Death by a Thousand Padded Expense Reports

  • November 10, 2016

“Nobody in this office eats dinner for less than $15!” I’ll never forget those words from my supervisor. My experience in corporate America is limited to two years working for a large property and casualty insurance company. I had just returned from a road trip, when the boss came out of his office and said, “We need to talk about your expense report.” That’s when he made the statement at the beginning of this paragraph. This being 1982, you can easily double or triple the dollar amount for today’s value. As a young worker, just a few years out of college, I was surprised by this attitude. I suspect many college graduates may be in for a surprise, when they venture into corporate America.

Our company, as with many others during the aftermath of a recession, was struggling. Profits were down and some people were threatened with layoffs. At one point, word came down from the regional headquarters to cut expenses. My boss came out and said, “Well, I suppose we’ll all have to wash our company cars [instead of paying for a car wash].” That was his solution.

I bring this up because mid-level management can set the tenor for behavior. We were told to report only a few hundred miles as personal mileage on the company car. When I was sent down to Houston to handle hurricane damage claims, the supervisors (who were much higher on the corporate ladder than my supervisor back in Oregon) tacitly approved of our padded expense reports, whereby we claimed just up to the daily limits, whether we spent that much or not (no receipts were required). One worker got in trouble for reporting considerably less than the per diem. There was one joker, who went too far and claimed way too much. He was reprimanded. The supervisors apparently subscribed to the Goldilocks’ theory of fraud; not too little, not too much; but just right.

Certainly there was little incentive to be scrupulously honest and report the exact amounts spent. One scrupulous person could make the rest of the gang at the office look bad. I suppose if the company had required receipts, the employees would simply have eaten more expensive food items and claimed the same amount instead of pocketing the difference.

It was pretty clear, however, that the mid-level management set the standards. Had my boss simply told me that it was okay to spend $15 on dinner that would have sent one message. But to say one had to spend $15 on dinner (lest the others look bad) was a somewhat different message.

I don’t imagine that shareholders would have been amused by our antics that reduced their profits. I have no idea what effect such behavior had on the corporate bottom line; I suspect it may have been minor, since expense reports do not comprise a large proportion of the expenses. Many people, perhaps even some shareholders, may have considered such penny-ante frauds as part of employee compensation and tolerable as long as it wasn’t too blatant.

Taxpayers and insurance policy holders might have felt aggrieved by our antics had they known about it. Because of our petty frauds, the company reported greater expenses and lower profits, which meant lower taxes. Policy holders may have faced slightly higher premiums, thanks to our shenanigans.

Expense report-padding is one of those small ethical issues all employees face, whether in the private or government sector. Whether or not this is an issue worth taking an ethical stand is debatable. I presume most organizations have their customs, and a young, new employee might be hesitant in creating a ruckus over the issue; I know I did not. The state of Iowa, as with many private companies, does not require receipts for meals and stipulates a fixed per-diem, thereby avoiding an ethical issue. The effort of auditors sifting through receipts probably is not worthwhile, so the state and private companies trust their workers.

But somewhere within the consciences of employees should be at least a twinge of guilt over such behavior, even if sanctioned by supervisors. Padding expense reports is a fraud, if not in the eyes of your supervisors, in the wallets of shareholders and taxpayers. “Does the fraud stop here or does it move on the something more serious?” becomes a key question. Is a small fraud a so-called “gateway endeavor” leading to more serious malfeasance?

 

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

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