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CEO Expense reporting

who should approve ceo expense reportsThe recent departure of Mark Hurd from HP over what was referred to as less than perfect expense reporting brings up a sensitive issue. CEOs are generally considered to be big and important people (especially by CEOs) and their expensive time is best spent on important issues like how to build the business. In all my years of experience I have never come across one that I would give more than a "B" to for their expense reporting, with points deducted for lateness, missing chits and receipts, lack of easy-to-find linkage between receipts and numbers reported, lack of information on purpose of expense activity, etc. Add this to the fact that CEOs tend to have higher levels of expense activity, and this can be an onerous problem with potential for escalation to unfortunate levels of outcome. I would be intereted in finding out how other CFOs manage to control their CEOs in terms of timely expense reporting, quality and completeness and ultimately the validity and reasonableness of expenses incurred on behalf of the Company. What happens when there are grey lines between intent and incompetence when "mistakes " are made that tend to benefit the CEO, and how how far have Proformative members gone before they bring repeated problems to the attention of the Board. Because of the sensitivity of this issue I would like to get as broad an input as possible and invite all members who read this posting to provide feedback on events that have caused them concerns, uncovered CEO "mistakes", the method of challenge, and the outcomes. Obviously no names should be mentioned but a depth of unnamed experience shared will enable us all to better handle any such situations we may face in future.


Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

My favorite control mechanism, although it only works in early stage companies: Don't give them a corporate card. Yes, there is nothing as motivating for receipt collection and T&E completeness than making people pay out of their own pocket first and then reimbursing them ex post facto. In fact, I use this at every company I go to as a control mechanism. As the companies grow you "must" give the CEO and heavy travelers their corp cards, but everyone else, forget about it! Trust me, you've never seen such compliance!

Mark Von Der Linn
Title: Principal
(Principal, |

I don't doubt the effectiveness of this, but I have to believe you get push-back from execs who want the convenience and status that go with the perk. Do you or is it usually not a big issue?

Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

Yes, I definitely get push back. But as you can see from my photo, I'm old and don't care about people wanting perks :). When I was younger I was more eager to please and that led to bad behaviors like non-compliance with corporate policies, or sloppy accounting, etc.. After a few decades in the role I realized that pushing back in the name of the company was okay and that the "pushee" typically understands where I am coming from. Now that is not to say that there aren't exceptions that you must make and deal with. The CEO, big travelers, heavy corporate buyers, and the like I do not expect to front $ to the company and they get corp cards. They also get technology that helps automate the expense reporting process (as does everyone) and much closer scrutiny from the folks in my accounting dept.

And don't forget that one very nice perk of people using their own cards is the miles they get. I often find people prefer using their own cards. This brings up the whole question of am I damaging the company by letting all of those miles/points get away, but i would rather have people strictly hew to our company policies around spending than have the points to use on travel. But, as they say, YMMV.

Peter Lyons, MBA, CMA
Title: Finance and Technology Enthusiast
Company: Currently Looking
(Finance and Technology Enthusiast, Currently Looking) |

As far as addressing the tardiness and missing receipt, I've gotten really close with the various admin's that support our senior management team. It's amazing just how much easier they can make your life when they are on your side. I have our admin's calling hotels for missing folio's, etc. Every now and then I'll take them out to lunch just to show my appreciation.

Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

This is a great point and should be elevated. Many execs do not do their own expense processing - it is their admins. Getting them on board is critical! Also important is giving them the tools they need to make expense reporting easy. Tools that can download transactions from credit card companies, plus giving them training around how to categorize expenses (e.g. what's a "business meal" vs. what is a "personal meal") can go a long ways.

John Stanhaus
Title: President
Company: GRN Edgewater
LinkedIn Profile
(President, GRN Edgewater) |

I agree with Mark S., having the executive use their own card, and not reimbursing until documentation is submitted is an excellent motivator. Air travel is usually handled through a separate corporate card, given the need for flight changes etc, but personal cards have been a requirement for for my last several companies, and when properly explained is generally accepted.

A key element of gaining this general acceptance is having the audit committee approve the procedure, and in the case of the CEO, having their expense reports subject to review (generally after the fact) by the (Chairman) of the audit committee. Both of these really take the "staff" off the hook, and every CEO I have worked with (as well as when I was CEO) got on Board as it set the right tone for the organization as a whole - respect for the financial function and financial controls.

