A REPORT FROM THE OFFICE OF INTERNAL AUDIT

Transcription

1 A REPORT FROM THE OFFICE OF INTERNAL AUDIT PRESENTED TO THE CITY COUNCIL CITY OF BOISE, IDAHO AUDIT / TASK: #16-03, Travel / Meals Expenses AUDIT CLIENT: Cross-Functional REPORT DATE: May 23, 2016 AUDIT GRADE: Satisfactory REPORT AUTHORS: APPROVED FOR RELEASE: Paige Holstine, Audit Intern Steven Rehn CIA, CFSA Steven Rehn CIA, CFSA Director of Internal Audit AUTHORITY: Boise City Code, FY2016 Work Plan

2 Task #16-03, Travel / Meals Expense Date of Audit: November 27, 2015 INTRODUCTION Internal Audit last undertook a review of expenditures related to travel and business-related meals early in Fiscal Year Under current regulations, business travel for the City is supported by the following basic criteria / control measures: Travel requires the exercise of good judgment; travel should be undertaken under comfortable, but not extravagant conditions. Travel must be pre-authorized at the appropriate levels of management. Cash advances are extended to employees for out-of-pocket costs. Meals and incidental expenses are paid to employees on an adjusted per diem basis consistent with IRS regulations. Expenses reasonably associated with the travel events are reimbursed. Original receipts must be retained and submitted for final reimbursement. Final settlement of travel events is required within 5 week-days of return. Since our 2012 review, policy and procedural guidance has been implemented for Business Meals as well. To qualify for payment, meals must be properly documented, and must serve a legitimate business purpose: Meals provided to employees that are at the convenience of the City. Meals at Trade or Professional Association meetings. Meals provided at events where the main purpose is to conduct City business. De-minimis meals that are provided to employees at authorized events, or to allow for the extension of employees work days. Meals must be supported by itemized receipts, and by an approved Business Meals Expense form that documents attendees and purpose. Travel and meals expenses for the past two fiscal years are estimated at: FY14 FY15 Total % Change Travel Expense $ 792,800 $ 964,200 $ 1,757, % Business Meals $ 7,600 $ 7,300 $ 14, % Total $ 800,400 $ 971,500 $ 1,771,900 2

3 The spending levels depicted above were derived by accumulating costs in the three accounts most commonly associated with travel expenditures, and the two accounts most likely to capture business meals expenses. Estimated travel expenses represent a 21.6% year-over-year increase in spending. The majority of the increase appears to be attributable to higher levels of spending by multiple departments (in order from largest increase to smallest): Fire, Planning and Development, Mayor, Public Works, and Parks & Recreation. Other departments incurred smaller increases; two Departments experienced decreases in their overall travel-related spending. Meals expenses reflect a slight decrease when comparing FY14 to FY15, having shrunk by approximately 3.9%. These expenses are largely comprised of working meals; e.g. Council meals, meals for Fire Department suppression exercises, meal / refreshment costs associated with official functions, etc to name but a few examples. 3

4 SCOPE AND METHODOLOGIES Internal Audit established a scope period for testing that included all of FY14 and the first three fully-completed quarters of FY15. Included were expenditures related to travel, including travel-related cash advances; and group and business meals. This period was selected for review in order to gauge the current status of the controls and procedures surrounding travel, and business meals expenses. Those measures should ensure that resources are used effectively and efficiently, that they are adequately safeguarded, and that activities are consistent with established policy and regulation. Specific objectives that were established for the audit included the following: To ensure that cash advances for travel-related expenses are properly authorized, and are reasonable within the context of the travel event. To ensure that Travel Expense Reports are approved, are submitted timely, and contain documented and allowable expenses only. To ensure that Business Meals expenses are approved, are properly documented, and are incurred only in those circumstances where it is supportive of official City business. Internal Audit conducted detailed testing on statistically-determined samples of transactions, interviewed staff, and conducted observations that were deemed to be sufficient to support the findings and recommendations contained within the body of this report. 4

5 EVALUATION AND COMMENTS Based on the work performed and the documentation reviewed, it appears that expenses associated with travel events and meals are supportive of the City s business. Overall, this area is deemed to functioning be in a Satisfactory manner. We did not note any travel, or any associated expenses, that appeared to diverge from the spirit and intent of the City s approved travel policy and the related regulations. To the contrary; method, duration, and purpose of travel appeared to be reasonable and proper in all cases we reviewed. Only minor deviations from the established procedures were noted. The results were similar for Business Meals expenses as well all of the expenditures we reviewed appeared to positively align with City goals and objectives, and were consistent with customary operating procedures. Only a limited number of minor issues were noted. Internal Audit did note one area where the potential to improve administrative practices continues to exist. During review of the travel events selected for testing, we noted that final settlement documentation due shortly after a traveling employee returns wasn t always submitted in accordance with the City s travel regulations. Audit noted and commented on this same issue during our most recent review of travel expenses, conducted during FY2012. The regulations continue to stipulate that travelers submit final trip documentation and settlements within five week days of return. 19 of the 63 travel advance / settlement events we tested were submitted after the 5-day limit; submissions ranged between 10 days and 76 days. On average, this sub-group of expense reports was delinquent by 19 days. Procedurally, both central Accounting staff, and Internal Audit review and follow up on delinquent advances during, and after each month in order to close out travel events as expeditiously as possible thereby minimizing risk. A review of travel policies published on-line by a sample of public entities suggests a more common practice is to require close-out of travel events within a 30- to 60-day timeframe. The City s requirement may be overly restrictive. Audit communicated a number of possible rule changes to senior management that would, if adopted, align the City s regulations more closely with other public agencies. Follow-up was left to management s discretion. The following pages contain our detailed observations and recommendations. (Refer to Appendix A for additional details concerning Internal Audit s existing grading scale.) 5

