Civil and Criminal: Abusing Expense Accounts

The Bronwyn Bishop scandal in which government expense accounts were abused is a reminder for employers and employees to review their business expense practices.

Employees can face both civil and criminal charges if they are found to be misusing company funds. Under criminal law, an employee can be jailed for fraud, as in the case of former Sydney Ferries CEO Geoffrey Smith. In a civil case, a company may try to retrieve misappropriated funds from an employee. The civil action by the Health Services Union to retrieve $1.3 million dollars from former union official Kathy Jackson is one such example.

Clear, transparent, consistent policies and procedures can protect employers and ensure that employees adhere to the limitations of expense accounts.

For Employers

There are a number of strategies which can be used to reduce the risk of expense account abuse. Make sure that these strategies are applied to both senior and junior members of staff. As the Sydney Ferries and Health Services Union cases demonstrate, senior, trusted staff members are capable of fraud. If senior staff members are serial abusers of expense entitlements, this can filter throughout the organisation. Consider the following.

  • Have a clear expense account policy which you revisit with employees regularly.

  • Replace manual receipts and log books with automated expense reporting software. By accepting only electronic receipts and recording expenses in real-time, the chances for fraud are greatly reduced.

  • Rather than allowing employees to have carte blanche with a corporate credit card, make sure it is tightly controlled. Regulate the amount of expenditure allowed at any one time and even the merchants at which it can be used. Prepaid business expense cards are more restrictive than credit or debit cards.

  • Designate the job of making travel bookings to one person in your company rather than allowing employees to do their own. This will avoid extravagances such as first class airline seats, charging for personal travel or chartering a helicopter to travel 100 kilometres.

  • Regularly audit employee expenses and query inconsistencies.

If you have previously disciplined an employee and breaches of policy continue, consult your lawyer about possible legal proceedings.  This sends a message to all employees that policies and procedures should be followed.

For Employees

As a new employee in a company, you have a responsibility to make sure you are compliant with the policies and procedures for expenses. Some companies may have developed a corporate culture in which employees regularly flout the limitations of the policy. Follow the policy rather than copying everyone else. Apply these routines in order to avoid problems.

  • Only charge expenses which directly relate to your work and fall clearly within the guidelines.

  • Only use original receipts.

  • Book restaurants, travel and accommodation that would reasonably fall within the levels of comfort dictated by company policy. Always used preferred suppliers.

  • If in doubt, check with the finance or auditing department. Make sure that you keep a record of their response for future reference.

If you do find yourself the subject of disciplinary action because of expense account inconsistencies, consult your lawyer. Lack of clarity in company policy rather than fraudulent behaviour may be to blame. If necessary, negotiations to repay money and avoid future punitive action can often be settled outside court.

Letter of the Law

Whether you are an employer or an employee, consult your lawyer, someone like RAMSDEN LAWYERS, if you believe inconsistencies have occurred. Early clarification and resolution can provide the best outcomes for all.