Navigating New Reimbursement Rules: Can We Simplify While Staying Audit-Compliant?

Earlier, my company's reimbursement policy required employees to submit bills for hotel stays, travel tickets, and any miscellaneous expenses incurred during business trips. However, since employees frequently travel for work and have a daily food allowance, the company has now updated its policy.

Under the new policy, employees must submit payment receipts along with the corresponding bills for all expenses, including food. According to the Accounts Manager of our company, this change is necessary to meet auditing requirements, as auditors require both the bill and the payment receipt for verification. Additionally, if an employee withdraws cash from their bank for expenses, they must provide a bank statement as proof.

This new requirement has made it challenging for employees to obtain food bills in certain situations. Could someone provide guidance from an auditing perspective on whether both bills and payment receipts are mandatory for all types of expenses? Is there an alternative approach that could ease the burden on employees while ensuring compliance with auditing standards?

Location: Noida, India

Tags: City-India-Noida, Country-India, accounts manager, bank statement, food allowance, new policy, reimbursement processing, travel allowance, types of expenses

From an auditing perspective, it is common for auditors to require both bills and payment receipts for verification purposes to ensure accurate expense reporting and compliance with auditing standards. However, there may be alternative approaches that could ease the burden on employees while still meeting these requirements:

Potential Alternative Approach:

1. Policy Review: Conduct a comprehensive review of the reimbursement policy to identify areas where the requirement for both bills and payment receipts can be streamlined without compromising audit integrity.

2. Expense Categories: Differentiate between types of expenses based on their significance for auditing purposes. For example, separate out meal expenses from other miscellaneous expenses to adjust the documentation requirements accordingly.

3. Thresholds: Establish thresholds for expense categories where only one form of documentation (either bill or payment receipt) is required. For lower-value expenses, a simplified documentation process can be implemented.

4. Electronic Receipts: Encourage the use of electronic receipts where applicable, especially for food expenses. This can streamline the submission process for employees.

5. Internal Controls: Implement robust internal controls to monitor expense claims and ensure compliance. Regular audits can help identify any discrepancies or potential issues early on.

By implementing these alternative approaches, the company can strike a balance between easing the burden on employees and maintaining compliance with auditing standards. It is essential to consult with relevant stakeholders, including auditors and employees, to tailor the policy adjustments effectively.

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Dear Shruti Arora,

When one reads the first and the second paragraphs of your post, one does not find the difference. What has changed? Nothing!

Nevertheless, to avoid the deep audit of the bills, your company may fix the per-day allowance as per the designation. The claimant can just raise the claims without being required to submit the supporting bills. While auditing the TA/DA claims is important as the audit team deterrence, it is important to check the cost of the audit. Find out how many claims are passed per month and what is the audit cost per claim.

Having said that, many companies follow the procedure outlined by the audit team of your company. As and when the expenses are incurred, the employee can take a photo of the bill. Later, a consolidated claim can be submitted for the in-station or outstation visit.

Thanks,

Dinesh Divekar

Dear Shruti,

1. Proof of PAYE for audits

Proof of PAYE, not by way of receipt, is not necessary for an audit. Your CFO can assert that it is not necessary. As long as the expense was valid and approved, the audit will accept it. Most companies do not require a receipt (or at least the ones I have audited). The CFO can establish a policy, amend the SOP, and provide it to the auditors. They will have no choice but to accept it.

2. Handling expenses without formal receipts

If you anticipate that people will dine at establishments where they will not receive a bill (such as roadside eateries or railway stalls), you can provide a DA/TA allowance, which then does not necessitate proofs to be submitted. Alternatively, you can instruct employees to dine at places with a formal billing system. The cost may be higher, but we follow the same practice for our audit team (as auditors, we have to submit proof of expenses for expense claims).

Thus, if they need a bottle of water, they will purchase it from a restaurant for ₹25 instead of a railway vendor for ₹10, which we consider acceptable (and, in some cases, better for long-term health).

3. Privacy concerns with bank statements

Concerning bank statements, it is a violation of privacy and is not acceptable. If an employee withdraws money to cover expenses but has proof of the expense, that should suffice. Your auditors are overstepping boundaries. Kindly request your CFO to communicate with their partner and cease this practice.

4. Implementing expense management software

Finally, consider implementing an expense management software that allows employees to document expenses on the go and capture images of invoices and expenses for submission as proof. This will simplify the process for both employees and the accounts department.

Thank you.