Get your house in order
Article Date: Nov 25 2009
MPs made hundreds of dubious claims
There are four lessons that businesses can learn from the MPs’ expenses experience which would go a long way to ensuring that expenses are kept in line in the business world, writes David Vine, MD of GlobalExpense.
Fairness
Changing the rules is only the first step on a long road towards reforming the culture of accepted expense fiddling which grew in Westminster over decades. Those rules need to be seen to be fair by both the MPs and the public. In business, too, rules need to be equitable otherwise staff will try to circumvent them – as can be seen by the “wife swapping” solution to the expected ban on MPs employing family members. This is not a good start.
Clarity
Despite the cynical abuse of employee expense systems for personal gain, the majority of dodgy expenses claims are the result of error rather than dishonesty. A clearly worded and unambiguous policy is paramount. MPs were urged to avoid expense claims that might seem luxurious which unsurprisingly, resulted in a chaos of confused claims. In business, roughly 10 percent of all claims are outside company policy and can total a significant sum at the end of the financial year, not to mention the unexpected tax penalty.
The most thoroughly calibrated and expensively calculated expense rules in the world will come to nought if the policy is not easily understood by the claimants. Equally, it is no good having a fair and clear policy if people are not aware of it. Many of the compliance headaches that are created by expenses can be put down to a lack of knowledge on the part of both the claimant and the expense claim authoriser about what constitutes an expense claim in the eyes of HMRC.
Enforcement
A policy needs to be properly enforced, especially if people are used to slack rules that are easy to exploit. Not everyone is on the make, and mistakes can sometimes be made despite having a clear and well-communicated policy, so it’s necessary to gently remind people who have made errors in their claims.
However, payroll staff, in common with House of Commons Fees Office staff charged with authorising and processing MPs’ expense claims, can be put under pressure to sign off expenses when they shouldn’t by more senior employees. It would be a brave finance employee that rejected the CEO’s golf junket because it didn’t fit the rules. In my experience, directors have been known to hit the roof because claims of less than a pound have been rejected. This level of intimidation should not be underestimated. Payroll or finance staff who process expense claims need to be backed up by senior managers.
At Parliament, the House of Commons staff did not have the authority to challenge MPs’ claims (despite what was written on paper) and this was a major contributory factor to the scandal.
Punishment
There will always be people who do not comply with a policy no matter how clear, well communicated and strictly enforced it may be. Serial offenders need to be dealt with firmly, no matter what their level within the company. Party political leaders seem more than happy to apply the strap to errant MPs to make a clear point to the general public that they no longer tolerate expense fiddling. In business the message is more muted.
It is rare that expense fraudsters are made an example of in order to send a message to the rest of the staff. These issues are mainly dealt with behind closed doors. In light of this, I applaud the action of KPMG in prosecuting a senior director who abused trusting expense rules to maintain his wife’s lavish lifestyle.
