FINAL. Internal Audit Report. Employees Travel and Subsistence Expenses 2014/15

Transcription

1 FINAL Internal Audit Report Employees Travel and Subsistence Expenses 2014/15 Document Details: Reference: 2.14/ Senior Manager, Internal Audit & Assurance: ext Engagement Manager: Audit Assistant Date: 10 th September This report is not for reproduction publication or disclosure by any means to unauthorised persons. Page 1

2 EXECUTIVE SUMMARY INTRODUCTION As part of the 2014/ Internal Audit plan an audit of Employees' Travel and Subsistence Allowances was carried out. This report sets out the detailed matters arising from the Internal Audit undertaken during July to September The Audit examined the systems and procedures in operation with regard to Travel and Subsistence payments which are processed electronically on People Online and manually through the Payroll office. BACKGROUND Travelling allowances payable are designed to ensure that employees are compensated for additional expenditure genuinely incurred whilst on official business away from their normal work base. The Council's Travel and Subsistence Allowances Scheme has been amended to reflect a collective agreement reached with the Trade Unions in January Consequently, all claims made with effect from 1 st March 2014 should be made and approved in accordance with the revised scheme. With effect from March 1 st the "lesser than rule" (under which specified mileage could be claimed when undertaking business travel starting or ending at home) will no longer apply. Therefore, future claims for business travel beginning or ending at home must be made in accordance with the new guidance which states that Travel and Subsistence Allowances should only be claimed in excess of an employee's journey from base to duty or, for certain field workers, their designated start point. OVERALL OPINION It is pleasing that the overall opinion of this review is significant assurance. A sample of twenty travelling and subsistence claims were reviewed with further testing carried out where required. There are a number of areas of good practice within the Council which have led to the significant assurance rating, including: For a sample of ten officers, appropriate business Insurance documents were provided. Policies and procedures around claiming Travel expenses are comprehensive; there are a few areas for further improvement within the report. Payroll services have instigated a good mapping procedure to ensure managers receive the Payroll Travel Expenses and Subsistence report. The revised Travelling and Subsistence Allowance scheme appears to be working effectively. However, we also identified a number of areas for improvement during this audit. Page 2

3 The requirement to pre-authorise travel claims needs to be reviewed given the significance non-compliance and whether it reflects current working arrangements. Discussions were held with a number of line managers who receive the People Online Travel and Expenses report. It would appear that the level of checking and challenge regarding individual claims varied albeit it is accepted that there are significant variations regarding the number of claims managers are responsible for. The Travel and Subsistence Allowances Scheme does not draw attention to the responsibilities of managers when reviewing claims. It was also noted that the Travel and Expenses reports do not include all of the detail entered by employees to explain the rationale of individual claims. One Budget holder was not receiving the People Online Travel and Expenses report and therefore not providing any checks on their employees' mileage claims. Employees are not always retaining VAT receipts for travel and Subsistence expenses claimed or passing their VAT receipts to their Directorate HR team to be stored on their personal file when leaving the organisation. There is a requirement to review the codes available to claim subsistence There is a lack of guidance regarding the types of claim which are and are not acceptable to be paid under 'approved costs'. These and other matters that it is felt require attention, together with our recommendations are referred to in the detailed findings below. Overall Audit Opinion Full assurance Full assurance that the system of internal control meets the organisation s objectives and controls are consistently applied. Significant assurance Limited assurance No assurance Significant assurance that there is a generally sound system of control designed to meet the organisation s objectives. However, some weaknesses in the design or inconsistent application of controls put the achievement of some objectives at some risk. Limited assurance as weaknesses in the design or inconsistent application of controls put the achievement of the organisation s objectives at risk in some of the areas reviewed. No assurance can be given on the system of internal control as weaknesses in the design and/or operation of key control could result or have resulted in failure(s) to achieve the organisation s objectives in the area(s) reviewed. Page 3

