Many insurance and financial services planners have to comply with strict National Association of Securities Dealers requirements for their training and education meetings. Now, industry planners working for publicly held companies also need to pay attention to legislation that requires strict reporting procedures for corporate meetings.

Until now, the Sarbanes-Oxley Act (SOX) has been the concern of primarily senior executives and finance officers. However, new requirements could mean changes for meeting planners as well, including closer scrutiny of expense reporting and more stringent documentation requirements.

Introduced by Sen. Paul Sarbanes (D-MD) and Rep. Michael Oxley (R-OH), the bill was enacted in 2002 to increase corporate responsibility and curtail accounting scandals. The area of concern is section 404 of the Act, which becomes law August 15, 2004, for large corporations and June 15, 2005, for smaller publicly traded companies. The legislation does not affect private companies, except those planning to go public.

Section 404 requires each public company to include an “internal control report” in its annual report. Companies must document financial reporting procedures in the annual report and have independent auditors sign off on it.

The onus of the changes will fall most directly on procurement and other departments that control the purse strings. Because of the annual audits, planners will face tighter controls in the way they purchase such items as meeting space, hotel rooms, airline tickets, food and beverage, and other services. “From the meeting planners' perspective, it's going to be a filter-down effect,” says Joshua Grimes, attorney with Grimes Law Offices, Philadelphia.

There are several steps that planners can take to comply with SOX, says Scott Green, director of audit and compliance at Weil Gotshal & Manges LLP, New York, and author of the new book, The Managers Guide to the Sarbanes-Oxley Act: Internal Controls to Prevent Fraud. First, document the business purpose of travel and meetings by establishing an approval system wherein senior management signs off on the objective of the event, says Green. The larger and more expensive the meeting, the more senior level approvals will be required. “The idea is to prevent, or at least raise as possible abuse, activities such as throwing lavish, million-dollar parties in exotic locations for corporate personalities that have little business purpose or benefit for shareholders,” he says.

Second, if they don't already, companies should establish policies to determine what portion of travel or offsite meeting-related expenses the company pays and what would be considered personal charges.

Incentives won't be hurt by the law, according to Green. “Those expenditures designed to motivate employees and, as a result, improve financial results that drive stock prices, should continue to be encouraged and paid for by a corporation.”

Documentation Costs

The end result of tighter controls will be higher costs. “Most companies are saying the costs are much greater than anyone anticipated,” Green says. Many firms have hired consultants to document their processes in preparation for external audits. Others are purchasing special documentation software. While consulting fees are one-time costs, audit fees are not, and they are expected to rise anywhere from 25 percent to 100 percent over past years.

In a new white paper, WorldTravel BTI, a corporate travel management company based in Atlanta, says planners should consider using automated expense-reporting systems to assist in the enforcement of financial controls. The paper suggests contacting the company controller or internal auditor to discuss compliance requirements. It also outlines a number of internal controls, such as reviewing company travel policies, supplier rebate and discount programs, travel authorization processes, value-added tax reclamation procedures, employee per diems, corporate card programs, and client billing processes; mandating compliance for preferred supplier and travel management programs; and revising employee handbooks to include sections on business ethics and codes of conduct.

SOX will also require that planners record measures to ensure the safety of meeting attendees, says Bill Boyd, president and CEO of Sunbelt Motivation & Travel Inc., Irving, Texas. He suggests recording the due diligence done to account for the safety of a destination and venue.

An understanding of SOX could help raise the profile of planners within the corporate structure, Boyd believes. “It's a wave that's going to sweep you away if you don't ride on top of it. If you do, it could help you get a seat at the table because this is going to be a major issue in our industry in the next two to three years.