Denver's finance department has improved expense approval system, auditors say

Denver's finance department has done a better job of guiding employees in approving expense reports, although the risk lingers that some spending is not being adequately scrutinized, the city's auditors concluded. 

In a follow up report to a 2021 review, Denver Auditor Timothy M. O’Brien said the Department of Finance fully implemented five of his office's recommendations, notably that the department define and document the responsibilities for each level of approver and develop standardized training guides for expense reports.

Training was, indeed, provided to some of the employees engaged in this process, the follow up audit said, adding that training materials and financial newsletters now offer "clear information" about the expense report process and links to related job aids and fiscal accountability rules.

“By improving these safeguards, the city is protecting the taxpayer’s money,” O’Brien said in a news release. “Whether it’s millions of dollars or just a few hundred, accountability adds up over time.”

Denver reimburses employees for out-of-pocket expenses that they make on behalf of the city. To get their money back, they submit the expense report through Workday, which is the  city’s financial record system.

In 2021, auditors reviewed the city’s process to, among other things, understand why expense reports with poor documentation and inaccurate expense categories were getting approved.

Auditors found that a high percentage of expense reports received approval without proper documentation or accurate expense categories. Also, they said the roles and responsibilities for employees tasked with approving expense reports were not adequately defined or uniformly understood, which allowed for purchases to get approved even though the action or supporting documentation may not comply with city rules.

Auditors made seven recommendations, five of which were completed. The department made progress on partially implementing another recommendation — to develop and implement a method of periodically assessing and monitoring city agencies’ compliance with the expense report approval process, as well as systematically respond to deficient approvals or approvers’ questions.

The department failed to implement a seventh recommendation, auditors said.

Specifically, auditors said the department should identify workflows with the appropriate expending authority in which the expense report approval business process does not align with a rule that dealt with separation of duties, such as the workflow for a city council president’s expense reports.

Denver still needs to improve how it monitors expense report payouts in cases where an employee is their own manager or does not have a manager, such as elected officials, auditors said, adding the risk remains that expenses by some managers are "not being adequately scrutinized."

Auditors also said while the department created procedures to analyze the percentages of expense reports sent back for adjustments and resubmission as a portion of all expense reports by a city agency, there is no process to confirm whether the reports that are not sent back are also compliant with requirements.

All told, auditors lauded the department for accomplishing five out of the seven recommendations. 

"That matters because the city is at less risk of wasting taxpayer money or misclassifying expenses that could inaccurately impact agency budget plans," the auditor's office said in a statement. 

“Our audits give city agencies the tools they need to improve their work,” O’Brien added. “In this case, I am pleased to see steps in the right direction.”