4 2 SUMMARY OF CONCLUSIONS 2.1 The conclusion for each control objective evaluated as part of this audit was as follows: Control Objective Assurance Full Significant Limited None To ensure appropriate policy and procedures are in place. To ensure there are appropriate controls and adequate segregation of duties regarding the authorisation of individual claims. Allowances and expenses are claimed and paid in accordance with the authority's current rules and regulations and payment is made through the payroll. To ensure there are appropriate monitoring and exception reports in place. 2.1 The recommendations arising from the review are ranked according to their level of priority as detailed at the end of the report within the detailed audit findings. s are also colour coded according to their level of priority with the highest priorities highlighted in red, medium priorities in amber and lower priorities in green. In addition, the detailed audit findings include columns for the management response, the responsible officer and the time scale for implementation of all agreed recommendations. 2.2 Where high recommendations are made within this report it would be expected that they should be implemented within three months from the date of the report to ensure that the major areas of risk have either been resolved or that mitigating controls have been put in place and that medium and low recommendations will be implemented within six and nine months respectively. 3 ACKNOWLEDGEMENTS Audit would like to thank all staff involved for their assistance during this review. Page 4

5 3. DETAILED AUDIT FINDINGS C01: To ensure appropriate policy and procedures are in place 1 Low The Travel Expenses disclaimer which appears on People Online does not mention that employees claiming travel expenses should update their vehicle registration number, when they change their vehicle. People online may not contain appropriate information to inform officers of the process they need to follow should they change their vehicle. Consideration should be given to including a paragraph within the travel expenses disclaimer on People Online which requires employees claiming travel expenses to update their vehicle registration number when they have changed their vehicle. We will review content and update. Alison Watkins 31 March 2 Medium As part of the audit process discussions were held with a number of line managers who receive the People Online Travel and Expenses report. It would appear that the level of checking and challenge regarding individual claims varied albeit it is accepted that there are significant variations regarding the number of claims managers are responsible for. Inappropriate claims may be processed through the system in the absence of an effective check on the mileage claims being processed. The Travel and Subsistence policy should clarify manager's responsibilities following receipt of the People Online Travel and Expenses report. Agreed. The current policy will be amended to include managers responsibilities. Rob Morris 30 January Whilst the Travel and Subsistence policy states a requirement to pre-authorise journeys, it does not detail responsibilities of individual managers when receiving the

6 People Online Travel and Expenses report. C02: To ensure there are appropriate controls and adequate segregation of duties regarding the authorisation of individual claims. 3 Medium The People Online Travel and Expenses report that goes to the Manager for approval does not include the following information: Comments and clarification relating to individual claims; Details of passengers; Journey times. Managers may not have all the information required to provide an effective check on the information and mileage claims employees have entered on-line. Information provided to managers needs to be reviewed particularly in view of the revised guidance to provide the manager with an effective check on the travel claims being processed. We will review content in consultation with HR SAP Team to explore how much more data we can add to the report. Alison Watkins 31 March It is understood that Payroll Services and the claimant are the only people who are able to view this information. Clearly, such information would inform individual managers when checking claims. 4 Medium Two relocation expenses did not have an authorised application form for Payment of Excess Travelling Lack of supporting evidence to support mileage claims. Relocation expenses should be supported by an authorised application for payment of excess travelling expenses. Please could you share your findings so that we can fully understand whether this is an employee,

7 Expenses. In addition one officer who had claimed relocation expenses for the following amounts: 481 Miles 143 Miles Incomplete audit trail. Potential overpayment of mileage claims. Relocation expenses should be claimed at the correct band rate. manager and/or HR transactional issue and then action accordingly However, these were claimed since the 16 th May 2011 at Band Rate 1 which pays 45p per mile, instead of using the correct relocation drop down option which would have paid 33.75p per mile and would also have been subject to tax and National Insurance. The employee who has since left the organisation had not passed any VAT receipts incurred during the course of business travel to the HR Directorate to be stored on their personal file. 5 Low Two of the travel claims examined contained incomplete information; the mileage claimed appeared high on observation, however following further investigation Incomplete audit trail. Mileage claims should contain all the relevant details of the journey the employee has incurred during the course of business. Employees should record the post Agreed. We will reinforce in the guidance. Send a reminder to all employees Rob Morris 30 January Bridget Clark 31 December 2014

