Managing Meetings

FINANCE/FRAUD

Managing Meetings

The budget line for meetings is rife with opportunities and risks.

by Will Tate, Joan Eisenstodt and Cheryl Rosen

EXECUTIVE SUMMARY

Every good meeting has three elements: an agenda, a site that’s conducive to the meeting objectives and a contract that guarantees you get what you need on the budget you expect.

If you are planning many meetings in the same city or have a large transient travel budget, it may pay to negotiate with a national hotel chain for one flat rate for all your meetings. But otherwise it’s more economical to negotiate a price for each individually.

Conference centers may seem expensive because of their all-inclusive pricing, but they often end up costing the same as a meeting in a hotel. And they’re more comfortable and conducive to sitting for long periods.

Watch out for cancellation and attrition clauses. Even if you are positive your meeting will not be canceled, bad things can happen.

Make sure employees understand what they may accept from suppliers. Have a clear written policy about accepting gifts from outside vendors, and make sure your meeting planners understand whether it applies to frequent-traveler points.

Will Tate, CPA, is vice-president of Management Alternatives, a travel consulting firm based in Norwalk, Conn. Joan Eisenstodt is founder and chief strategist of Eisenstodt Associates, a Washington, D.C.-based conference consulting, facilitation and training company. Their e-mails are willtate@comcast.net and eisenstodt@aol.com, respectively. Cheryl Rosen is managing editor of the JofA and former executive editor of Business Travel News. Her views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through specific procedures, due process and deliberation.

ave you heard the one about the Wall Street meeting planner who bought tens of thousands of dollars worth of silver at Tiffany and charged it all to her boss’s meetings budget? How about the planner who paid himself $3.5 million for choosing a site? Or, more likely, the secretary who accepted a free week in Vegas in return for bringing her firm’s business to one national hotel chain? Ask the people who plan your off-site meetings and you’re likely to find they accept frequent-traveler points from hotels—even though they would never consider accepting an expensive gift from any other supplier.

The T&E Tab

The meetings budget line of American companies totaled $122.31 billion in 2004—making up more than 36% of the hotel industry’s operating revenue and 17% of the airline industry’s operating income.

Source: Convention Industry Council, www.conventionindustry.org.

Meetings are purchased for and by every executive under every department and budget line, from marketing to sales to travel—and they add up to a huge budget item that’s exceptionally difficult to control and track. In keeping with the “what you can’t count, you can’t manage” theory, meetings also are exceptionally vulnerable to waste, mismanagement and out-and-out fraud. With travel and entertainment making up the third-largest budget item at most businesses, meetings are an arena where CPAs who institute processes and oversight can boost the bottom line in a big way.

In this article we’ll begin by outlining the steps for planning a great meeting and getting the best return on your budget. Then we’ll offer best practices for dealing with the ethical issues that can get a planner and a business into trouble. CPAs can use the ideas to plan meetings and institute meetings policies for their own firms, or share them with clients to keep budgets and processes in line with the changing times.

A Sample Meetings Policy

Unless prior approval is obtained from a vice-president or more senior company official, an employee may not accept payments of any amount or any single gift, entertainment or favor valued in excess of $200 or entertainment that is unreasonably lavish from customers, vendors or any other person or entity with which the company conducts or is considering conducting business.

Employees may not solicit gifts, entertainment or favors of any value from persons or firms with which the company actually or potentially does business.

Under no circumstances may employees place vendors, customers, suppliers or business partners in a position where they may feel compelled to make a gift, provide entertainment or provide personal favors in order to do business with the business. Employees may request something of value for their own personal benefit from a vendor or customer only if the cost is incurred by the employee.

Source: Meeting Professionals International, www.mpiweb.org.

KEEP YOUR EYE ON THE PRIZE
Whether the point is to gather partners or prospects, customers or trainees, every good meeting is made up of three basic elements: an agenda to serve as a framework for useful discussion and sharing of information, a site that’s conducive to the business at hand and a contract that guarantees you get what you need on the budget you expect. The best way to start is by thinking about what you or the meeting sponsor wants to achieve and working your way backward. End every meeting with an action plan of measurable steps for which someone is accountable.

Often people start planning a meeting with one objective in mind and then add more and more as the date gets closer. “As long as we’re getting together,” five different people say, “let’s also do this and this and this”—until the agenda gets so overcrowded that the original goal is buried in trivial issues. Put your goals in priority order, set your agenda and don’t let clutter get in the way.

A Sample Procurement Policy
Purpose
This document offers guidelines to reinforce consistency and efficiency in expense policies for the company, with the goal of ensuring compliance with company policies as well as reducing the growth rate of expenses. Compliant and cost-conscious employees have a business impact on the company and its shareholders. By following these policies, the company will be able to more effectively meet its business goals and deliver greater benefits to shareholders, the company and employees.

Using This Policy
All employees are responsible for being familiar with and adhering to these policies.

