Good people do file bad expense reports

When it comes to business expenses, common practice and unwritten rules can seem acceptable at the time but not after the fact.

Why are some expense reports a lightning rod for scandal? The highest profile cases are usually in the public sector, and the smallest amounts can garner the most media coverage. Former federal cabinet minister Bev Oda’s $16 glass of orange juice is now legendary. Ontario NDP leader Andrea Horwath was criticized for claiming the cost of muffins from Tim Hortons, as were the consultants fired from Ontario’s eHealth initiative. Even the Senate scandals have focused on expense claims — admittedly in the hundreds of thousands of dollars, which is but a tiny fraction of the more than $90 million it apparently costs annually to operate the Senate.

The private sector also has its expense report greed, although only the most spectacular stories come to light. It is still the small but iconic expenses that we remember — former Tyco International CEO Dennis Kozlowski’s US$6,000 shower curtain and US$15,000 umbrella stand raised more noise than his US$81 million in unauthorized bonuses. It was for these bonuses that he was convicted of fraud.

Why are we so outraged by such acts and the people behind them? We attribute their insensitivity and greed to a sense of entitlement — they think they are better than us. Can they not see, we ask, that they are wasting taxpayers’/shareholders’ money? And we compare their situation to our own — we cannot claim reimbursement for our daily coffee and donut fix, so why should they?

The remedy is not simple, which explains why we are so poor at managing our own conflicts of interest. We ask people to apply their judgment and sense of what is right to expense claims. We tell them to question any expense that exceeds what they would have spent from their own money. The problem is that we don’t all have the same priorities. And business behaviour is different from what we do in our personal life.

If I am on vacation in New York City, I will walk several blocks to find a reasonable place for breakfast rather than pay what a hotel restaurant might charge, which I consider highway robbery. But if I am on business and can charge my hotel breakfast to my employer or to a client, I will do so.

I rationalize that my time is valuable and I am spending personal time on business travel so I am entitled to a room-service breakfast. However, I will happily pay US$200 a person for a great meal in New York as part of my vacation, but would not consider it appropriate to charge that to a business expense report.

My personal sense of value for money is different from my business judgment, and that will be different for each individual.

If we cannot trust business judgment to make these decisions, what can we do? A senior staff accountant from a large firm recently confided that she was uncomfortable with the expenses her manager was charging to client codes. But she felt that questioning the claims would only get her into trouble. The rules were gray — and she didn’t trust the ethics and judgment of her manager.

But before you blame the manager, think about whether all the expense reports you have filed would survive scrutiny in the newspaper or cause some embarrassment if posted on a coffee-room bulletin board.

The problem is that our ability to rationalize our actions can usually overcome our best intentions to act ethically. Ethics always emphasizes that rules are not enough to ensure ethical behaviour — you also need good character and judgment. And we all like to feel we can be trusted. But common practice and unwritten rules, or people’s interpretations of them (for example, it is fine for a senator to claim a vacation property as his or her principal residence), can seem acceptable at the time but look pretty sleazy in the light of day.

So in the case of expense reports, lots of rules — with examples and discussion of how the rules work in practice — and periodic audits are a necessity.

About the Author

Karen Wensley

Karen Wensley, MBA, is a lecturer in professional ethics at the University of Waterloo and a retired partner of EY.


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