The Craig Thomson controversy has highlighted the importance of setting clear policies and structure around the use of expense accounts, experts say, with too many businesses allowing employees to spend more than they should and often on inappropriate expenses.
The warning comes as Fair Work yesterday released its report into the Thomson controversy, alleging the Federal MP had misused tens of thousands of Health Services Union funds on escorts, wining and dining, and for other personal uses.
Although Labor MP Thomson has denied several of the allegations and even using his credit cards to purchase said expenditures, the report argues there is evidence that “overwhelmingly support an inference that it was Mr Thomson who used his own credit cards to make these transactions”.
Some specific allegations include Thomson having spent $73,000 on wining and dining and over $5,700 on escort services.
Human resource experts say there is another lesson here, with many businesses having refused or neglected to set up any sort of protocols or policies around the use of expense accounts or company credit cards.
This can often lead to employees spending money on items and experiences that are completely inappropriate, leading to cost blow outs or potentially controversial situations if the expense is inappropriate.
“Setting standards are critical,” says Martin Nally, chief executive of HR services company HR Anywhere.
“There are two extremes. One is to just have a series of rules in place and make people aware of them, and the other is that you set rules for absolutely everything and make sure they’re followed to the letter.
“But the problem is that many businesses don’t spend the time implementing these policies clearly and then maintain consistency.”
While Nally says it’s common for businesses to operate company credit cards, it’s less common for them to develop specific policies and then keep that policed. He says businesses need to develop regulations down to the item, giving practical examples about which expenses are appropriate – meals, but not alcohol, and so on.
“There needs to be an outline of what is and isn’t acceptable at the time of issue. Maybe a small education process, just to let people know that there are conditions involved.”
“The second point is to give employees a declaration by the employer and have them sign it, saying they understand and will abide by the conditions therein.”
And while Nally says the issue of privacy is a difficult line to maintain, he urges businesses to start putting in checks and balances to ensure the holders of these credit cards or accounts are following the rules.
“There are so many systems available for small businesses, accounting packages that can integrate with accounts to make sure there is reconciliation done on a monthly basis.”
“It’s appalling for this type of thing to go unseen. There are systems available to watch this sort of behaviour, and it’s unacceptable to let it all slip by.”
Bridget Beattie, general manager of Right Management in Australia, New Zealand and India, says while businesses may believe some elements of such a system are overkill, she reaffirms a set of rules is essential.
“When any sort of corporate environment, that’s critical. The manager has an accountability here, and the finance director.”
“Every month, you get a statement, so you’re only one month behind. Usually you have a couple of steps, one is the manager, and then the finance controller, and then man organisations are required to have external auditors.”
“Everything’s easy. It’s online, easy to check. Most organisations would have a policy around reasonable expenses incurred in the course of doing business…that needs to be referred to.”
This article first appeared on SmartCompany.