A blind eye is often turned to some expense claims, writes Gerald Flynn

A MID-RANKING executive in a State development agency caused a right rumpus some years ago when he submitted a claim for a £2.30 cinema ticket as part of his expenses. "For heaven's sake, we're not going to pay out taxpayers' money for you to see a film," was the response of his department boss, which provoked a row.

Not unreasonably, the executive said that he had spent three days helping man a stand at a trade show in London and, while colleagues went to the pub, he went down to Leicester Square to a cinema. His colleagues had pooled their drinking receipts and submitted them as legitimate entertainment expenses without any queries being raised. This "awkward customer" stuck to his ground and pointed out that his cinema seat cost less than 10 per cent of what the others had each consumed in pints and "small ones".

Eventually, my informant paid the €2.30 to defuse the situation and prevent anybody looking too closely at his expense claims. He had a happy habit of collecting till receipts issued to other customers to pad out his expenses which, eventually, came from subventions paid through the department of industry and commerce, as it then was. I was thinking of the "cinema seat crisis" when looking over recent research on company expense claims.

Some organisations are now outsourcing expenses administration along with wages and holidays, and these expense-monitoring services offer to take a much closer look at monthly claims than most line managers are prepared to undertake before they scribble their initials as approval before passing the expense sheets and assortment of dog-eared receipts on to accounts.

According to one such service firm, GlobalExpense, about €1 in €20 claimed is fraudulent and a further one-tenth is outside the scope of company-approved expenses - like the controversial cinema ticket. Somewhere about €530 million a year is paid in estimated employee expense claims by Irish businesses and, based on international experience, only about €2 million is rejected by company managers or cost-controllers.

Of course it bounces both ways. I often failed to keep a receipt to back up an expenses claim until I got into the habit of paying all business-associated bills by credit card so that, up to a month later, I had some evidence to justify the hefty claims.

One of the trickiest areas is expenses incurred in "business entertainment", which usually is just a euphemism for lots of food and drink. What complicates this issue is that the spoilsports in the Revenue Commissioners rarely see this as being a legitimate business expense, so it may have to be shoe-horned into the "subsistence" category.

Analysis by GlobalExpense in Britain for 2007 found that the average expense-claiming employee received €2,100, with men claiming about 17 per cent more than women. This may reflect more men in senior positions rather than women being more thrifty with company cash.

The bigger the organisation the higher the expenses, but in smaller companies employees are more likely to claim for bus trips, ballpoint pens and short taxi journeys.

When it comes to the big spenders, executives from banks, insurance and other financial service firms lead the pack, with average entertainment claims of €167.60 last year. This compares with the average hospitality and entertainment claim by media and publishing employees at a more modest €91.35, which may explain why you find more banking suits than advertising or newspaper hacks, in Ireland's Michelin-starred eateries.

The issue of expense claims can sometimes turn nasty, especially in a period of "cost retrenchment" when glum edicts are issued about only using taxis when it is raining or how lunch may no longer be washed down with even a glass of modest Chablis.

Often a blind eye is turned to some expense claims if the manager feels that the employee has been putting in a good effort or has been spending long periods away from home. In some workplaces, staff have their own "manager-management" strategies such as all presenting their expenses claims just hours before they are due to be sent to the accounts department so that their approval is not checked too closely.

This can be double-edged in that managers who want to "get" an employee may use expenses claimed, which are outside of the organisation's corporate policy, to admonish them at a later stage and raise a suspicion of fraud.

A clear policy on what expenses are allowable is considered best practice and it is better to incorporate this as part of an induction process rather than having new recruits attend "expenses master-classes" in the pub on Friday evening with their seasoned colleagues who have mastered the art of the padded claim.

In most organisations, expenses guidelines often go no further than banning business-class flights or restricting business travel to flights of longer than 4,000km (2,500 miles) or four hours in duration.

Happily our civil servants have not only managed to keep their entitlements to business-class air travel, but are also allowed keep the "frequent flyer" perks and points as well for their personal or family use.

And, ironically, it emerged last week that certain Revenue staff can claim up to €200 for hotels and meals clocked up on an overnight stay in London without needing a receipt. Lower-level underlings at the Revenue may claim just €180.36 for overnight jaunts. Changed times since the hard-pressed public-sector executive tried to have his cinema ticket approved on a point of principle.

Gerald Flynn is an employment specialist with Align Management Solutions in Dublin. gflynn@alignmanagement.net