I need seven page PPT slide. The day after you hand in your organizational analy
ID: 2566192 • Letter: I
Question
I need seven page PPT slide.
The day after you hand in your organizational analysis, you notice the following headline in the business section in the news: “Employees Accused of Stealing from Company.” Apparently, a group of employees who worked for a company similar to yours was routinely lying on their expense reports, claiming—and getting reimbursed for—personal expenditures, including Caribbean trips and four-star restaurants.
You nearly spit out your coffee when you read this. You work in the same sector! After doing your organizational analysis, you feel like you have a good grasp on the mission and values of your company, and you’d be very surprised such behavior was tolerated. This article, however, still makes you wonder about your industry as whole.
Once you get to your office, you discover that you aren’t the only one interested in this story; everyone is buzzing about it. As soon as you drop your stuff in your cube, you see a message from the COO’s assistant: the COO, Kate Lindsay, wants to see you this afternoon. Why does Kate want to see you? Kate is very high in the organizational “food chain.”
You head to Kate’s office. As you sit down, Kate lives up to her reputation for being focused and direct and immediately launches into what she has to say, “You must have heard about the expense report scandal at our competitor’s organization. We need to ensure that the same thing is not happening here.” She continues, “I came to this organization because I considered it to be among the best – are we?” She begins ticking off questions on her fingers: “How can we be sure what we believe and say matches what we actually do? How can we be sure we don’t have a culture and climate that are viewed as unethical and unhealthy? Do we put enough emphasis on ethical and caring behavior in our decisions and our actions?”
She pauses before going on. “I’m new to this position and to this sector in general. I’m clearly responsible and accountable for the climate, culture, and ethical behavior in this organization. We need to be concerned about these issues, and I need your help figuring out where we stand and what, if anything, we should be doing differently.” Your help? You look at her expectantly.
She answers your implied question, “I read your organizational analysis last night, and I was enough impressed with it that I think you could handle this particular task. I’m an engineer by training, and I’m methodical, thorough, and detailed,” Kate says, before adding, “This report needs to reflect +my—and, more importantly, this organization’s—careful and thoughtful approach to these issues. So even though organizational culture, climate, and ethics may seem like ‘soft’ issues, I expect strong critical thinking and an evidence-based report. I don’t just want opinions. It might help to imagine yourself as an independent consultant we are counting on for both expertise and objectivity.”
She glances at her phone. “I have a meeting in two minutes.” She stands up. “I really need your best thinking and good advice on this in three weeks. Talk to my assistant about making an appointment to see me then, and have 15-minute PowerPoint presentation ready along with a brief memo summarizing your points,” she says, “Also, I trust you understand this is a matter that needs to be kept between us.” She looks at you squarely: “I don’t want to learn my questions and concerns have become the subject of general discussions in the office.” “Absolutely!” You say, with confidence, as Kate heads out of her office. Then she turns around, “Oh, and I want to see some of your work-in-progress as you do this project. Talk to my assistant about that as well.”
You return to your desk thrilled that the COO has shared her concerns and asked you for your input. You have so many ideas and lots of questions—but you also realize you are going to need to proceed without all the information you would ideally love to have. You know you will need to rely only on publicly available information and not go poking around in confidential work files or asking others in your office for input or advice.
How will you tackle this project? What evidence will you use to inform your understanding and strengthen your analysis? What will you tell your COO next Wednesday
Explanation / Answer
In 2016, we might expect that emerging technologies and better processes might have reduced the amount of money companies are losing due to travelers adding unnecessary expenses to their travel spend or even lying on their reports. Yet, according to a survey of over 1,000 business travelers by Chrome River in February of 2016, expense reporting fraud currently costs U.S. businesses more than $2.8 billion per year. While 1,000 business travelers is a relatively small sample size from which to draw this kind of a conclusion, the study effectively shows that expense reporting fraud is still happening, and it’s costing companies money.
Types of Expense Report Fraud
Employees engage in a wide variety of activities to cheat the system—most of which are considered fraud schemes. The Association of Certified Fraud Examiners (ACFE) breaks down expense reporting schemes into four categories:
While it is important to understand that employees are committing fraud when they engage in these “schemes,” many employees are perhaps not being as intentionally devious as the term scheme implies. Some feel they deserve a little extra money in their pockets. As Allan Bachman, then-education manager at the ACFE told CNN, “Employees are thinking, ‘They make me travel on a Saturday night, they can afford to buy me a steak for dinner.’”
Some employees believe they deserve quality meals and lodging because they are traveling for work.
The other good news is that most employees do not commit expense report fraud. According to the Chrome River survey, more than 94 percent of employees who submit business expenses claimed that they were honest when submitting their expense reports.
Despite the fact that most employees are honest, small expense report lies can add up quickly. For instance, the same Chrome River report shows that while most employees submit honestly, those who do submit fraudulent claims request reimbursement for, on average, $2,448 in false expenses. Some individuals even admit to claiming as much as $25,000 per year.
