Corporate maverick spending — sometimes known as rogue spending — refers to unauthorized or improper expenditures made by employees within a company without proper approval or adherence to established financial controls. It involves individuals within an organization using company funds for personal purposes or non-business-related expenses, often with the intention of benefiting themselves or others at the expense of the company's financial well-being.

Rogue spending can take various forms, such as:

• Employees use company credit cards for personal expenses. 

• Submitting fraudulent reimbursement claims.

• Diverting funds for personal use.

• Making unauthorized purchases on behalf of the company without proper justification or approval.

These actions typically violate internal financial policies, ethical standards, and potentially legal regulations.

The motivations behind rogue corporate spending varies. Some employees may engage in such behavior due to financial pressures, personal greed, or a sense of entitlement. Others may rationalize their actions by perceiving the company’s funds as a resource they can exploit for personal gain.

Rogue spending can have significant negative consequences for a company. It can lead to financial losses, compromised financial statements, damage to the company's reputation, legal liabilities, and strained relationships with stakeholders. Detecting and preventing rogue spending requires robust internal controls, effective oversight mechanisms, and a strong ethical culture within the organization.

Companies typically implement measures such as regular financial audits, expense approval processes, and segregation of duties to minimize the risk of rogue spending. Additionally, promoting transparency, ethics training, and whistleblower mechanisms can encourage employees to report suspicious activities and deter rogue spending within the organization.

Documenting Rogue Spending

Procurement studies reveal that 20% or more of total corporate spend is for purchases that could have been acquired at a lower cost. A key contributor to this inefficient spend is rogue spending, defined as not following corporate procurement policies when acquiring goods or services, such as making unauthorized purchases or buying from higher priced non-preferred suppliers.

Purchasing goods or services out of contract or from non-preferred suppliers means the company doesn’t benefit from negotiated price discounts from preferred suppliers. Rogue spending occurs in all corporate functions, and fleet operations is no exception, especially when managing dispersed assets operated by multiple field locations.

Rogue spending is common at companies growing through acquisition, have a large number of remote operational locations, or experience high employee turnover rates.

Rogue Spending in Fleet

Fleet vendor payments occur in three ways: via a purchase order, a P-card or a national account program. A nagging headache for fleet managers is dealing with employees who do not follow established procurement policies.

A common example of rogue spending occurs when field personnel buy aftermarket equipment for vehicles, primarily trucks, without informing fleet operations. Typically, these purchases are made impulsively by field employees to resolve a pressing operational need without seeking authorization. Often, these are innocent purchases since many employees don’t know how to go through proper channels to get authorization to make an expenditure.

Other examples of rogue spending include unauthorized equipment rentals to meet an operational need, which requires a contractual agreement for which the employee does not have authorization to sign on behalf of the company.

It isn’t the vendor’s responsibility to ensure whether the employee is authorized to make the expenditure or the rental commitment, especially if the vendor has had prior dealings with the employee. The responsibility falls on the employer for not having the safeguards in place to prevent such an occurrence.

Yet another example is modifications to field assets, which are not reported to fleet and may go undetected for years until a problem occurs that brings it to the attention of fleet management.

A key enabler of rogue spending is the corporate P-card, which field personnel use to buy unauthorized goods and services approved by their immediate management because it resolves a pressing operational need. Often, this type of rogue spending is not discovered unless there is an audit. These unauthorized purchases are often done under the philosophy that it is easier to ask for forgiveness than permission.

In other cases, these types of expenditures are embedded into a G&L account deliberately concealing rogue expenditures by miscoding them.

Strategies to Minimize Unauthorized Spending

The overwhelming percentage of rogue spending is done because employees believe they are doing the right thing and are not attempting to do something nefarious. Many times, employees are not aware they are not authorized to make expenditures, because procurement guidelines were not communicated to them.

Even when purchasing policies are communicated company-wide by the VP of operations, there is no guarantee the message will reach all employees, especially when there is a high turnover and employees join the work force subsequent to these communications.

Three Strategies to Curb 'Rogue Corporate Spending'

The following are three strategies to curb rogue spending in fleet operations:

1. Ensure procurement policies are regularly communicated (and recommunicated) to all employees on an ongoing basis.

Often, at the field level, employees do not receive the procurement policy requirements from their immediate management. This is especially true at larger fleets, which have many layers of management or numerous field operations. Often, the problem is these employees simply did not know that what they were doing was against fleet policy. All they do know is they have an issue preventing them from completing their job, and they are looking to resolve the problem. The real problem is when managers do not communicate these policy restrictions to employees, and this information is not pushed down to the lower levels of the organization. It is a communication issue.

