What to Do if a Co-Worker Submits Personal Expenses for Reimbursement
A common question I am asked is what to do if you travel with a fellow employee on an out-of-town trip and the employee hands in an expense reimbursement request that includes personal expenses. Some employers attempt to short-circuit the problem by providing a maximum reimbursable amount for daily expenses. The company still should require documentation for income tax purposes. The real problem arises when an employee spends less than the maximum and asks for full reimbursement. Only legitimate business expenses should be reimbursed so the employee should not be reimbursed for the difference between the maximum allowable amount and the amount actually incurred. Ethical employees will submit documentation only for business expenses incurred while performing professional duties. Here is the question and answer.
I just returned from an out-of-town trip with a fellow employee who submitted credit card receipts for company reimbursement for dinners with personal friends. The employee knew many people in the town and each night for ten nights had dinner with different friends, paid the dinner bill, and submitted it for reimbursement. I knew about it because the employee asked me to back his story, if questioned, that the two of us had gone to dinner and he promised to give me cash for the actual cost of my dinners which was much less than one-half of his submission. The controller of my company has asked to see me to discuss “a variety of issues related to my recent out-of-town trip.” I am uncertain whether I should either tell her about the improper expenses of my fellow employee, wait to see if she asks me about and then tell her about it, or feign ignorance of the whole matter?
First, you should clarify your obligations under company policies related to the submission of documentation by employees for business travel expense reimbursement. I assume the policy prohibits submitting personal items for company reimbursement. The cost of meals for friends of the co-worker is not employer-reimbursable costs. Moreover, they can’t be claimed by the company for accounting or tax purposes as ordinary and necessary business expenses
The first alternative is the way to go. If you voluntarily offer up the information before being asked about it by the controller, you build trust with her and the company. The company will then feel you are trustworthy employee and have integrity – act based on principled behavior. If you wait until asked about it, the company may question whether you have its best interests at heart and those of the shareholders, if publicly-owned, because it is a misuse of company resources by the employee. A company has a fiduciary responsibility to its shareholders to safeguard company assets. Ignoring the whole matter even if you are not asked about it opens you to charges of participating in a cover-up later on if and when the employee repeats the inappropriate behavior. The result may be that the company starts to question whether you have submitted personal expenses for reimbursement as well.
An important ethical issue in this case is loyalty. There are two types of loyalty: loyalty to your own supervisor and loyalty to a fellow-employee and loyalty to the company and shareholder interests. The ethical position is to act in accordance with loyalty to the organization and its shareholders that provide the capital. All sorts of problems may develop for you down the road if you support or stand idly by while an employee violates a company policy or worse, commits fraud. Once you begin the silence and/or deny knowledge when questioned, you have begun the slide down the proverbial ethical slippery slope and it will be difficult to take the high road in the future for fear that your prior bad acts will become known.
Blog posted by Steven Mintz, aka Ethics Sage, on August 10, 2011