Has the Method of Paying for Travel Services Come Full Circle?

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» Posted by on May 8, 2013 in Business Practices, Payment Methods, Travel Professional Resources | 0 comments

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At issue is how government employees pay for travel expenses while performing their duties.

Cash Advances

Prior to corporate travel cards, there were travel advances where employees would request a certain dollar amount to pay for expenses while traveling on official state business.  This methodology seemed to work well at the time, but the presence of fraud and abuse always lurked in the background.  There were some control measures put in place to prevent this, and receipts were required to be submitted, along with unused funds being returned.   There were also employee risks involved by sending out an employee with a large amount of cash that could have been easily lost or stolen.

Full Credit Cards

To curb this problem, the thought of using personal liability corporate credit cards to pay for travel expenses occurred.   This solved the problem of risk and provided a secondary means of tracking expenses.  When credit cards came on the scene, the credit industry was thriving and everyone was eligible for cards.  The problem was that some people who were issued cards made very poor judgments.   The abuse on government credit cards really came to light in 2001 when several key military members were questioned by congress by purchasing “safety shoes” at Nordstrom and a large number of PDA’s and flat screen monitors with little or no justification.  The State of Oregon faced similar problems with its Diners Club program.  Some state employees took it upon themselves to go on shopping sprees or make weekly ATM withdrawals with no intentions of paying the money back.   These employees thought since these were personal liability cards, it would only affect them and not the State.

Restricted Credit Cards

Upon entering a new contract with US Bank in 2001, tighter controls were implemented restricting ATM cash access and who could be issued cards.  These control measures resulted in dramatic reduction of fraud and abuse.  These controls also led to another problem, with credit restrictions tighter, some employees who need to travel were no longer eligible for a corporate travel card, and they weren’t eligible for a personal card either.  This presented a problem of how to have employees complete their missions without having a credit card available.

Direct Billing

Through the use of the price agreement for car rental services, some direct bill accounts were established. However, unless there is enough volume to warrant a direct billing account, not all state agencies are able to establish these.   Some state agencies have set up instate hotel direct billing accounts for the key cities in serving their mission, however it is impossible to set up a direct billing account with all hotels.

A simple solution would be using the States Purchasing Card, which is a state liability card.  However, rules within the State ofOregon prevent the purchasing card be used for travel.  Travelers are to submit travel reimbursement claims after the trip.  The only on exception is air fare which is pre-paid using the States CTS accounts.

So that leaves us with the dilemma of employees needing to complete their missions and how to accomplish this.  Limited travel advances are once again being issued.  We have come full circle in the process.

Breaking the circle

Before this practice becomes the norm, we are now working with US Bank to loosen the restrictions surrounding credit cards.  The real trick will be to find that happy medium where enough controls are in place to prevent the fraud and abuse, but still allow individuals who once weren’t able to qualify for a card, be able to obtain a card.  This will be a challenge as we have the responsibility to protect the traveler, the state, the tax payer as well as the bank.

Our Responsibilities

The State of Oregon enjoys a yearly rebate back from the bank based upon the amount of spend.  If there are any payment defaults on the cards, the rebate is deducted by the amount of default, if the default exceeds the rebate, future rebates are then deducted. One might look that this is built in protection feature to protect the bank from losses; however the protection can only go so far and eventually, there could be enough loss where the rebates won’t cover it.  Yes, this is an extreme example, but the State does have a contingent liability on these corporate cards.  This brings me to the protection of the State. The State not only looses a rebate each year if there are enough card defaults, it also looses it credibility in the banking industry.  With these tough economic times, it is now harder to obtain credit.   If the State was unable to obtain credit on this contingent liability for its employees to complete their missions, it could be catastrophic.   The third item is the protection of the traveler.   As the employer, when the State sends a traveler out to complete a mission, the State is responsible for the well being of the employee while on travel status.   Whether the employee has access to credit or not; the State is still responsible for that employee.   And finally the fourth item, we the State are responsible to ensure the proper and responsible use of the taxpayer’s dollar.   If rampant spend where to occur, and we reverted back to the fraud levels in 2001, it would discredit the State with the tax payers.

Conclusion

As this paper demonstrates, there are many variables to consider.  Where do you draw that happy medium?  Do we cut off the traveler from completing their missions, do we put the state at financial risk in loosing the credit restrictions, or do we go back to cash advances.  It has been said that history sometimes repeats itself, and this situation is proven example.  It is evident that there will never be a perfection solution.  Even among different organizations, one solution will work best than another solution being used elsewhere. There is no one size fits all solution, but we need to find the solution that works best for all, and stick with it.

by Tim Hay

 

 

 

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