One of the top issues we encounter when auditing travel reimbursement claims is determining what is considered an appropriate expense and does it comply with the district policy. As we are back out and traveling again, now is a good time to assess your travel and expense policy and ensure staff are aware of the policy requirements BEFORE claiming for a reimbursement that may not be approved or may cause additional questions.
While each district has their own policies and procedures in place, we have found that some are not as detailed, which leaves room for misinterpretation and misunderstanding on what is considered an appropriate reimbursement claim per school law. Below are some of the issues we have noted along with recommendations to strengthen your policy.
Reimbursement for sales tax when traveling is a common disagreement amongst school districts. School districts are only tax exempt within New York State. Often when traveling within the State, restaurants may not honor the sales tax-exempt certificate. Some districts will reimburse for sales tax, and some won’t at all even if it the expense occurred in another State. Schools though can reimburse sales tax on meals even within the State. Does your policy explicitly state whether sales tax is reimbursable? If not, this needs to be documented within the travel reimbursement policy, so it is clear to all employees, the accounts payable staff, and the claims auditors. Sales tax on hotels within the State should not be charged and will not be approved to be reimbursed. If an employee was charged sales tax on a hotel stay within the State, we recommend reaching out to the hotel and requesting credit (we have seen this work in the past).
Reimbursement for conferences can involve transportation costs. Generally, transportation should be by the most practical means, which should be documented in the travel policy. What is considered a practical travel method? Ensure your policy defines the various transportation methods that are permitted and includes using Uber/Lyft as well as other private car service companies. If multiple people are traveling together in a hired car, it is more efficient to pay for one car expense; however, one person may be bearing the cost for a group and the policy should support what documentation is required to reimburse that individual.
Employees who use their personal vehicle for school related business generally should be reimbursed using the IRS rate per mile for that year, and usually this rate is memorialized either within the policy or in the minutes of the reorganization meeting at the beginning of the fiscal year. What is the calculation for mileage reimbursement? Generally, it is the mileage that exceeds the employee’s typical commute to work, and this should be detailed in the reimbursement request along with support of mileage from MapQuest or Google Maps. Furthermore, any repairs or vehicle maintenance generally are not considered appropriate claim.
Employees may be reimbursed for using a rental vehicle, such as when the travel is upstate and driving would be impractical, or when traveling to another state. Again, the need to use a rental car should be necessary for attendance and reasonable in cost. What is reasonable? The policy should define when a rental car would be permitted and should generally require prior approval for the expense, which should include a justification for the cost (e.g., needed to travel to the conference and other locations). Other reimbursements that are permitted can include parking fees and tolls; however, any parking or traffic violations are not permissible expenses and will not be approved for reimbursement.
Overnight travel requires staying at a hotel and generally employees are expected to secure the most “reasonable” rate for necessary hotel accommodations. What is considered reasonable hotel rate? Some districts follow the maximum lodging rates set by the federal government for that location. The General Services Administration (GSA) rates can be found here. The rates are updated each year and tend to be low. We recommend that the policy states whether the lodging fees will be reimbursed at the GSA rate or actual lodging fees if it is deemed that the GSA rates are not sufficient based on multiple hotel quotes. Any employee staying at a hotel whose lodging rate is higher than GSA should have that expense preapproved and the reason for the approval should be documented.
Meals when traveling can be reimbursed as long as the employee is not being provided with a meal such as at a conference. Does the policy indicate a maximum dollar limit that must be adhered to? Sometimes we see a maximum dollar amount that will be reimbursed per day. This can be problematic as we have seen reimbursements for a very expensive items ordered (like filet mignon or lobster) which are under the total for the day but would be considered excessive and not reasonable. We recommend that the policy provides either a breakdown of the maximum cost per meal that will be reimbursed or indicate that the reimbursement will follow the GSA rates for that location. The GSA rates are updated each year. The policy should also reference the specific procedures/forms that need to be completed for reimbursement for meals along with the required support documentation which should be a detailed itemized receipt. As claims auditors, we look to see what was ordered to ensure alcohol was not included in the reimbursement request.
We also assess whether the tip was automatically added and if an additional tip was provided. What about reimbursing gratuities? Tips can be reimbursed, and it is up to each district. We recommend that the policy indicates whether tips will be reimbursed and if so, the maximum gratuity percentage that would be reimbursed, for example 20%.
As claims auditor, we also look at how many people were included on the bill. What about one person paying for the meal for others? We strongly discourage this practice and recommend that the policy require each person to put in for their own expenses.
Any personal expenses incurred while the employee is traveling on school district related business, such as room service (unless prior approval), laundry, toiletries, entertainment, etc. are not reimbursable.
Miscommunication in the workplace is the one of the top causes of issues and can be reduced through clear and detailed policies and procedures. Take the time to review your travel and expense reimbursement policy and make sure it answers the questions. Feel free to reach out to us for some sample policies that we find work well.
Shari Diamond, CIA
Partner
Shari has been with Cerini & Associates, LLP since 2008 where she works primarily with the firm’s school district clients providing internal audit and claims audit services. She has over twenty years’ experience performing internal audits, risk assessments, and compliance reviews, as well as recommending processes to strengthen the internal controls environment while increasing efficiencies. Her prior experience at PWC and Northrop Grumman included performing Information Technology audits.
Angela Avecillas
Staff Accountant