6 FINDINGS AND RECOMMENDATIONS Internal Audit s Findings are detailed below, including any recommendations that were made, and management s responses to those suggestions. 1. FINDING: Travel Program Compliance Internal Audit noted a number of transactions that displayed one or more deficiencies when compared to existing travel policy and regulation. A total of 63 travel events occurring over the scope period selected were reviewed, encompassing all activities from initial advance payments on through to the submission of final reimbursement reports (Travel Expense Reports). The types and numbers of findings were: Per Diem Miscalculated Two instances were noted where the per diem payment to the employee appeared to be incorrect. Payments both short and long were noted. Other Issues One instance was noted where mathematical error led to a small over-payment by the traveling employee. Audit discovered one other instance where an agency sponsoring a training event failed to charge a City P-Card for training provided. Late Submission of Travel Expense Reports As discussed earlier, nineteen instances were noted where the Reports were not submitted within the 5-day timeframe stipulated. Errors that were entirely internal to the City were minimal, netting to a total under-payment to traveling employees of $ Additionally, after follow-up by Audit, the City was charged for the training that was provided but not paid for (noted in Other Issues immediately above). RECOMMENDATION: Internal Audit contacted the individual departments / divisions involved, and recommended they validate and correct the identified issues as appropriate. The table below provides an overview of how the exceptions noted were resolved. MANAGEMENT RESPONSES: See table below for a summation of corrective actions pursued. 6

7 Travel-Related Findings Department Finding Amount Resolution Mayor / Council Employee under-reimbursed for meal one dinner allowance. $ Employee was reimbursed for the missed dinner allowance. Police Employee received excess reimbursement for miscellaneous expenses. $ 5.00 Employee retired prior to review. No follow-up possible. Police Employee received excess meal allowance one breakfast. $ 7.00 Employee terminated employment. No follow-up possible. PDS Vendor failed to charge City P-Card for cost of seminar. $ Vendor processed the charge for the seminar cost. 7

8 2. FINDING: Business Meals Documentation While performing detailed tests on a sample of 30 individual meal purchases, Internal Audit noted five transactions that displayed deviations from existing regulations. By type and amount, those were: Sales Tax One transaction was noted where sales tax was paid. Similar purchases from the same retail vendor evidenced the fact that waiver of the tax was possible for the vendor involved. Meals Expense Form One transaction was noted where the required Business Expense Form was not attached. Itemized Receipts Three transactions were supported by a copy of the charge slip only no itemized receipt for the purchases was present. RECOMMENDATION: Internal Audit contacted the individual departments / divisions involved, and recommended they validate and correct the identified issues as appropriate. The table below provides an overview of how the exceptions noted were resolved. MANAGEMENT RESPONSES: See table below for a summation of corrective actions pursued. Business Meals Findings Department Finding Amount Resolution DFA / Collections Itemized receipt for the meal purchase was missing. $ Procedures were reinforced with the responsible staff member. DFA / City Clerk Mayor / Council Mayor / Council Business Meals Expense form missing from documentation. $ 6.10 Sales tax was paid on the purchase. $ 3.88 Itemized receipt for the meal purchase was missing. $ Procedures were reinforced with the responsible staff member Staff will continue to request waiver of sales tax at this, and other retail outlets. Procedures were reinforced with the responsible staff member. Mayor / Council Itemized receipt for the meal purchase was missing. $ Procedures were reinforced with the responsible staff member. 8

9 CONCLUSION Clear, concise, comprehensive, and effectively communicated guidance serves as a strong control measure in any environment; it is no different for travelrelated expenses and business meals. Based on the results of our review, it appears the City s travel regulations have been effectively implemented across all Departments and Divisions. The issues we noted during our review of travel and meals expenses were relatively insignificant no waste or abuse of process was noted. Additional enhancements to travel-related administrative requirements, as indicated earlier in this report, would likely align the City s practices more closely with those common to the industry. MANAGEMENT PARTICIPANTS Managers from various City Departments / Divisions 9

10 APPENDIX A Evaluation and Grading of Audits Each audit will be evaluated or graded, and will receive one of the three following ratings. Grades will be assigned based on the perceived best fit. Thus, not all attributes associated with an assigned grade may be present within a given Department or Division. Satisfactory No significant weaknesses or operational issues were noted during the audit. If any issues were noted, they did not materially detract from the business unit s ability to deliver services and / or to accomplish defined mission, goals, and objectives. Overall, systems of internal control are effective, and management oversight is adequate and effective. Needs Improvement Weaknesses or issues detrimental to operational efficiency or effectiveness existed within the audited area, and were encountered frequently enough to lose the appearance of isolated. Issues noted were strongly suggestive of an impaired ability to provide services at needed levels, or to accomplish mission, goals, and objectives successfully. Internal control mechanisms may not be universally in place, implemented, or actively observed. Management oversight is weak. Unsatisfactory Material or significant issues were noted within the operations under review. Issues posed risks that were mission-fatal; the business unit could not successfully deliver services in an acceptable fashion. Management failed to implement appropriate internal control mechanisms. Management oversight is ineffective, absent, or willfully avoided. 10