The guidelines in this document take precedence over any other expense policies unless the business unit has stricter policies.

All managers must exercise diligence and scrutinize all reimbursable expenses.

Purchase Orders
Purchase orders (POs) are required for all purchases of more than X dollars.

All POs must be issued and approved in accordance with policy before any work is performed by the vendor.

All managers must exercise diligence and scrutinize all reimbursable expenses.

POs for X dollars or more can be issued only against vendors who are under contract with the company.

POs should be for the entire contract; splitting POs to circumvent authorization levels is prohibited.

No work without a PO; no PO without a contract.

Competitive Bid
Competitive bids are required for all purchases greater than X dollars.

Competitive bids are recommended for all purchases greater than X dollars.

Contract Policy
Legal must be involved with all contracts. Contracts are required for

All purchases greater than X dollars.

Vendors on-site.

Projects that will last longer than three years.

Source: Meeting Professionals International, www.mpiweb.org.

PICK THE RIGHT PLACE
The locale of a meeting sets the tone, so choosing a site is the biggest and most complex decision you’ll have to make. As with every good business decision, start by considering the needs of your customer. Think about who will be attending and why.

First consider the type of venue. Do you want a small and intimate hotel in which to cozy up to customers or a midtown locale that’s easily accessible to salespeople coming from out of town? Will you stay in one room the whole time, or do you need to break into small groups? Will your partners be expecting a high-quality hot lunch or will sandwiches and cookies suffice? A serene executive conference center 25 miles out of town may work fine for an executive retreat, but if families are invited, are there things for their spouses and children to do and easy access to the activities?

Over the past few years, many firms and companies have tried to consolidate their travel with a small number of preferred hotel chains. Whether trying to get everyone to book their meetings in a Sheraton is worth the trouble depends on how many meetings you hold each year and how much transient travel your firm does. If you’re planning 60 seminars in your hometown, or if your firm already has a preferred hotel program, it may make sense to negotiate one flat rate. But usually it will cost less if you get the best available rate at the time each meeting is being held.

A Sample Conflict-of-Interest Policy
As an employee, you are expected to act at all times in the company’s best interests and to exercise sound judgment unclouded by personal interests or divided loyalties. Avoid the appearance as well as the reality of a conflict of interest. A conflict of interest exists if your circumstances would lead a reasonable person to question whether your motivations are aligned with the business’ best interests. Here are some of the most common conflict-of-interest situations:

Use of company information for private gain.

Friends and family stock.

Outside activities—nonprofit and civic organizations whose goals compete or conflict with those of the business.

Moonlighting.

Service on a board of directors or technical advisory board whose goals compete or conflict with those of the business.

Spouses, domestic partners or relatives as suppliers, vendors or business partners.

Kickbacks and rebates by suppliers or vendors.

Gifts from vendors, suppliers or customers.

Honorariums.

Outside Activities—Nonprofit and Civic Organizations
The business may encourage its employees to be active in their communities and to volunteer their time to bona fide charitable, educational, civic and trade organizations. Participation in these types of activities does not generally require prior approval, but you should guard against possible conflicts of interest or the appearance of such conflicts. If participation in an outside activity has the potential to cloud your judgment, prevent you from acting in the company’s best interests or create an appearance that you will not act objectively, you must obtain prior written approval.

Source: Meeting Professionals International, www.mpiweb.org.

The very lowest price, of course, will be at that little limited-service motel on the highway where the facilities add up to one meeting room and an ice machine. The management will be thrilled to have you and boy, will it be cheap. But what you really need is a place that’s conducive to fulfilling your objectives and making people comfortable—and if it costs a little more, you’ll likely get a better return on your investment.

For meetings involving partners, executives and customers, consider executive conference centers and unusual venues. The price quoted by conference centers may at first sound high compared with that of hotels, but their all-inclusive pricing—for meeting room, snacks, meals and audio-visual equipment—makes planning simple and often is not in the end any more costly than a similar package at a hotel. Note that you should never hold a staff retreat in your own building; that makes it too easy for people to slip back into their offices, undermining the dynamics that are the reason for getting together in the first place.

Practical Tips

If you plan a number of meetings each year, have a lawyer draw up a standard contract for you to give the entities with which you negotiate.

Write an ethics policy that spells out what meeting planners may accept and what they may not.

MAKE YOUR DEAL
One of the biggest but most common mistakes unsophisticated meeting planners make is to think that every meeting contract is standard and they can just sign on the dotted line. Make sure any contract you sign covers all the things you need to hold a successful event. Include all the details on the meeting space, the hours, the number and details of sleeping rooms and meals, and most important, the cancellation and attrition clauses that will apply if you have to cut back on the number of attendees. Just as you’d expect a client to ask a CPA for tax advice, ask an attorney or other expert to review the contract for any large meeting.

