Travel expense reimbursement issues at Northern Arizona University – The case for re-evaluating, reviewing and testing travel reimbursement policies and procedures in local governments
Recently the Arizona Auditor General released its report for Northern Arizona University’s (NAU) internal control and compliance for the year ending June 30, 2019. The report includes only one finding, that the “University inappropriately paid for $40,277 of the President’s and her spouse’s travel expenses that conflicted with policies and lacked appropriate documentation, which put public monies at potential risk of misuse.”
The report highlights several different types of non-compliance with NAU’s travel reimbursement policies including:
- Unallowable expense – Visas, valet parking, room service, etc.
- Exceeded rates – Hotel stays where room rates exceeded pre-determined limits
- Lack of documentation and support
The report resulted in articles in the AZDailySun, AZ Republic, AZCentral and more, with some students and alumni even calling for the President of NAU to resign. The fallout highlights not only the importance of having strong travel reimbursement policies, procedures, and processes, but also the importance of re-evaluating those policies and procedures periodically.
While NAU had strong travel policies in place, they were not being adhered to consistently as reported by the Auditor General. To gain assurance that your own organization is meeting the requirements for travel reimbursement in regards to various funding sources, an organization should consider evaluating their travel policies, performing a walk-through to gain an understanding of the processes and controls surrounding travel reimbursement and then periodically testing those processes and controls.
Evaluating Travel Policies
Review your organization’s travel policies to make certain the requirements and procedures it outlines will lead to compliance with an organization’s specific funding sources (state, federal, tribal, donors, or otherwise.) For example, for federal grants, you will want to review the federal compliance requirements from the Code of Federal Regulations (CFR), more specifically 2 CFR 200.474 for restrictions. While organizations expending federal funds are not required to adopt the language of the CFR in their own policies, they should at least reference the CFR in their own policy regarding expending federal awards for travel expense reimbursement. Additionally, an organization will want to review all grant agreement or other funding agreements for allowability of travel reimbursement and additional restrictions on the expenditure of funds for travel.
Evaluating Travel Procedures and Processes
As noted in the case of NAU, simply having a strong policy will not always keep an organization in compliance with travel reimbursement policy. The next step in testing an organization’s policy and procedures should be to perform a walk-through of the organization’s processes. Begin with an employee requesting reimbursement for travel, tracing the process through the various levels of approval, all the way through the actual disbursements of funds, documenting the key controls that would prevent non-compliance. Compare the results of the walk-through with requirements of the organizations policy to see if the organizations processes ensure compliance. Performing a walk-through of the organization’s processes will help identify the key controls that ensure compliance of travel expense reimbursement policies (or the lack of controls).
Testing Travel Procedures and Processes
Once an organization has evaluated their travel reimbursement policies and performed a walk-through to gain an understanding of the processes and controls surrounding travel expense reimbursement, an organization should consider testing those controls to obtain more assurance that those processes and controls are being applied consistently and are operating effectively. An organization should consider selecting a sample of travel expenses from throughout the year and from across different department and different employee levels, reviewing for proper authorizations and adequate support to ensure the approvals and support are in line with the organizations policies.
In taking the time to re-evaluate the policies, processes and controls surrounding travel expense reimbursement, local governments and other organizations can prevent risking the trust of the populations and groups it serves.
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