Expense Report Approval Process

Silver tip of a black pen resting on a piece of paper labeled

Objective

To examine the city’s process for approving expense reports and to identify why the approval process allows for poorly documented and miscategorized expenses to pass through — an issue initially identified by our risk analytics.

Background

The City and County of Denver reimburses city employees for out-of-pocket expenses they make on behalf of the city. To be reimbursed, an employee submits an expense report through Workday, the city’s financial record system. The report should include information to fully describe the expenses. The Controller’s Office, within the Department of Finance, develops and manages the expense report approval process. After an employee submits an expense report, the document is then routed through multiple levels of approval, culminating in final approval by the Controller’s Office.

Why this matters

By not having a sufficient approval process and by not properly monitoring compliance citywide when reimbursing employees for business-related expenses, the city risks:

Processing improper expenses and reimbursing employees for them, which can waste or misuse taxpayer money.
Misclassifying expenses in financial accounts — causing potential inaccuracies in how agencies spend money, which can influence budget forecasts.

Findings

Finding 1 - A Poorly Defined and Monitored Expense Report Process Leaves the City at Risk for Inappropriate and Misclassified Spending

The city’s expense report approval process is insufficient. We identified a high percentage of approved expense reports that lacked adequate documentation to support the dollar amounts listed and that did not include sufficient explanations of what an expense was for. Several expenses were also categorized inaccurately.
The roles and responsibilities for employees tasked with approving expense reports are not adequately defined or uniformly understood.
The insufficient approval process allows for potentially questionable purchases to be approved, even though they may not comply with city rules.
The approval process created by the Controller’s Office for the City Council president’s expense reports, in most cases, violates the separation-of-duties requirement in the city’s Fiscal Accountability Rules.
The Controller’s Office does not formally review the expense report approval process to identify and fix deficiencies and ensure it works as intended.

Recommendations

1.1 Define Responsibilities for Expense Report Approvers – The Department of Finance should define and document the responsibilities for each level of approver for expense reports: manager, cost center approver, grants manager, and accounts payable data entry specialist. These definitions should address, but not be limited to:

Definitions for each approver role that communicates the authority of each role.
The responsibility of each approver role with clear links to Fiscal Accountability Rules, Careers Service Rules, related procedures, and job aids.
The documentation associated with expense reports that each role is responsible for checking and approving.