrant paid his account and the manager pocketed the money. Indeed, very few employees express much discomfort about the common practice of expense account padding. There is really a good life at the top through the expense account.

Detection and Prevention

Excessive entertainment and business meeting expenses of the executives and managers were brought to light when the chairman of the board of directors asked for a report on the expense accounts of all employees. After the review, justification for the excessive expenditures was then required as a deterrent to reporting false expenses. The raised amount of an invoice was detected when the erasure was scrutinized and the supplier confirmed that the amount appearing on their copy was much less than the original copy submitted by the employee.

In the case of the fictitious hotel invoices, the irregularity was discovered through the unusual sequence of the serial numbers of the invoices submitted. The serial numbers were found to be consecutive and not variable. The hotel later confirmed that the questionable invoices had been stolen and were subsequently cancelled by them.

Padding of expense accounts was discouraged later by bringing to the attention of the employee concerned any erasures or alterations made on his expense account statement. Collecting for personal plane fares was likewise forestalled by requiring strict observance of the company rules that airplane or boat fares for business trips must be authorized by a travel requisition and the purchase order stating the purpose of the trip.

Cheating on expense account does not pay because one's reputation is at stake. It was not long when the birthday celebrant began spreading the words about the enterprising manager who used his credit card to get a free loading and pocket money as well.

To provide check and balance, the internal auditor was required to make a monthly review of the expense accounts of the employees for any improprieties and excesses over the budgetary limits. The chairman of the board was handed such reports from the internal auditor.

Employees, knowing that such audits are periodically done, will think twice before they attempt to rob the company. An effective antidote for expense account dishonesty is the use of one's good conscience and judgment developed in an environment created by the top man who fosters morality and high business ethics. Let good practices flourish at the top and everyone follows suit.

Above all, expense accounts should be kept at reasonable level. Much care should be exerted as one would in the disbursement of his own funds.