Audit Approach
Background
The university's travel and expense reimbursement practices are governed by the Business and Travel Expense (BTE) Policy (effective 3/14/2011). The policy requires that individuals submit expense reports (ERs) within 90 days of when the travel was completed or the expense was incurred. For expense reports submitted after 90 days, the reimbursement must be treated as taxable income to the individual. The Controller's Office is responsible for ensuring ongoing compliance with this policy.
Employee Reimbursement Audit Approach
Once an employee expense report has been submitted and approved in Oracle Internet Expense by the applicable department, the expense report will be available to be processed for payment.
Responsibility for adhering to the BTE policy resides with the employee and with those submitting the expense on the employee's behalf (preparer). Responsibility for approving employee expense reports for payment and ensuring that the BTE policy is followed lies with the approver of the expense report.
After the close of each month, the Controller's Office obtains a data file of all employee expense reports paid during the prior month for all sets of books. This file is used to perform data analysis to apply the designated risk-based auditing approach to identify the sample of expense reports to be audited for the month.
All audit findings identified during the audit process will be sent to the appropriate ALG member for review, resolution and follow up on a monthly basis in a spreadsheet format. The audit findings spreadsheet will identify the expense reimbursement in question and request additional information or departmental action as applicable.
Some examples of audit findings include:
- Inadequate business purposes/justifications
- Inadequate or missing receipt documentation/support
- Incorrect per diem calculations
- Missing Designated Departmental Finance Representative (DDFR) approvals for upgrades
- Expenses that appear to be personal in nature
If an audit finding results in an overpayment to the employee, it is required that the amount be returned to the university. For example, if an employee incorrectly claimed per diem expenses of $300 (3 days x $100) instead of $270 (3 days x $90), the employee will need to reimburse Carnegie Mellon for the overpayment of $30. It should be further noted there is no "de minimus" amount as it relates to an individual that has been overpaid for a business expense.
Employee expenses submitted after 90 days
The Controller's Office identifies expenses submitted for reimbursement after 90 days because the reimbursement must be treated as taxable compensation. Notifications will be sent to individuals whose reimbursement will be considered taxable compensation, with copies going to the ER preparer, ER approver, and respective ALG member. The employee's next paycheck will show earnings (labeled LATE ER TXBL) in the amount of the reimbursement and any required taxes will be withheld.
Nonemployee Reimbursement Audit Approach
Nonemployee expense reports are completed using the Nonemployee Expense Report Form [.xlsx] and are approved by the applicable department.
Responsibility for adhering to the BTE policy resides with the nonemployee and with those submitting the expense on the nonemployee's behalf (preparer). Responsibility for approving nonemployee expense reports for payment and ensuring that the BTE policy is followed lies with the approver of the expense report.
All nonemployee expense reports are audited by Travel and Expense Reporting (T&E Reporting) upon receipt and prior to processing the payment. This review is to ensure that the reimbursements requested are in accordance with the university's BTE policy.
If the nonemployee expense report is incomplete or additional information is required, the T&E Reporting department will send an email to the preparer requesting the necessary information (copying the approver and ALG member). The notifications will identify the expense in question, request additional information where applicable and/or remind the preparer/approver about the proper procedures in place surrounding business expenses incurred on behalf of the university. Payment of the nonemployee expense reimbursement will not be processed until all identified issues are resolved.
Nonemployee expenses submitted after 90 days
The T&E Reporting Department reviews expenses submitted on the nonemployee ERs to ensure that they are within the 90 day time period
If an expense is submitted after 90 days it must be treated as taxable compensation to the non-employee and will be reported to both the individual and the IRS on a Form 1099-MISC. As a result, the nonemployee will need to submit a Form W-9 to T&E Reporting prior to the processing of the reimbursement. If the W-9 is not included when the expense report is submitted, the T&E Reporting Department will contact the preparer, approver and ALG member to request a Form W-9 from the nonemployee for tax reporting purposes.