I was invited to give a presentation and assist a group with strengthening their system and controls, specifically their reimbursement process. So, I researched their organization and their policies, and while meeting with them, invited one of the team members to review their reimbursement process and then asked the team to talk about their greatest concerns.
After the presentations, I assigned them to working groups and prepared talking points for them, asking them to share any information and/or concerns about their current practices. I was surprised when they got straight to the point and shared their biggest challenge: sufficient justification for the reasonableness of the expense from the employee. They shared some examples and after I heard them, I understood their dilemma.
Some examples they presented for the justification (or not so justified) expense:
- Because/Supervisor approved (seriously, how did anyone ever get reimbursed with that one?)
Notice that these three examples were simple subject words to justify the activity. To appropriately defend the reasonableness of the expense, the employee should have provided more detail. For instance, instead of just the word “meeting”, the justification should have been more like:
- Meeting for new employee training; five new employees attended orientation, lunch was provided, agenda attached, meals were within per diem, etc.
Long story short: I helped the group focus on their system and recommended changes. Here’s an overview of some of the improvements we implemented:
They came up with a system where after employees submitted their reimbursement requests, the first thing to pop up in the system was the Policy surrounding it. The person seeking reimbursement would then have to click a box that verified they understood this Policy. Once they uploaded their business transaction support, they had to click a sub-topic for their expense, and then they had to enter a business justification (describe the reasoning for their expense and why it was necessary). Once they completed this portion of the request, the system prompted the person to click that they could support and justify the purpose of the expenditure, and that it was allowable – according to Policy. There was one last step that required the person to sign-off that they understood that the reimbursement would be reviewed for reasonableness, and that it would be reviewed for proper approval or denial. The system then forwarded the request to the authorized supervisor for approval and to validate that it was pre-authorized. Once that was checked off, it was queued in the system and the reconciler was copied. Lastly, the accounts payable division reviewed the transaction to determine approval or denial – according to Policy. Once the decision was rendered, the reconciler and the requester would be copied.
I did follow up with the group and they shared that total reimbursement costs were down and that rejections/denials had increased. But, overall, they were happy with the improvements and they felt that they certainly enhanced their system and improved their controls.