Council expense reimbursement claim audit – issues and risk ratings

For each of the 7 councils, the Inspectorate audited a sample of expense reimbursement claims for compliance with the council’s expenses policy and discussed relevant matters with council representatives.

As part of the audit exercise, the following matters were considered:

1. Councillor expenses reimbursement claim forms.
2. Councillor expenses policy.
3. Councillor expenses procedure.
4. Oversight of councillor expenses, including audits.

During the audit exercise, various risks were identified, which ranged in severity from issues that could lead to fraudulent activity or the wrong amount being reimbursed (both very high risk) to claims being submitted outside of the required time period (lower risk) (see Figure 12).

While these specific issues have been pursued with the relevant council and rectified where possible, they are shown here as examples of common issues seen across councillor expense reimbursement audits.

Figure 11: Councils audited
Council	Classification	Planning region
Hepburn	Small shire	Central Highlands
Strathbogie	Small shire	Hume
Campaspe	Large shire	Loddon Mallee North
MItchell	Large shire	Hume
Yarra	Metro	Greater Melbourne
Hobsons Bay	Metro	Greater Melbourne
Bendigo	Regional	Loddon Campaspe

What are the key issues or challenges?

Councillor expenses policies and procedures vary greatly across councils.

There is no uniform level of evidence required to support claims for reimbursement.

Council oversight of expenses, including checks on legitimacy and sign-off on claims, is also varied and is a potential financial or integrity risk.

Figure 12: Risk ratings of some common issues in audited councils
Issues found in council audits	Risk rating³²
Claims submitted outside of the required time period	Low
Inconsistent application of the practice of rounding of kilometres travelled to the nearest whole number for private vehicle use	Low
No evidence required in support of private vehicle use kilometres travelled	Moderate
Descriptions of the expenses incurred lack detail	Moderate
Administrative error in failing to accurately document the basis of calculating a reimbursement	Moderate
Claims for car mileage expenses for council meeting attendance do not include the locations of the meetings attended	Moderate
Policy refers to an outdated claim form	Moderate
Claims not applied for in writing but petty cash form used instead	High
Claims not clear on how the expenses were incurred while performing duties as a councillor	High
Claim forms include space for signature of authorising officer, but do not include space for their name or position	High
CEO’s corporate credit card used for purchases by the Mayor	Very high
Incorrect rate for kilometre reimbursement for private vehicle use applied	Very high

Best practices observed in the course of the audit, which may assist in reducing the risks of inappropriate or fraudulent expenses claims, include:

expense claims are authorised by more than one senior council employee with the appropriate financial delegation, thereby providing additional oversight
instead of using phrases like ‘reasonable costs’ or ‘appropriate costs’ will be reimbursed, monetary ranges or caps for food/beverage and accommodation costs are specified
claims for private vehicle use are required to be supported by logbook entries or records of odometer readings at the start and end of the journey, rather than just a single figure for kilometres travelled
councillors are required to submit a written report following attendance at training and professional development courses in order to justify their attendance and to share their learnings with council
councillors are not permitted to cover the costs of meals or refreshments for anyone other than themselves, where these items relate to the duties of councillor.

Recommendations

LGV should consider a more detailed model councillor expenses policy and claim form, which councils can adopt to suit their individual circumstances.
Councils must publish their current Council Expenses Policy on their website.
Councils must train councillors on the Council Expenses Policy during their induction training and provide refresher training on the policy mid-term.
Councillor expenses must be authorised by council employees with the appropriate financial delegation, not the mayor.

32. Risk ratings determined by Inspectorate risk criteria

Case studies

The expenses policy for a regional council states that reimbursement of expenses requires details of the ‘purpose of the event/function associated with the expenditure’. The Inspectorate found many examples of claims for reimbursement of car parking fees which were supported by invoices alone, with no explanation of the council-related event or function attended provided. This was not in compliance with the policy but had previously not been addressed by the council.
The expenses policy for a recently audited inner metropolitan council did not require a reason in support of travel reimbursement claims (for example, for public transport, taxi travel and private vehicle use) to be included on the claim form. A claim form submitted by a councillor stated ‘cabcharge’ as the only detail for the claim and included a taxi invoice, with no further explanation of the purpose of travel included.

Discussions with the council governance representative revealed that the claim was assessed as legitimate based on the origin, destination and time of travel, from which they deduced the councillor was attending a council meeting. If the policy explicitly required the reason for travel to be included on the claim form, it would increase the ease of confirming the legitimacy of claims and transparency.

Updated 15 October 2020