Canadian HR Reporter

CANADIAN HR REPORTER CANADIAN HR REPORTER May 5, 2014 May 5, 2014 NEWS NEWS 9 Canada's prestigious fourth annual health and safety awards — Canada's Safest Employers — have launched a new category to recognize employers for best practices and leading initiatives in workplace mental health. To nominate your organization visit www.safestemployers.com for details. Nominations close June 2, 2014 Mental health problems will cost businesses $198 billion in lost productivity over the next 30 years, predicts The Mental Health Commission of Canada. To recognize employers that are leaders in addressing psychological issues in the workplace, Canadian Occupational Safety has launched the Canada's Safest Employers Psychological Safety Award. Centre for Mental Health in the Workplace Great-West Life www.workplacestrategiesformentalhealth.com Presented by National Founding Sponsor & Title Sponsor Psychological Safety Sponsor Is your organization a leader in workplace mental health? You spent how much? You spent how much? Entitlement, opportunity, pressures can lead to expense fraud: Experts Entitlement, opportunity, pressures can lead to expense fraud: Experts BY SARAH DOBSON THE HEADLINES pop up often and have a familiar theme: "CBC president Hubert Lacroix repays $30K in expenses," "Brampton mayor Susan Fennell defends $50,000 airfare expenses" and "Former general says attacks over moving expenses a 'smear campaign.'" Whether it involves extrava- gant travel or inappropriate pur- chases, expense mismanagement can put executives in the public and private sector in the spotlight. And while they often claim igno- rance or innocence, the damage to reputation — for the employee and employer — can be severe. So employers are respond- ing. Whether because of tighter budgets, the power of social me- dia or a change in focus, expense management is more in the spot- light these days, according to the experts. In lean times, companies are trying to watch their bottom lines while new rules around bribery and corruption — with hefty fi nes and sanctions — also have em- ployers on edge, according to Da- vid Meadows, associate partner in fraud investigation and dispute services at EY in Toronto. "We've defi nitely seen an up- tick in activity from our clients wanting to take a look at their employee expenses that are be- ing submitted to the company for reimbursement." In the past, relatively little at- tention was paid to travel and entertainment costs because they typically make up a small part of the company's budget, unlike the purchase of capital equipment or large investments, said Rob Shull, vice-president of MDD Forensic Accountants in Toronto. "We're hearing more about it now than we may have in the past because as controls in other parts of the organization tighten up, you're kind of left with the things that are more easily committed, which are expense report fraud." Companies are starting to look more closely at their costs and are noticing more of this type of wrongdoing, he said. "Employees, similarly, feel that maybe they have not received a bonus or they might not feel they're being compensated fairly or they're working harder for the same salary, so they're looking for ways to get a little bit more out of the company." With executives, expense errors can be more newsworthy or sen- sational because they tend to be higher paid, so it seems even more unfair — and hard to understand — when they cheat, said Shull. "Executives tend to represent the company more so when there is a fraud like that, it does have a real impact on the reputation of the organization from the public standpoint." e public is looking for signs of waste, especially if a company is not doing well, said Kelly Ohayon, vice-president of consulting and deals at PwC in Montreal. "And with social media... it goes really, really fast and it can get blown out of proportion quite quickly, so a lot more companies, being aware of that and conscious of that, are really tightening up this area of the organization." Rationalization, pressure, opportunity But why are there problems in the fi rst place? Expense fraud comes back to a triangle of activities, said Meadows: rationalization, pres- sure and opportunity. "So if the policy has holes in it or ambiguity as to what is accept- able or if the tone at the top of the organization is 'We do whatever's necessary to get the business' or 'Yeah, but that's OK because that's the way we do it here'… then that presents opportunity." Pressure to commit wrongdo- ing can also occur if individuals are feeling particular stresses, whether that's from a divorce or the need to reach sales targets, said Meadows. " ey may get to a point where that pressure gets severe enough that they can then rationalize submitting the expenses and be- ing able to augment their income through this." Rationalization also comes into play when people talk about en- titlement, he said. "We see that many times, where it's 'Oh, the company's not paying me what I should be paid, I'm not getting paid what I'm worth' — that's a common rationalization." A sense of entitlement can definitely affect executives if they're going through cost-cutting measures, said Shull. "They are certainly making more money than a lot of the lower-level employees but often- times what we're seeing is their salaries or their bonuses have been reduced, so they feel that maybe travel is one of the perks of their employment, so they should be entitled to business class or an even nicer restaurant than com- pany policy might allow." However, a board of directors often pre-approves certain ex- penditures for the C-suite, said Ohayon. "In most cases, you would fi nd it's been approved by the board and there was legitimacy behind it," she said. "If somebody feels that an ex- penditure is excessive, maybe the company does not have the right policies but it does not mean that the individual did anything wrong. And this is why compa- nies are tightening this area of the organization." e weaker links often come where expenses are a little more discretionary, said Ohayon. "When you get to the execu- tives, they have a bit more lee- way just because of the role that USE > pg. 10 "(Executives) often feel that travel is one of the perks of their employment so they should be entitled to business class or an even nicer restaurant than policy allows."

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