22nd August 2011

T.E.F - Taking Expenses Fairly courses to follow for FSA staff?

We learned last week in MM that the FSA has cancelled its programme of TCF regional workshops to concentrate its resources on the move to the new regulatory restructure and the RDR. We also learned that Citywire had obtained under an FOI request details of the latest huge expenses incurred by Messrs Sants, Turner and others.

Does this mean that new RDR regulatory structure will require ‘TEF’ courses for staff to help them navigate around the FCA expenses matrix?

In light of these reports and our findings about FSA expenses in our March 2010 report on the subject plus the constant hike in regulatory fees, huge industry job losses and cost reduction exercises uppermost being in all our minds, we felt it appropriate to look once again at what the FSA Staff Handbook says in 2011 on expense.

Is there a likelihood that that once again, despite the handbook suggesting the contrary, some staff are more equal than others and oblivious to the cost such luxury incurs in tough times.

The Handbook introduction states - “it is not possible to set out rules to accommodate every conceivable situation and so you are required not only to adhere to the express terms in this policy but also to exercise your judgment to ensure that all claims made are within the spirit of the policy. Staff should also be sensitive as to what is “reasonable” in the current business climate”.

Under Principles it states - “all reasonable travel costs and expenses, wholly and necessarily incurred for the execution of the FSA’s business will be reimbursed” and “such travel costs and expenses have been incurred in the most cost effective way”.

The handbook also states very clearly that - “Any attempt knowingly or falsely to claim expenses in breach of the Travel and Expenses Policy will result in disciplinary action”.

As one would expect, there is a clear-cut chain of command in the sign off process for expenses, dealt with under the Expenses authorisation approval section.

The handbook states, “in relation to this policy, the following structure will apply to the approval and authorisation of travel costs and expenses.“For:

• an Administrator: Associate or above;
• Associates: Manager or above;
• a Manager: Head of Department or above;
• a Head of Department: Director or above;
• a Director: Managing Director or the CEO or the Chairman;
• a Managing Director/the COO: the CEO or the Chairman;
• the CEO: the Chairman;
• the Chairman: the Deputy Chairman; and
• Non-executive Directors: the Company Secretary.

In addition, the Chairman's travel costs and expenses will be subject to an annual review by the Audit Committee”.

So, with the above protocols now clearly defined, I am at a loss to see how airfares of such magnitude can be justified or signed off as “reasonable” in the current business climate”.

The FSA uses an approved travel agent, to get I assume, the best ‘corporate’ deals for flights and accommodation - much in line with what many other large companies and organisations do. In this case the agent preferred is Hillgate Travel, I am not sure if they work on a fee or commission basis.

Under Travel Costs and Expenses by Category, the handbook states that –

• “To ensure that the FSA obtains maximum value for money from its travel spend, the following apply:
• all air travel on FSA business should be by Economy Class (but see below);
• flights must, whenever possible, be booked well in advance;
• fully flexible fares should only be selected when there is a business need to do so.
• Air travel on FSA business by Business Class will only be permitted where:
• the flight time is more than five hours (to enable staff to be fit for work on arrival where they have a demanding schedule); or
• there are no seats available in Economy at the time you need to fly; or
• the Business Class ticket is less or the same price as Economy Class;
•  Air travel on FSA business in First Class will only be permitted: in exceptional circumstances;

The FSA has Preferred Airline deals and the handbook states “from time to time the FSA may enter into a preferred airline arrangement with one or more airlines to certain destinations in order to utilise fully its buying power. Preferred airline agreements allow either staff members to have discounted fares or they give a rebate to the FSA at the end of the agreement period dependent on amounts spent.

It goes on to say - “If there is a preferred airline arrangement in operation on the route you are flying, the lowest available fare from that airline will be offered by your FSA Travel Consultant, along with two other flight options.  The handbook goes on to say, “using such airlines can save considerable amounts of money and must therefore be considered”.

Currently the FSA have preferred airline agreements with BA & Virgin, if this is the case, how can Turner incur a £5,147 roundtrip from London to Toronto and Cole a £4,550 flight from London to Hong Kong and Beijing?

Initial checks carried out on the BA website this week confirm that a business class fare to YYZ (Toronto) restricted is £4238, unrestricted £5637 and PEK (Beijing) £4,213 restricted, £5085 unrestricted for roundtrip travel between 26^th – 30^th September. The BA fares include the reflection of increases of up to 55% in tax from November 2010, long haul flights are now hit with a £150 tax, and the fare does not factor in previous fuel surcharges or the discounts available. We are not sure of the travel dates for Turner or Nichol last year.

The fares may suggest that maximum value for money from its travel spend is not perhaps being obtained in the "current business climate".

You should also be aware that FSA staff can accumulate airline rewards that can be used for personal or family travel. They are not, indeed need not be offset against business travel. Additionally, given the distances flown by these and other senior individuals, most if not will have a frequent flyer status Silver status with BA or Virgin, some may even have Gold. These additional reward perks also give free Lounge access, priority boarding, free seat selection, pre flight meals, shower facilities for the cardholder and a guest.

The handbook confirms that for discretionary increases of claims under “Overseas accommodation and subsistence” discretion does not apply to the £10 a night limit for the reimbursement of personal incidental expenses, which may not be increased”.

When considering the seemingly small things charged by MPs as expenses that gave rise to such public anger, and not wishing for one minute to suggest that some may wish to ‘milk to the max’ the allowances available, I was puzzled by the claim by Cole for a £10 charge for ‘television and tax’ on a trip to Washington, DC”. I hope this was not for a ‘movie’ to help deal with the effects of jetlag. The industry would not like to see a scandal over regulatory fees funding that type of thing would we?

The FOI request is now in the post!

FSA/FCA, RDR, Panacea Comment