Council Credit Cards A New Scandal Is Brewing

Today’s revelations in The Telegraph regarding expense claims submitted at Cornwall Council, highlights the ongoing problem of Expense Management in the Public Sector.

While spending on home cinema systems, silk ties and foreign hotels will undoubtedly grab the short term headlines, the real scandal runs much deeper and will require a long term change in procedure and systems.

Our work on the MP’s expenses system and with other public and private sector organisations show the real benefits and savings that can be achieved when expense management software, coupled with appropriate procedures and verification, is implemented.

The most important of those procedures, seemingly lacking at Cornwall Council are:

1. Ensure that all details relating to the expenditure are captured so that a full audit is possible at a later date.

2. A detailed justification for the expense should be given and if this is not provided, the expense claim should be rejected.

3. Expenditure policies and limits should be built into the system so that inappropriate or excessive spending is caught at the point of entry and either flagged or refused (“the computer says no”).

4. Workflow rules should ensure that line managers and senior executives are required to sign off all expense claims over predefined limits. These limits should be specified at individual expense type and total claim value level.

5. Realtime reports should be a available showing a detailed breakdown of expense claims by employee, councillor and executive and the justification for all expenses should be viewable on every report.

Credit Cards issued by councils pose their own unique problems. In effect they become a blank cheque issued to employees and councillors and without the proper procedures in place can result in excessive or unjustified expenditure.

One acute difficulty with “Corporate” Credit Cards is that the company (or council in this case) usually settle the bill and so the incentive for the card user to adequately document their expenditure is limited or non existent because the money does not come from their bank account.

One solution is to make employees personally liable for all expenditure on their Company Credit Card which is not documented and justified by them within 30 days of their bill being received. The expenses would then be netted against salary or other cash expenses due to be paid, pending the receipt of detailed justification for items on the Credit Card.

One final twist in this story may be HMRC. It will also be interesting to see whether they decide to take a look at the expenses at Cornwall Council. From my casual reading of the story there could be some BIK (benefit in kind) liabilities for executives, councillors and the council itself.

This story might run for a while.