Expense Claim Ethics

Padding expense claims or otherwise abusing expense accounts may well be the most common form of petty wrongdoing in the workplace, perhaps second only to stealing office supplies. Such behaviour is likely to be common because it is so often necessary for employees to pay for certain kinds of expenses up front (travel, for instance) and get compensated for it later. Typically, such expanse claims are subject to some form of oversight by the Accounting Department. But it’s probably worthwhile, from the point of view of administrative efficiency, to structure an expense-claims system such that they basically trust employees to report their expenses honestly. And with that trust comes the opportunity for malfeasance — an opportunity some people find too good to pass up.

So, what ethical standards apply to filling out and filing an expense claim?

First, it should go without saying that expense reports should be honest and accurate. There’s no justification for ‘padding’ an expense claim. Some may say that the organization they work for is cheap, and that by padding expense claims they’re simply taking what they’re really owed. That, of course, is simply a self-serving rationalization — akin to the shoplifter claiming that she’s not doing anything wrong because she’s merely exacting restitution for having been cheated by the store in the past.

So, basic honesty is a given. But what sorts of things is it OK honestly to claim? Well, most obviously, you can claim things that your organization’s expense claims policy permits you to claim.

Now, some expense claim policies are vague, stating only that “reasonable” expenses will be covered. That leaves lots of room to manoeuvre. Some people will use such vagueness to their own benefit, trying to argue that if there’s no specific rule against claiming a certain kind of expense, then it must be OK to do so. Of course, that doesn’t follow.

Why don’t organizations just make the rules clearer? Well, fair question. And maybe they should. Some policies probably are too vague. But a certain amount of slack and vagueness is inevitable. No policy, no system of rules can ever be so complete as to describe in full detail exactly what is and is not permitted. For one thing, policy-makers sometimes just can’t foresee every eventuality that could arise. Further, ask yourself this: would your world (your organization) really be better if policies were as detailed as possible, and left no room for individuals to use their judgment?

So, when rules are vague, what should you do? How should you decide whether a particular expense is or is not fair to claim?

The most obvious rule of thumb, here, is that in order to be ‘expensable,’ an expenditure should be one that you had to undertake only because of your job. Here’s an obvious example. The airfare to meet a client in another city is very likely alright to claim: you wouldn’t have had to expend that money in the first place if not for your job. But your pyjamas probably are not a reasonable expense to claim, since you were going to wear those wherever you slept that night.

One last piece of common-sense advice: if all else fails, consider the ‘publicity test.’ When contemplating submitting your receipt for that espresso maker for your ‘home office,’ ask yourself whether that is an expense you would be happy to see honestly reported in your local paper, or that you would be happy to explain to the person or persons to whom you are ultimately accountable: shareholders, in the case of corporate employees, or taxpayers in the case of public employees. Now of course, explaining yourself can be a pain, especially when it’s hard for outsiders to understand the requirements of your job. (For example, I blogged last year about the use of corporate jets and pointed out that most people don’t know that some big companies require their CEOs to use a corporate jet, for security reasons.) When people don’t understand your job, things that you know are essential expenditures can look frivolous. But still, being accountable — being willing to answer for your actions — is central to the kind of agency role undertaken by employees in organizations of all kinds. Your organization entrusts you with an expense account; the quid pro quo is a willingness, on your part, to be accountable for how you use it.

5 comments so far

  1. Max on

    True…and I understand that two wrongs do not make a right, but how about looking at this in another way i.e. are employers justified in underpaying employees in the knowledge that “if the employee finds the compensation package unfair, he or she can leave and we can find a replacement quite easily?” Is this not “stealing” from the employee, in a subtle manner?

    Many employers talk about teamwork and then keep the rewards of teamwork basically for themselves, while using sweet words of praise, a pat on the back, etc. and perhaps buying employees a meal every now and then or giving them some free tickets to the movies. (An employer-employee relationship is a business courtship or marriage, depending upon how the relationship is handled by both parties. Job satisfaction and the welfare of corporations and individuals depend upon the degree of motivation through money, respect, fairness, challenging assignments,etc.)

    Great leaders realize that profits and improved cash flows result from fruitful relationships with all stakeholders, rather than from relationships that satisfy their own greed and irritate others.

    Great leaders structure compensation packages which promote effectiveness, thus reducing the temptation to cheat on expense claims and in other ways.

    What I say is ” Lead by example. Do not take undue advantage of your employees and other stakeholders. Then see who tries to cheat you, instead of cheating employees and others in a subtle manner, and then acting as if you are being taken undue advantage of.”

    For free abridged books on leadership, ethics, teamwork, motivation, women, sexual harassment, unions, law, etc., write to crespin79@hotmail.com.

    Maxwell Pinto, Business Author
    http://www.strategicbookpublishing.com/Management-TidbitsForTheNewMillenium.html

  2. Chris MacDonald on

    Max:

    No, that’s not a subtle form of theft.

    Theft is when you take something from someone without even the semblance of consent. Paying someone less than they would like doesn’t fit the bill.

    On the other hand, you’re certainly right that executives shouldn’t be too shocked at abusive behaviour by employees who themselves feel abused.

    Chris.

  3. Max on

    Hi Chris:
    Subtle theft, rip-off, taking undue advantage in a negotiation, etc….it all boils down to cheating and is unacceptable.

  4. Chris MacDonald on

    Max:

    Your original comment suggested that it was theft any time an employee thought her compensation unfair, or any time an employer takes advantage of a favourable labour market (i.e., high supply and low demand for a particular form of labour). That’s not a form of cheating at all, as far as I can see.

    Chris.

  5. Tallie on

    Excellent post! Your main points about padding expenses and the ambiguity of expense rules support the statistic that businesses lose an average of 5% of their revenue to fraud each year. It’s a shame when it happens because it ultimately is preventable with the right tools, like expense software that automatically detects errors, duplicates, and potential fraud. We wrote a blog post ourselves about preventing expense fraud that we think is relevant to your post. Take a look and let us know what you think. Thanks for the post. https://blog.usetallie.com/prevent-per-diem-expense-report-fraud


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