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Travel & Expense Reporting Made Simple

December 20, 2016


Your speakers

Bill Walter

Executive Director Government Contract Advisory Services

Dixon Hughes Goodman LLP

1410 Spring Hill Rd. Suite 500

Tysons, VA 22102

D. 703.970.0509

[email protected]

mailto:[email protected]


Travel & Expense Reporting

• Travel and expense reporting is challenging for many reasons. The amount of effort involved to make an accurate and complete expense report can be frustrating to your employees, challenging to the accounting and compliance team and concerning to top management who wants to ensure compliance and a reasonable use of company resources to achieve the goal.

• To accomplish this goal, a company's expense reporting policies and procedures need to be simple, comprehensive and consistently followed. If you sell to the federal government - your policies need to address the fundamental requirements contained in the travel cost principle at FAR 31.205-46.


Agenda

• Policies and Procedures

• Overview of FAR 31.205-46

• IRS, FTR, JTR and the Water Cooler

• Systems

• Travel Cost Allowability

• Compliance Risks and Fraud


Policies and Procedures


Procedure

• Clear set of your rules

• Improve employee satisfaction

• Provides consistency and efficiency

• Help to ensure compliance

• Mitigate or reduce audit risk

• KISS


What should be in a policy?

1. Purpose

2. Policy Intent

3. Travel Management – Arranging Travel

4. Travel Mode Reimbursement

5. Lodging

6. Business Meals and Incidentals

7. Air and Trade Shows

8. Other Reimbursable Business Travel Expenses


What should be in a policy? (continued)

9. Non-Reimbursable Expenses

10.Combining Personal Trips with Business Trips

11.Recording of Travel Time*

12.Frequent Traveler Programs and Airline Club

Membership

13.Documentation and Approval

14.Travel Safety

15.Terms, Web addresses, and POC information

* Also include in timekeeping policy


Overview of FAR 31.205-46


Travel Cost Principle

• Costs for transportation, lodging, meals,

and incidental expenses

• Airfare costs

• Owned, leased, or chartered aircraft

• Owned or leased automobiles


General Guidance - Transportation

• Costs incurred by contractor personnel on

official company business are allowable,

subject to the limitations in FAR 31.205-46

• Costs for transportation may be based on:

– mileage rates

– actual costs incurred, or

– on a combination thereof, provided the

method used results in a reasonable charge.


General Guidance – LM & IE

• Costs for lodging, meals, and incidental

expenses (LM & IE) may be based on:

– per diem,

– actual expenses, or

– a combination thereof, provided the method

used results in a reasonable charge.

• Refer to your CASB D/S if applicable


Disclosure Statement

• Section 2.7.0 – Direct Costs

• Section 3.2.3 – Direct vs. Indirect


Limitations on LM&IE

• Limitations to the amounts exceed the maximum per diem rates:

– Federal Travel Regulation• Contiguous 48 states

• Published by GSA

– Alaska, Hawaii and outlying areas• Joint Travel Regulations, DoD Civilian Personnel

• Published by DoD

– Everywhere else (International)• Standardized Regulations

• Published by Department of State

• EXCEPTION to the maximum per diem amount


EXCEPTION – Actual Cost/Expense Method

• Special or unusual circumstances

• Up to 300% of the daily limitation

• General requirements:

– Lodging and/or meals are procured at a prearranged place such as a hotel where a

meeting, conference or training session is held;

– Costs have escalated because of special events and costs to commute to/from the

nearby location consume most or all of the savings achieved from occupying less

expensive lodging;

– Because of mission requirements; or

– Any other reason approved within your agency.

• A written justification must be authorized/approved by an officer or

designee to ensure that the authority is properly administered and

controlled to prevent abuse.

• Use of the higher actual expense method repetitively or on a continuing

basis in a particular area – get CO approval in advance.


Documentation expectations

• Documentation to support actual costs incurred shall be in

accordance with the contractor’s established practices and

provided that a receipt is required for each expenditure of

$75.00 or more

• When no lodging costs are incurred; and/or (ii) On partial travel

days (e.g., day of departure and return)

– Appropriate downward adjustments from the maximum per diem

rates would normally be required under these circumstances.