If you sponsor a lot of meetings and conferences, have a contract of your own drawn up, so you can give your contract to the hotel rather than vice versa. Even if the hotel balks at some of the finer points, it will be a useful starting point for negotiations.

Unlike a usual hotel reservation that you can change until the day before your arrival, meeting contracts can have stiff cancellation penalties. This is where most newly minted meeting planners go astray. Even if you believe there is no question that the firm will hold its annual customer conference in April, consider what happened when Hurricane Katrina hit New Orleans. Consider also the reverse: What would happen if the hotel canceled? Natural and man-made disasters can ripple through the hotel industry, bumping meetings across the country. We saw a lot of that after Katrina, when hotels from Las Vegas to New York canceled smaller groups to accommodate larger ones that were displaced. Think carefully about the number of attendees to which you commit, and about what the hotel might do to make things right if it cannot accommodate you at the last minute. Get everything in writing.

AICPA RESOURCES

AICPA Antifraud & Corporate Responsibility Resource Center, http://antifraud.aicpa.org/.

Ethics and Fraud in Business: Cases and Commentary, http://antifraud.aicpa.org/Resources/
Tools+and+Aids/Case+Studies/Ethics+and+Fraud+in+Business+Cases+and+Commentary.htm. Cases involving ethical dilemmas in management.

Conference
AICPA Controllers Workshop
Las Vegas, Nev.
July 20–21, 2006

CPE
Fraud in the Governmental and Not-For-Profit Environments: What a Steal! by Linda M. Dennis (# 731921JA, text; # 180922JA, DVD).

OTHER RESOURCES

Web sites

Meeting Professionals International, www.mpiweb.org. Networking, training, conferences and a Global Corporate Circle of Excellence toolkit.

Convention Industry Council, www.conventionindustry.org. Information, resources and a Certified Meeting Professional certificate program.

THE POINT ABOUT POINTS
No meetings discussion is complete without considering the issue of frequent-traveler points. Hotels besiege planners with offerings—gifts, free stays, site visits—and make it easy for your employees to rationalize accepting them. The perks can add up quickly to free vacations in exotic locales. Many small firms consider frequent-traveler points a way to reward partners or their assistants, and that’s fine if it’s a conscious decision. But businesses that hold more than one or two off-site meetings a year—especially publicly traded companies—should have an ethics policy that spells out how employees should handle perks being offered by potential suppliers (see “Opportunity and Responsibility”).

“The whole point of Sarbanes-Oxley is that people should not make business decisions based on what they gain personally,” says Christine Duffy, chairwoman of Meeting Professionals International and president and CEO of Maritz Travel Co. in St. Louis. “You don’t want anyone in your organization basing decisions on getting a free vacation. But you can’t hold people accountable unless you have made your policy crystal-clear.”

Another increasingly common issue involves meeting planners’ setting up side companies to accept commissions on the meetings they’re planning instead of negotiating the best deal for the firm. In our opinion, this practice is outright fraud. To prevent it, make sure that a disinterested party reviews every meeting contract.

WRAPPING UP THE AGENDA
The “travel and entertainment” budget is a huge expense item at most companies—wide enough to leave plenty of room for waste and abuse. A little forethought can help you sidestep even the hint of wrongdoing and at the same time transform an ordinary meeting into one that gives you a return on your investment for months and years to come.

Opportunity and Responsibility

by Christine Duffy

n today’s post-Sarbanes-Oxley environment, corporate finance organizations have to focus on the broad implications of how meetings are run and documented. Meetings are a fragmented budget line, and often the expenses and costs aren’t broken out. So they don’t have the kind of transparency that’s required. At the end of the day, the finance department has the line of sight into what’s happening across the organization and is responsible for minimizing the company’s risks.

The first responsibility of management and auditors is to really understand how much the company is spending on this category. You’d be surprised how many companies don’t have this information readily available. The opportunity, then, is to look at the big picture across divisions, rather than letting each group make its own purchasing decisions. We’ve often seen businesses where one division is paying a hefty cancellation fee while another area of the same company is booking a meeting at the same hotel. If there was a centralized process for booking meetings, the second group could simply replace the first. The answer is to centralize at least the collection of meetings and travel spending data, and for someone in the finance department to document how meetings are planned, put some guidelines in place and leverage the company’s meetings volume.

A couple of years ago the point of having a formal meetings management program was to save costs, but now it’s also a matter of risk management and Sarbanes-Oxley compliance. You need to ensure that the business is operating meetings and events consistently and documenting what it is spending. In the Tyco trial, for example, one issue was a big event held in Sardinia; another was the fact that Dennis Kozlowski’s wife was paid for planning the company’s meetings. Management needs to be aware of what the company is spending money on and whether there are appropriate business objectives and documentation around what’s charged to the company.

Christine Duffy is chairwoman of Meeting Professionals International and president and CEO of Maritz Travel Co. in St. Louis.