What you don’t know about frequent traveler programs may cost you.
- The Weekly Spiff!
- Posted by AxioMobile
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By Marilou Vroman, CPA, CFE
As you start reading this Weekly Spiff you might expect the standard discussion about internal controls over travel and entertainment expenses. So here it is: T&E expenses should be submitted for reimbursement on a T&E reimbursement request signed by a manager and supported by detailed receipts in compliance with company policy. Now I am going to take this subject a step further.
As a frequent traveler, I’ve become quite familiar with airline and hotel websites in making my own travel arrangements to visit client dealerships. While making a reservation recently my internal auditor radar picked up on another way an employee could potentially take advantage of a dealer through T&E.
Many people are familiar with the opportunity to earn frequent flyer miles, points or other perks awarded for loyalty, and traditionally, those perks come in the ordinary course of physically flying miles and staying overnight in hotels. What dealers may not be aware of is the incremental cost the dealership may be spending on travel to fund additional reward perks with no business benefit at all.
For example, some airlines offer additional frequent flyer miles for the same type of seat simply by paying a higher fare. While simply selecting an economy seat (because that is the only fare class acceptable per the dealership’s T&E policy!) the base fare may be $600 but the option to buy additional 2,000 frequent flyer miles is simply a click of a button away, and an extra $216. The ticket will show an economy seat was purchased for $816 in compliance with company policy, but the employee also gets a few thousand extra frequent flyer miles at your dealership’s expense. A similar concept exists in making hotel reservations, where for an additional $75 per night, extra reward points can be added to the employee’s hotel rewards account.
While these may seem like relatively small dollars and the extra perks might serve as a slight morale booster, the extra expense doesn’t deliver an extra car, sell an additional part, improve CSI, or increase technician productivity, and can certainly add up over time.
Some dealers retain all points generated by their employees, and this would certainly reduce the risk of abuse. But most dealers I know allow their employees to keep the points and miles earned during business travel. At a minimum, detailed receipts should be required for hotel and airfare charges. Since the receipt might not reveal the additional points or miles purchased, we also recommend segregation of duties in making employee travel arrangements. Consider having travel arranged centrally, by an individual other than the person travelling to reduce the risk of abuse of the T&E policy. The dealership Controller should question and investigate any travel expenses that tend to appear higher than average.
Earning points and miles for travel can be a great perk but should not be at the extra expense of the dealer. Safe travels!