– While these adjustments need not be calculated in accordance with

the FTR or JTR, they must result in a reasonable charge.

• Allowable only if the following is documented:– Date and place (city, town, or other similar designation) of the expenses

– Purpose of the trip

– Name of person on trip and that person’s title or relationship to the contractor


Airfare Cost Limitations

• Airfare costs in excess of the lowest priced airfare

available to the contractor during normal business hours

are unallowable except when such accommodations:

– require circuitous routing require travel during unreasonable

hours,

– excessively prolong travel,

– result in increased cost that would offset transportation savings,

– are not reasonably adequate for the physical or medical needs

of the traveler,

– or are not reasonably available to meet mission requirements

• However, in order for airfare costs in excess of the

above airfare to be allowable, the applicable condition(s)

set forth above must be documented and justified.


Owned, Leased or Chartered Aircraft

• Includes the cost of lease, charter, operation (including personnel), maintenance, depreciation, insurance, and other related costs

• The costs are limited to the allowable airfare for the flight destination unless travel by such aircraft is specifically required by contract specification, term, or condition, or a higher amount is approved by the CO

• For any business purpose which is charged or allocated, directly or indirectly, to a contract, the contractor must maintain and make available manifest/logs for all flights on such company aircraft. As a minimum, the manifest/log shall indicate:– Date, time, and points of departure

– Destination, date, and time of arrival

– Name of each passenger and relationship to the contractor

– Authorization for trip and Purpose of trip


Use of an Advanced Agreement (31.109)

• Advanced Agreement for owned, leased,

chartered aircraft - Consideration should be

given to:

– Whether scheduled commercial airlines or other

suitable, less costly, travel facilities are available at

reasonable times, with reasonable frequency, and

serve the required destinations conveniently

– Whether increased flexibility in scheduling results in

time savings and more effective use of personnel that

would outweigh additional travel costs


Rental Cars

• Costs of contractor-owned or leased automobiles, as used in this paragraph, include the costs of lease, operation (including personnel), maintenance, depreciation, insurance, etc.– These costs are allowable, if reasonable, to the

extent that the automobiles are used for company business

– That portion of the cost of company furnished automobiles that relates to personal use by employees (including transportation to and from work) is compensation for personal services and is unallowable as stated in FAR 31.205–6(m)(2)


IRS, FTR, JTR and the Water Cooler


Sources of Guidance

• FTR & JTR

– Only the maximum daily rate applies

– All other rules apply to Gov’t employees

• IRS

– Company tax reporting requirements

• Informal

– Prior employment

– Water cooler


Systems . . .


Manual or Automated Systems?

Disadvantages to a manual system:

1. Inconsistency in data entry, room for errors, miskeying information

2. System is dependent on talented individuals

3. Turnover creates ongoing staff training cost

4. Reduction in sharing information and customer services

5. Time consuming and costly to produce reports

6. Lack of security

7. Duplication of data entry

8. Corrections

9. Checking Travel costs aligning with time charged

10. Storage and retrieval for future audits


Travel Cost Allowability


LM&IE

• Build “maximum daily amounts” into policy

• Pro-actively obtain actual expense

approvals

• Keep tables updated


Dealing with “Lowest Airfare”

• Audit Guidance on Revision to FAR 31.205-46(b) and (c) – Limiting Airfare

to the Lowest Airfare Available to the Contractor

• Policies and procedures should provide for advance planning of travel to

assure lowest price airfare is documented and utilized as the baseline for

allowable airfare

• Consider how you document - prenegotiate with airlines, travel agents,

credit card companies

• Auditors will question cost claimed in excess of the lowest airfare available

• Auditors should not question airfare costs claimed in excess of

nonrefundable airfare available during normal business hours if the

contractors data show that its experience with cancelling nonrefundable

tickets results in increased cost in comparison to the cost of refundable

tickets.

