Gaming the Expense Report

by Timothy B. Corcoran on June 25, 2009

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Catching up on my reading the other day, I ran across Stanley Bing‘s humorous column in the April 27 edition of Fortune magazine, which took the form of a mock memo from Finance to All Employees regarding controlling business expenses. I just returned from a short business trip to Washington, DC where I stayed in a hotel that was, to put it gently, not generally focused on the business traveler.  In fairness, my choice was based more on availability and proximity than cost, so it worked for me.  But these events called to mind the many amusing battles I’ve fought through the years over expenses, both as an employee fighting “the Man” and as an executive trying to reign in the employees.  A quick tour of some of these past battles:

We hired an employee in the metro NY area and then paid to relocate her to Washington, DC.  She started in the new territory in January.  By August she had met and fallen in love with someone in NJ, so she moved back.  Without notice.  And then demanded that we pay for another relocation.  When we refused, she demanded expense reimbursement for her day trips to and from the DC area.

Many of my salespeople have worked from home.  During flush times we offered a modest $100 stipend for office furniture or equipment.  One notably stylish salesperson sniffed that he couldn’t abide cheap furniture in his house so he purchased over $2,000 in fine oak office furniture and in a grand gesture offered to split the cost.

A common employee trick is to book flights late so the only remaining available fare is a “Y” or full fare. With many airlines, a full fare and a certain frequent flier status earn a first class seat.  Some employees leap at the first opportunity to visit a prospect or client without trying to coordinate multiple visits.  I deplore micromanaging travel itineraries but for one of my abusers I had to implement a 14-day approval policy so she would stop flying first-class to San Francisco on Monday, returning Tuesday, then fly first-class to Chicago on Wednesday, returning Thursday, then flying first-class to Dallas on Friday and staying over in a fine hotel to “save money,” returning Sunday.

Pre-approval can backfire too.  When I was a young sales rep my company launched a new product that had dismal sales. After countless attempts to arrange product demonstrations with prospects, I finally secured an appointment for an 8 AM demo two days later at a client site in a city over 4-hours away.  Managers of this company were gathered from all over the world and would be a captive audience for an hour.  We had a one-week advance permission rule in effect but I nonetheless asked my sales manager for permission to drive there the day before and stay in a $60 per night hotel. I was refused permission to travel without one week’s notice. We lost an $18,000 sale.

Most expense reports have a place for tips, such as to maids, bellhops, etc. for which one receives no receipts.  I’ve found that many who tip very little on restaurant receipts submit the highest allowable daily amount for these other tips which can’t be verified.  As a former college bartender, I live by the philosophy that no one ever got rich by stiffing the service staff!

Nearly every employee rounds up auto mileage.  Some go so far as to treat mileage reimbursement as a mechanism to print money!  With online maps, we can challenge employees on the 60-mile route to the airport 26 miles away.

During one hiring spate, I allowed one of my managers to purchase an airline club membership so interviews with travelers and locals could be conducted in a central, private room. (This was pre 9/11 when even non-travelers could pass through airport security.)  The annual cost of the club: $250.  Accounting rejected it, despite my strenuous lobbying. For the next round of interviews we were forced to rent a hotel room for 3 days, pay for travel to/from the hotel and pay hotel rates for a few sodas for the candidates. Cost $1,400.

When internet travel sites first appeared, we sought out cheaper flights.  Our travel agency rejected these because it couldn’t book them or earn a fee.  In the face of our pressure, it offered the company a kickback on all travel purchases.  The agency was incented to book more expensive travel, and our corporate parent enjoyed the kickback. But our travel budgets were cut because we spent too much on travel.

When several employees travel together, be prepared for multiple receipts for the same meals.  And I’m not referring to a $100 meal split into four equal receipts, but four receipts for $100!  Usually they come in over the course of several weeks so a signing manager won’t see them all at once.  If they’re caught, the employees feign confusion, each assuming s/he was responsible for submitting on behalf of the group.  If you don’t catch it, a $100 meal can cost the employer $400!