2. Mandate that expenditure requests go through a formal approval process.

There must be restrictions as to who can issue a purchase order. There should be greater emphasis on using a centralized billing system. Fleet management must communicate to the field the fleet program meets any of their needs, and it’s not necessary to go out on their own to make expenditures. When developing an approval process, be sure it is a streamlined procedure. A common justification for rogue spending, at some companies, is the desire to bypass a lengthy approval process to expedite emergency purchases. To minimize this, keep things simple to expedite approvals.

3. Seven ways to maximize face-to-face communication with employees explaining procurement policies and restrictions.

To maximize face-to-face communication with employees while explaining procurement policies and restrictions, examples include:

• Town Hall Meetings: Organize regular town hall meetings during which employees from various departments gather to discuss important company matters. Allocate dedicated time during these meetings to explain procurement policies and restrictions in detail. Encourage questions and open discussions to ensure clarity and understanding.

• Training Workshops: Conduct interactive training workshops specifically focused on procurement policies and restrictions. Provide comprehensive training materials, case studies and practical examples to help employees grasp the concepts effectively. Allow for hands-on activities and encourage participation to facilitate a deeper understanding.

• Departmental Meetings: Arrange meetings with individual departments or teams to discuss procurement policies relevant to their specific roles. Tailor the information and examples to their needs, emphasizing how adherence to these policies positively impacts their work and the organization as a whole. Address department-specific concerns and provide practical guidance.

• One-on-One Sessions: Offer one-on-one sessions with employees who require additional clarification or have specific questions about procurement policies. This personalized approach allows for in-depth discussions and a better understanding of individual concerns or challenges they may face in policy compliance.

• Lunch-and-Learn Sessions: Organize informal lunch-and-learn sessions where employees can gather during their lunch breaks to learn about procurement policies. Make the sessions interactive, engaging and enjoyable while covering the necessary information. Provide opportunities for employees to ask questions and share their perspectives.

• Internal Communication Channels: Utilize internal communication channels, such as intranet portals, newsletters or email updates, to share regular reminders, updates and explanations of procurement policies and restrictions. Include real-life examples, success stories and practical tips to reinforce understanding and compliance.

• Training Events or Retreats: Plan dedicated training events or retreats focused on procurement policies and restrictions. These events can provide a more immersive learning experience, combining presentations, workshops, group activities and networking opportunities to promote understanding and engagement.

• Employee Feedback Sessions: Set up feedback sessions or suggestion boxes to encourage employees to provide input and express their concerns or suggestions related to procurement policies. This two-way communication shows their opinions are valued and helps address misconceptions or areas requiring further clarification.

Remember, combining multiple communication channels and approaches can be beneficial, as different employees may respond better to different methods. Also, ensure the information is presented in a clear, concise and accessible manner to enhance comprehension and engagement among employees.

Rogue Spending Can be Known by Many Names

Rogue spending is also known by various other names, depending on the context and perspective. Some common alternative terms for rogue spending include:

• Unauthorized spending: This term highlights the aspect of expenditures made without proper authorization or approval from the appropriate channels within the organization.

• Off-book transactions: Refers to financial transactions or expenses not recorded in the company’s official books or accounting records. Off-book transactions are often used to conceal or misrepresent expenditures.

• Maverick spending: Maverick spending emphasizes the independent and nonconformist nature of the unauthorized expenses, indicating individuals within the organization are acting on their own without following established procedures.

• Non-compliant spending: Non-compliant spending refers to expenditures that do not comply with the company's policies, guidelines or legal requirements.

• Shadow spending: Shadow spending implies the expenses occur in the shadows or are hidden from official scrutiny, indicating a lack of transparency and accountability.

• Hidden costs: Hidden costs can refer to unauthorized expenditures that are not readily apparent or easily identified within the company's financial records.

• Misappropriation of funds: This term specifically denotes the act of diverting or misusing company funds for personal gain or purposes unrelated to the organization.

It's important to note that these terms may have slightly different connotations or nuances, but they all generally refer to the same concept of unauthorized or improper spending within a corporate context.