8 it appeared the two employees had missed off details of their journeys. The on-line travel claims examined did not detail the post codes of the destinations the employees had travelled to and from, making it difficult to provide an effective check on the mileage claimed. codes of their outbound and return journeys when undergoing business travel in order to provide a complete audit trail of their journeys. 6 Medium One of the claims examined was a single line entry totalling 618 miles, there was no itemisation of individual journeys undertaken during the month. The description given for this travel claim was "work". The travel claim was also not supported by VAT receipts. The Travel claim related to several journeys which had been put through as one journey a month after the journeys had been undertaken. Inadequate detail around the travel claims will make the authorisation by exception process less effective. Travel claims should be submitted as soon as possible after an employee has incurred the journey in line with their duties. All details regarding employees travel claims should be recorded in full when mileage claims are entered onto the system. VAT receipts should be retained by the employee when they have entered the travel claim on line as "trip with a VAT receipt" Agreed. We will reinforce in the guidance. Send a reminder to all Manager of their responsibility to check and challenge as part of the approval system Rob Morris 30 January Bridget Clark 31 December 2014 The mileage in this instance had not been pre-authorised

9 (see finding no 13). 7 Medium The current system allows subsistence claims to be coded to either subsistence or meals. There is a control in place to ensure that claims coded to meal expenditure are only made up to the maximum of However, four of the samples of twenty claims reviewed were coded to the subsistence code. Of the four expenses one related to a subscription fee for an accountancy course, this expense should have been a direct payment to the vendor. Upon further investigation of the expenses claimed in April and May 2014 it was noted that there were a further fourteen items of expenditure coded to subsistence. For claims coded to subsistence There is a lack of clarity regarding the way subsistence is coded. Claims may exceed the meals allowance of Only meal expenses which meet the correct criteria as per the Travel and Subsistence policy should be claimed and the correct drop down option should be used when inputting the expense claims on People Online. Consideration should be given to reviewing the expenses categories with a view to reducing them and providing clear guidance to define what should be coded to the various categories. Whilst accepting that there is a requirement for the process to be simple to administer and encourage consistency, there is also a need to consider whether the current process is sufficient to meet all needs and provides managers with sufficient flexibility and discretion. Agreed The drop down options does clearly state 'meals post 2011' We need to keep the previous 'subsistence' category to maintain the history of earlier claims. We will review with HR SAP team if we can improve. The options are based on the changes to t&c's introduced in 2011 Alison Watkins 31 March

10 there is evidence of claims exceeding the normal subsistence allowance and other isolated issues such as not travelling more than 50 miles from the officers base. From discussions with some of the officers the claims appear to be genuinely incurred whilst on official business away from their normal work base. Moreover, they would have been authorised prior to payment. 8 Medium Nine out of twenty of the subsistence expenses examined were not supported by a valid VAT receipt. Non-compliance with procedures. Lack of evidence to support subsistence claim. All subsistence expense claims should be supported by a valid receipt. Agreed, this is an employee responsibility and is defined in the guidance. Send a reminder to all employees Bridget Clark 31 December 9 Medium Out of a sample of twenty travel claims examined only six of the claims were pre authorised before the employee undertook their Possibility of financial penalties if the records were inspected by HMRC Journeys which have not been incurred in the course of business may be undertaken which Line managers of employees claiming travel expenses should under the current scheme ensure all journeys undertaken by their staff are pre authorised before As the County Council has developed over the years and in line with its value of 'freedom within boundaries' should the need for pre- Rob Morris and Bridget Clark 31 March

11 journey. may result in an inappropriate mileage claim being made. travel is undertaken in line with the Travel and Subsistence policy. It is acknowledged that County Council encourages where appropriate 'freedom within boundaries" and that there may be scope to review the appropriateness of pre-authorising journeys, However, any review should be mindful of the benefits to managers in determining whether such journeys are appropriate before expenditure is incurred. authorisation be reviewed with a view to removing it? Does such an approach add value to the process? The manager is responsible for approving the expense (hard copy signature or online by exception) so are we burdening employees and managers with this outdated requirement? Review in consultation with audit 10 Medium Out of a sample of five officers who had left the organisation and who claimed travel expenses, only two had passed their receipts to their Directorate HR team so they could be stored on the officer's personal file for 6 years in line with the Travel and Subsistence policy. Non-compliance with Travel and Subsistence policy. Possibility of financial penalties if the records were inspected by HMRC Officers who claim travel expenses and retain their VAT receipts should pass all their receipts to their Directorate HR team when they leave the organisation so they can be stored on the officer's personal file in line with the Travel and Subsistence policy. Consideration should be given to including this as part of the exit interview process. Agreed, this is an employee responsibility and is defined in the guidance. Send a reminder to all employees and managers Bridget Clark 31 December 2014