Separately, I believe I read that one of the problems with Mark Hurd's expense reporting was that his expense reports indicated on numerous (as many as 15) occasions that he went to dinner with his personal security person, and the security person could/would not corroborate Hurd's story. The implication was that he was spending this time with the woman. If this is true, then he was flat out lying on his expense reports, which should be grounds for dismissal for cause regardless of the other disagreements with the Board.

Keith Taylor
Title: CFO
Company: Lyris, Inc.
(CFO, Lyris, Inc.) |

Simon, as CFO's we typically hold ourselves to higher standards than others to ensure our integrity is never at issue. Certainly CEO's should be in that category. Ever since my Apple Computer days in the 90's, when then-CFO Joe Graziano required two levels of signoff on the Executive team's expense reports (one up and Internal Audit), I have always adopted a policy that the CFO's and CEO's expense reports must be approved by a Board member, or if available subject to 100% Internal Audit review (in fact, its quite surprising that HP doesn't have this control requirement.) One VC I knew required Investor receipt of c-team expense reports on a quarterly and another recommended a random shift of peer review (i.e., the CFO would designate who reviewed whose expense reports each month or quarter.) Most of the CEOs I have worked with have appreciated this transparency.

Robert Honeyman
Title: CFO
Company: Advanced Predictive Analytics
(CFO, Advanced Predictive Analytics) |

But I'm guessing problems if not implemented early in the life of the company or the tenure of the CEO. I plan on using these ideas on my two startups. Thanks.

Christine Russell
Title: CFO
Company: Evans Analytical Group (EAG)
(CFO, Evans Analytical Group (EAG)) |

I have found it useful to have the CEO's Admin ask the CEO to just give the Admin all the receipts,itineraries,bills and the Admin fills out the Expense Report. Since the Admin has no vested interest in filing an inappropriate expense report the report is usually correct. I also find Admins will cross off out-of -policy items off of CEO hotel bills for instance if they have a written policy and have been told to follow it.

(Agent, JKS Solutions, Inc.) |

In both of my roles as CAE (including my current one), I utilize a quarterly audit process whereby the T&E of all 'C-level' employees are audited each and every quarter - with the results being presented to the Audit Committee in their quarterly meetings.

It works very well -- with all parties settling in, eventually, to strict policy compliance.

John Jepsen
Title: Consultant
Company: Jepsen Consulting
(Consultant, Jepsen Consulting) |

Do away with Petty Cash immediately. In this day and age where everyone accepts Credit or Debit cards there is absolutley no reason for it. At my prior employer the CEO and only the CEO had access to $1,000 Petty Cash account and lo and behold, wouldn't you know, every week his driver turned in an expense statement for exactly (you guessed it) $1,000! Pretty amaxing that some weeks a stick of chewing gum would cost $0.05 and some weeks they were $1.00, whatever it took to round it out to $1,000. Here was a guy making almost $3 million in comp and still ripping the company off for $1,000 (or the better part of) each week. (he would occasionally sneak a legitimate expense in there). Give them a corporate card and have the statement go directly to the head of IA, and like any other employee the card gets canceled when they are late in turning in receipts. Ah=fter that they have to use a personal card and wil only get reimbursed when they turn in receipts and an expense report. Major items such as airline tickets and hotels (airline tickets were generally the biggest single dollar item) can be paid for directly by the company.

Kirill B
Title: Finance Manager
Company: TheBroth Inc
(Finance Manager, TheBroth Inc) |

Hi, great posts so far. Speaking of having a prudent corporate policy on expense reporting can anyone provide a sample of actual language from the policy. I am working on putting together an employee handbook and would like to include a paragraph relating to expenses made on behalf of the company. Thanks!

Maria Marsala
Title: Financial Advisor Coach, Speaker, Author
Company: Elevating Your Business
(Financial Advisor Coach, Speaker, Author, Elevating Your Business) |

IMO, it's important that a CEO have a good calendar that is looked at by his/her executive assistant. And that the assistant prepares the expense report, that is looked over by the CEO every Friday before it's submitted.

Once I worked as an internal consultant at a brokerage firm. One day the Managing Director gave me the monthly expenses and told me to look them over. Once I learned what all the codes were, I found out that this dept had been billed $100K for the quarter that belonged to a different department.

My job became to fix all the records for the previous 6 months, and create a system so that the problem never occurs again.

Then I taught two people on the team to take care of things and just checked it.

A system, even a paper system combined with an excel spreadsheet or paper report can be easily created and sent to the Accounting Dept.

Another thing we did was issue everyone an Amex Card with the company address. That bill had to be submitted monthly to the boss with back up along with what each entry was for and who was involved. If we didn't submit it on time, we had to pay the bill ourselves.


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