A different study, conducted in the U.K., yields different data. A survey of over 1,000 workers in the U.K. commissioned by expense management software firm Webexpenses shows that the average amount of exaggerations was just over $38 (U.S.) per worker. Yet, they note that very few employees (only 18%) have ever been caught—likely because of these small numbers. With many employees’ small overstatements not being caught, companies will continue to lose money. So, it is important to be able to detect some of the common ways that business travelers potentially exploit the system:
1. Airline travel add-ons. Air travel poses a particular challenge because it is very easy to tack on premium seat options and priority boarding fees. If employees are only asked to provide a credit card statement showing payment, or if they are booking via a company card, these kinds of add-ons may not be visible to accountants or travel managers.
2. Car mileage. A common way employees get reimbursed for more than they deserve is by claiming additional mileage when they are driving for business purposes. Related, gasoline reimbursement is a commonly exaggerated expense. In fact, the Webexpenses study shows that the top expense area employees exaggerated (at 40%) was gas. This is easy to do when employees are using cash to pay for their gas.
3. Out-of-policy spending. While many companies have specific guidelines about what they will allow employees to spend and how, some employees fail to follow these policies and occasionally manage not to get caught. For example, a traveler may try to submit a report for a $70 meal per diem when the company’s policy dictates a per diem of $50. These small differences–understandably–may go unnoticed.
4. Personal expenses. Some employees try to pass off personal expenses as business-related purchases—what the ACFE would call a mischaracterized expense scheme. Often, these expenses are for meals or drinks. While this could happen at home, if an employee uses a corporate card to cover a meal or gift for a spouse, it can also happen during business travel if an employee meets a friend in the area, takes that friend out, and covers the expenses as business-related. It becomes more difficult for accountants and travel managers to make distinctions when travelers are asked to travel on weekends, making it more tricky to discern if a purchase was related to work.
5. Out-of-pocket expenses. A common strategy for getting more money than you are owed is to over-claim on out-of-pocket expenses such as tips for hotel bellhops or cabs that only take cash. Sometimes, travelers are legitimately stuck in these situations, unable to use the company card or show proof of payment. Yet, these excuses can also be used to game the system. Some people even request a blank receipt. Also, over-claiming restaurant server tips is common. An employee might be courting clients at a fancy dinner during a business trip, and covering that meal is completely within the company’s policies. However, some employees over-claim tip amounts, and this can be difficult to prove if they say they paid in cash or if they are using an original receipt from the restaurant and write a different tip amount.
6. Double reimbursement. Falling under the category of multiple reimbursement schemes, some employees seek out more than one proof of payment for a single item and then submit these forms to different supervisors to get paid twice. This is particularly common with airline purchases and train tickets. An employee can easily submit the actual airline receipt to one individual in the company and his or her credit card statement to someone else. Depending on the size of the company and how much travel occurs at the company, some employees even get away with getting double reimbursement from the same accountant or travel manager.
7. Unused expenses. Another approach some business travelers take is to submit a request for reimbursement for an item that they may have originally purchased but then did not use. The Chrome River report suggests that this happens often when airline flights are canceled or when an employee decides not to attend a conference that she already paid for.
Resolving Expense Report Fraud
It is important to keep in mind that not all travelers try these tricks, and their intentions are often not malicious. Sometimes, employees are trying to make their lives a little easier or use common sense. For example, the company’s preferred airline may only offer flights to a certain destination with long connection times or 2+ stops. In such a case, a traveler may book out of policy and spend a little more, but fraud is not on the traveler’s mind. Also, expense fraud tends to occur most often by those who, according to Chrome River, “an organization would typically trust the most.” In their survey, the role with the highest expense fraud rate was senior vice presidents (at 13.9%).
Some travelers simply are trying to make their lives a little easier when they book out of policy.
In short, resolving expense reporting fraud can be tricky. One approach is through technology. A variety of digital T&E management systems help hold travelers accountable for their expenses by allowing for photographs or receipts to be attached to reports and by requiring travel bookings within company policy. Companies also may need to implement a more robust audit system. Chris Rossie writes in Business Travel News that companies can target “statistically high out-of-pocket expense claims” and “implement a monthly audit system to monitor 100 percent of T&E transactions.” He suggests that employees’ behavior will change if they know they are more likely to be caught in such an audit, and this also allows accountants to monitor those who are high up in the organization, which does not always happen.
Tracking traveler data can be helpful, too. Rossie suggests benchmarking travelers so you know “what is usual for lodging and meals by city.” This requires, Rossie claims, “cataloging all hotel stays by night and understanding the itemized expenses. Separate lodging and related taxes from other expenses at hotels, including meals and internet. If a traveler’s lodging expenses are consistently higher than their peers, you may want to ask why.” In other words, understanding what is common for your business travelers to spend in a given city, and itemizing those expenses well, will help you identify potential problems.
Companies might also consider only reimbursing post-travel and requesting additional items of proof (such as a conference program), which could reduce issues with travelers trying to get paid for a canceled flight or a conference they did not attend. Post-travel reimbursement may also may reduce an employee’s ability to over-claim by over-estimating potential future costs.