Most companies, and IRS rules, disallow business travel reimbursement for the first and last appointment of the day, because this is considered a commute.  So, for example, if your first meeting is 60 miles away, an employer won’t allow mileage reimbursement.  Some salespeople schedule their meetings accordingly, with the closest meetings first and last.  Others simply edit their calendars so it appears they start close and end close.  Others plan their first meeting at a local Starbucks, where they meet with colleagues to prep the call, and then “drop in” to a local client to drop off a brochure on their way home.

Once, on a day trip, I was stranded overnight due to a late flight cancellation.  I purchased a toothbrush, toothpaste, brush, razor and shaving cream in a hotel gift shop. Total cost $60. The company wouldn’t reimburse me, so I was more forgiving when I became the signing authority.  Until I was asked to sign for a $580 room in a very expensive hotel, $120 in roundtrip taxi fare to the city when the employee refused the airline-paid hotel near the airport, a $30 breakfast, $75 in undergarments and a $180 spa treatment due to the stress of an unscheduled overnight visit!

My favorite anecdote, and one which earned me a lifetime slot in the doghouse with my VP (at least until he left) was the restaurant dining club caper.  My VP had joined some sort of restaurant club which encouraged him to eat at certain restaurants and to use a certain credit card.  When he did so, his credit card reflected a 20% discount on all of the meal purchases.  He bragged about his access to such perks due to his high station in life as he signed for our $120 lunch… until I asked him which receipt he would submit with his expense report.  His red face and sputtering suggested that he had been routinely submitting the full meal receipt while pocketing the 20% discount.

Look, business travel is tough.  I’ve earned lifetime Elite status on Continental Airlines, and I’ve outgrown the point at which I brag about this as some sort of badge of honor.  There’s nothing wrong with trying to improve your comfort when away from home.  And there’s a certain amount of gamesmanship in securing your comfort with a company subsidy.  My good friend Lou, a weekly business traveler since the 1950s(!), summed it up nicely in his remarks at his retirement party some years ago.  He talked about the wonderful opportunity he had been given to see the world, even though on one of his final trips abroad he found himself enjoying a fine glass of champagne in an airport bar, alone on his birthday.  The CEO chided Lou, assuming he had submitted the champagne on his expense report.  Lou said, “Sir, you will not find that champagne anywhere on my expense report.”

Safe travels, everyone!

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{ 3 comments… read them below or add one }

Patrick August 18, 2010 at 9:56 pm

While I agree with the point about “trusting an employee to act in an ethical and honest manner in all things” would you begrudge someone that little extra (€44 in this case) if they felt they were under compensated and on this particular travel felt they had done something of vast benefit for the Company (net €44 against €68,000)?

Timothy B. Corcoran June 26, 2009 at 10:10 am

Exactly! When confronting my team with evidence of “carelessness” in submitting for expense reimbursement, I will usually recount anecdotes of others whom we had to terminate over a few lousy bucks. It wasn’t the few dollars the corporation lost, it was the trust in the employee to act in an ethical and honest manner in all things. In my experience, everyone is eventually caught and gaming the system for a little extra pocket money, or to extract your just reward because you’re otherwise under-compensated, is simply not worth the loss of your livelihood.

Ross Fishman June 26, 2009 at 9:11 am

Interesting post, Tim. Yes, business travel can be a grind, and there are plenty of ways to game the system if you’re so inclined. As a further cautionary note to your readers, submitting for reimbursement intentionally inaccurate (i.e. fraudulent) travel and entertainment expense reports were one of the primary reasons a former nationally renowned AmLaw 100 Managing Partner I worked for was publicly disgraced, disbarred, and thrown in federal prison for two years.

His systematic efforts totaled six figures per year, but I’m confident that a lawyer who is caught regularly monkeying around with T&E expenses, even over relatively small amounts (i.e. “four receipts for $100!”), would stand a real chance of being fired and/or disbarred.

You’re either ethical or you’re not. It’s like that old joke about “We’ve established what you are, now we’re just haggling over the price.” When I look at people who try to cheat the system, especially over chump change, I always wonder where else in their lives they’re cutting ethical corners.

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