Prepare for the Inquisition

Have you heard of the Sarbanes-Oxley Act? Don't be embarrassed if you haven't. Many corporate planners haven't a clue what Sarbanes-Oxley is about -- even those who have planned meetings on the subject. "I've set up seminars internally for my company on Sarbanes-Oxley, but I don't know what it means to meetings," admits one planner at a publicly traded company. "But I'm going to do the research now." Says another corporate planner: "Our accounting people have asked us more questions, so I planned a meeting for the auditors on Sarbanes-Oxley, but I'm still not sure what it means to me."

For planners at all public companies, this act will have an immediate impact on how you'll account for meetings expenses -- and whether you'll manage them at all.

What is Sarbanes-oxley?
Sarbanes-Oxley is a Congressional act that aims "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws," and beginning with the fiscal year 2004, compliance is mandatory for most public companies. The law was created to restrain accounting abuses by corporations, but for meeting planners, it means that controlling and accounting for meetings spending is no longer just good business sense, it is the law. And failing to comply could mean hefty fines or even jail time.

The act is a reminder of the importance of reporting practices and controls that govern meetings, because it requires the chief financial and chief executive officers to personally sign off on financial statements based on those practices. It holds CEOs and CFOs personally responsible for any discrepancies between reported data and the numbers that might be discovered by accountants in an audit. Company leaders can be fined or criminally indicted if those numbers don't match up.

What does the act Mean to You?

If you're a planner at a publicly traded company, it means that you may be planning a lot of training meetings to bring the managers of every department in your organization up to speed on how to deal with the act. "For companies to roll [Sarbanes-Oxley compliance] out effectively, they'll have to hit multiple levels in their organizations," says Cleveland, OH-based PlanSoft Corp. President Ed Tromczynski. "The business unit managers, the procurement directors, on down to the corporate travel director and the meeting manager" all have to be on the same page.

And each department is going to be subject to the same scrutiny, including the meeting department. Meetings can account for up to 20 percent of travel and entertainment spending, which is one of the top three costs for most corporations, says Alan Bednowitz, vice president of sales for Philadelphia-based meetings consolidation software firm StarCite Inc. Bednowitz estimates that meetings generate $100 billion in annual domestic spending, and $300 billion globally. Obviously, those numbers are big enough to draw the attention of shareholders and accountants.

"To me it's the beginning of the juggernaut," says Bednowitz. "Companies are just starting to understand that meetings are susceptible to the legislation, and as they're beginning to comply with Sarbanes-Oxley, they're implementing the standardized processes, centralized documentation, and reporting that the act requires.

"Those companies are moving forward with meetings consolidation at an accelerated pace," he continues. "They aren't doing it just because of Sarbanes-Oxley, they're doing it because it's good business to manage your costs. But you can't deny that Sarbanes-Oxley is driving every public company with respect to how they're managing costs. Now, they're being compelled to consolidate meetings."

Although Sarbanes-Oxley was written to apply to public companies, its effects will be more widespread, says PlanSoft's Tromczynski. Smaller organizations should also take heed. "People assume that if you're a private company, you can handle your financials any way you want to, but that's really not the case," he observes. "If you want be part of a merger or acquisition, or if you're thinking of going public or seeking investors, you need have your books in order."

Challenges for corporate planners

For meeting planners who are concerned with Sarbanes-Oxley, "The first step is to get with their own legal departments and go from there, to make sure they are complying with the act," says Julie Carroll, director of industry relations for Atlanta-based WorldTravel Meetings and Incentives. "It's difficult to define meeting spending, but a company can categorize it in terms of travel, housing, food and beverage, audiovisual, et cetera. And all of that can be audited, tracked, and managed."

The goal is to minimize sloppy accounting, says John Ohaver, vice president of Management Alternatives in Naperville, IL, who's educated dozens of corporate travel and meeting managers in seminars on Sarbanes-Oxley. "Companies must establish processes to make sure risk is at an acceptable level. If there isn't a lot of control in a process, there is great deal of risk. If a meeting planner cuts deals with hotels and get secret kickbacks, that could be dangerous for the organization. Policies have to be in place to control this type of thing, and the policies have to be tested, verified, and enforced."

It's a multifaceted job that some believe should be in the hands of corporate travel managers, who are often seen within their organizations as more senior than meeting planners. "More and more frequently, you're seeing corporate travel managers being asked to get their hands around the meetings," Carroll says. "They're basically taking the same steps with meetings that they did with managing corporate travel."

But it also creates the danger of having the meetings procurement function taken over by the corporate travel department. And having responsibilities taken away is never a good sign for a planner's career path. Getting behind the effort on Sarbanes-Oxley is one way that planners can show their value, but most are unprepared, says PlanSoft's Tromczynski. "In most organizations, meetings spending is decentralized, making it impossible to identify expenses with any accuracy. Even for a specialist, managing meetings is a very difficult job, and [even more challenging is that] companies often have people who are very inexperienced doing it. A lot of people plan just one or two meetings a year. And it's very difficult to be an expert in something that you do once a year."

If an organization has a significant amount of spending on meetings, such as a pharmaceutical or financial services company, "That spending is of material significance in the overall budget," says Mark Williams, director of travel and meetings management for New York City-based consultancy PricewaterhouseCoopers. "You have to make sure that your operations are appropriate and legitimate. For example, this means making sure that sure that no one is getting a rebate that is not accounted for. Your management is signing off on your budget, and if there are discrepancies there, then there could be civil and criminal penalties."

Specifically, says Williams, planners should "document that, given the objectives of the program, you have negotiated fair prices for goods and services, and that everything that you were told would be delivered was delivered. In a lot of respects this relates more to the financial side than the service side, but all it comes down to making sure that there is no funny stuff going on, no fraud. Your documents should show that the job was well done and money was well spent."

Those unofficial currencies of meetings, such as rebates, comped rooms, familiarization (fam) trips, and travel advances, are under special scrutiny, says Williams. "Across many corporations, there is the feeling at the senior level that no more of that will go on. And we'll also see a big crackdown on private use of corporate aircraft. If you can justify a fam trip as site selection research, that's OK. But if it's closer to a boondoggle, that could be trouble. The whole environment is one that will cut back on that kind of thing, and I don't see it coming back in the near term."

Williams says that planners at publicly traded companies "may be hearing from an internal or external auditor, and there is a ninety-nine percent chance [that the auditor] will not know about the meetings business. You'll have to walk them through it and show them the controls, and prove that the controls work. It'll take some time, and you may have to document things a little differently than you have in the past. Look at it the way a total novice would, and explain it to the auditor in those terms. That's something that a lot of meetings and travel people have never done before.

"Ultimately, the people who have to sign off on the processes in the meetings and travel departments are the CEO and the CFO, so they are going to be extremely interested that things are done right," says Williams. "If you can work with the auditors and they have little to report to higher-ups, except to say that the program works," that's going to reflect positively on your work.