Employee Expense Reimbursements – Common Problems & Internal Controls to Implement

Governments generally provide full reimbursement to employees for travel and other expenses that benefits the governmental entity. The Government Finance Officers Association (GFOA) recommends that all governmental entities that expect to have such travel, have a comprehensive employee reimbursement policy. Such a policy will help ensure that expenses incurred by employees are a reasonable and prudent use of public funds.
 
The GFOA provides an outline of topics governments should consider including in their travel reimbursement policy. (Click here to download the outline provided by the GFOA as a PDF-document.)

Following are several sample employee reimbursement policies of California cities and counties:  

1. County of Napa – Travel Policy (PDF)

1. County of Santa Clara – Travel Policy (PDF)
2. County of Sonoma – Travel and Meal Reimbursements (website)
3. City of Los Angeles – Policy for Travel Expenses, Non-Travel Expenses and Elected Officials’ Contingency Account Expenditures (PDF)

Common Problems with Processing Employee Expense Reimbursement

Processing employee expense reimbursements is time consuming for employees to fill out forms, and for the finance department to verify eligible costs are incurred, documented and approved. Following are four common problems with processing employee expense reimbursement:

 1. Unclear employee expense guidelines and policies
If expense reimbursement procedures are confusing, not well-communicated, or forms are hard to obtain, it is more likely that employees make errors in reporting their expenses.
 
2. Employees submit incomplete or inaccurate travel expense forms
Most governments ask employees to complete an employee reimbursement request form, which categorizes expenses by type (e.g., meals, airfare, taxi, conference registration). Typically, the finance department codes these expenses to general ledger categories. The reimbursement request form and its related completion instructions should clearly tell what expenses are reimbursable and what expenses are not, and clearly describe where on the form the employee is to report each type of expense. The sections of the form that are required to be completed by the requesting employee should be clearly identified. 
 
Click here to download a Sample Travel Expense Form in Excel-format, that your agency can use and modify for their needs.
 
3. Slow Employee Reimbursement
The time it takes for employees to get their expense reimbursements approved (and their money back) or rejected will affect the system’s usefulness and employees’ willingness to report expenses properly and timely.
 
4. Expense Reimbursement Fraud
No organization is exempt from the risk of employee expense reimbursement fraud, but government and public administration sectors, as well as banking and financial services, are especially at risk, according to a report by the Association of Certified Fraud Examiners.

Commonly committed employee expense frauds include:

• Seeking reimbursement for personal items
• Seeking reimbursement for eligible expenses that were paid via a procurement card

• Seeking reimbursement for items that were not purchased (professional dues, office supplies, gifts for clients, canceled airline tickets, canceled registration fees)
• Two employees bill separately for travel or mileage reimbursement when they traveled together
• Falsifying or manipulating receipts

In order to minimize the risk of employee expense fraud, it’s important to have adequate internal controls and procedures in place.
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Important Internal Controls to Incorporate Are:​

1. Have a clearly structured expense policy in place and communicated to all employees, who might need to submit claims. This policy should describe allowable expenses, dollar limits, payment methods, documentation requirements, submission process, approval procedure, and other guidelines.
2. Assure a department manager or equivalent reviews employees’ reimbursement request forms prior to submission to the Finance Department. 
3. Annually audit a sample of employees’ reimbursement request forms to ensure established procedures are followed and proper documentation exists.
4. Require employees to attach original receipts for all expense claims. 
5. Implement the use of procurement cards to reduce (or eliminate) the need for employee expense reimbursement.
6. Routinely question expenditures that look extraordinary or abnormal. Confront and take action against unacceptable spending or attempts of fraud. Too much leniency will set a bad example for other employees. 
7. Promote an honest and ethical work environment by adopting an ethics policy and holding training seminars about ethics and expected behavior.

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For more specific questions related to employee expense reimbursement, please feel free to reach out to Kevin directly at:
 
Kevin Harper, CPA
[email protected]
(510) 593-503

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