• Adequate documentation is left up to the opinion of the auditor

• Lowest means absolute lowest price at the time of booking, This limits a

contractor from being biased towards a particular airline


Business Meal - Audit Issues

• Recent Issues Noted for Business Meals Expense:– Not using the corporate card for expenses

– Non-detailed receipts are being accepted for unallowable expenses or receipts are missing (even if unallowable, receipts above the current threshold are required for reimbursement)

– Incidentals being recorded on expense reports and not described

– Alcohol being recorded as an allowable business expense

– Reimbursement for an expense that was not incurred

• Reason for these Issues:– Managers are not adequately reviewing expense reports

before approving them


Keep employees in the game . . .

• Give feedback to the employee when something is changed from allowable to unallowable

• Provide receipts for allowable and unallowable expenses -detailed to reduce risk of questioning

• Allowability has limited relevance in determining reimbursability

• Give accounts payable authority to reject/return expense report if backup isn’t in order or data isn’t presented correctly; rejections will affect two week turnaround for payment

• Have Travel Administrator conduct live training sessions once a month or as required for new employees, Managers should be encouraged to review on-line instructions periodically as a refresher for expense requirements

• Spell out all acronyms when filling in reports

• Managers need to review expense reports thoroughly


Travel Backup

What to Submit for Travel Reimbursements:

• Business purpose for trip – state “conducting business”, include dates and location(s)

• Back up - agenda for meeting, conference, name and affiliation of person with whom you met if informal meeting

• Flight itinerary showing proof of payment

• Flight itinerary should show the date and arrival and departure time for each location

• Changes and/or cancellations to Itinerary - provided brief explanation

• Personal combined with business? State when, and where, provide comparable airfare quote

• Receipts are required for all expenses $75.00 or higher (except for Lodging per IRS)

• Credit card statements are not generally substituted for receipts, but may be submitted in addition to show proof of payment

• Car rental receipts showing payment in full

• Zero-balance, itemized hotel bill (unless claiming per diem for foreign travel)

• Signature of traveler is required with certification statement

• Manager review and approval.


Unallowable Travel Costs

Themes that make allowable travel subject to

challenge:

• Backup is lacking

• Purpose is missing or weak; use of acronyms

• Not following Per Diem

• Not following policy

• Math is incorrect

• Dates don’t match backup

• Inconsistent with CASB Disclosure Statement


Compliance Risks and Fraud


Audit Concerns & Non-Compliance Factors

• Audit Concerns/Red Flags

• Turnover in overall management of the T&E expenses processing function

• Claims for items used for personal reasons (gas, groceries, hotels)

• Claims for travel and entertainment that never materialized (canceled airline tickets, seminars, conferences, conventions, tuition, professional dues)

• Claims for items that were never purchased (office supplies, gifts for clients)

• Collusion among employees who both bill separately for travel or mileage when they travel together

• Falsified or manipulated receipts

• Claims for meals or entertainment in excess of allowed per diem

• Additional tips, tolls, or parking in amounts greater than what was already claimed

• Flights in first class when more modest means were available

• Inflated mileage totals on personal car usage


Safeguards for Fraud Prevention

• Implement the use of corporate charge cards for greater control. With corporate cards, companies can query each card individually and ensure that payments are being made against them.

• Receive credit activity reports on a monthly basis from the issuing company, if using corporate charge cards. These reports can help you determine how many charges are being cancelled or credited back to the accounts. This activity can be compared to actual expense reports to determine if it is being accurately reported.

• Annually audit a sample of employees’ expense reports to ensure they meet the company’s established guidelines. Be sure that proper documentation exists to support the expenditures that were requested. If a company card is used, verify that the balance is being paid promptly.

• Treat reimbursement activities consistently by having employees pay expenditures and seek reimbursement, or by having the company pay these expenses directly. Flip-flopping between the two could allow for duplicate reimbursement to occur.

• Prosecute offenders found to be violating or falsifying their expense reports. If they are allowed to escape unpunished, others will follow their actions.


Questions?