12 C03: Allowances and expenses are claimed and paid in accordance with the Authority's current rules and regulations and payment is made through the payroll. 11 Medium The band rates paid for business mileage are linked to the type of vehicle the employee owns, however on two out of five manual claim forms examined the licence plate did not agree to the licence plate on SAP which determines the rate used to calculate the employee's mileage claims. For a sample of ten electronic claims, four of the vehicle licence plates did not agree to the licence plate on SAP which determines the rate used to calculate the employees' mileage claims. Incorrect information regarding the vehicle used by the employee during the course of business mileage could lead to the incorrect band rate being applied to the calculation which is used to determine the employee's reimbursement payment. Cars used by employees for business mileage may not be insured for business cover. Officers should be reminded to ensure the vehicle registration details on SAP match the car the employees uses for business mileage and the vehicle insured. However, it is acknowledged that since the audit fieldwork three of the vehicle licence plates have been updated on SAP. Agreed, this is an employee responsibility and is defined in the guidance. Send a reminder to all employees and managers Bridget Clark 31 December Medium For a sample of ten employees, three had not retained their VAT receipt despite putting their travel claim through on People Online as "trip with VAT receipt". Out of a sample of five manual claim forms, four of Lack of supporting evidence to support mileage claims. VAT cannot be reclaimed without a valid VAT receipt. Possibility of financial penalties if the Employees should retain all receipts incurred in the course of business travel where they have selected a "trip with VAT receipt" option on People Online. Manual claim forms should be updated to include an additional column split between claims with and without VAT receipts. Agreed, this is an employee responsibility and is defined in the guidance. Send a reminder to all employees We will review content and update. Bridget Clark 31 December 2014 Alison Watkins 31 March

13 the forms did not clearly indicate the VAT status of the miles claimed so that payroll can ensure the information they input is correct. records were inspected by HMRC Old manual claim forms can still be used as long as it clearly indicates the VAT status of the miles claimed so Payroll can ensure the information they input is correct. 14 Medium 15 Medium There is an agreement with HMRC which dates back to 1985 which states that employees working for Homecare can deduct 4 miles a day off their travel claim for tax purposes. It was recommended in the previous Travel and Subsistence report (09/10) that" the use of approved costs should be investigated further. It is not clear what expenditure some of the payments relate to. Some transactions should be processed under other wage types. While accepting that approved costs is intended as a "miscellaneous" category of expenditure, clearer guidance should be issued to claimants and budget holders regarding The agreement may no longer be valid following the current amendments to the Council's Travel and Subsistence Allowance Scheme. The correct procedures for claiming expenses may not be adhered to. A current agreement should be sought from HMRC to confirm that the agreement is still valid following the current amendments to the Council's Travel and Subsistence Allowance Scheme. Clear guidance should be issued to claimants and managers regarding approved costs. We have an agreement with HMRC and there was/is no requirement to update this. This issue was not raised at our last HMRC audit in 2012 and so I would not propose to take any further action. Agreed. We will reinforce in the guidance. Rob Morris 30 January

14 the types of claim which are and are not acceptable under this wage type". This recommendation still stands. C04: To ensure there are appropriate monitoring and exception reports in place. 16 Medium Out of a sample of twenty Travel Claims one of the managers did not receive the monthly People Online Travel and Expenses report which provides the manager with an effective check on the travel claims employees within their team are making. Further investigation revealed that the line manager had requested reports to go to an alternative line manager who has since gone on long term sick leave. No out of office was set for this employee which is why it was not identified via the payroll checks prior to payment. There is currently no check being carried on the mileage claims made; which could lead to unauthorised claims being paid out of the budget. Where Budget holders are unavailable for an extended period their line mangers should notify payroll of an alternative manager to receive the Payroll Travel and Expenses reports. HR Control Services review all out of office (OoO) responses received and forward report to named person. Managers are responsible for ensuring OoO are set and for planning for employees on long term absence. We will include a reference to this in the guidance Rob Morris 30 January

15 Key to Priorities: High Medium Low This is essential to provide satisfactory control of serious risk(s) This is important to provide satisfactory control of risk This will improve internal control Limitations relating to the Internal Auditor's work The matters raised in this report are limited to those that came to our attention, from the relevant sample selected, during the course of our audit and to the extent that every system is subject to inherent weaknesses such as human error or the deliberate circumvention of controls. Our assessment of the controls which are developed and maintained by management is also limited to the time of the audit work and cannot take account of future changes in the control environment.