There is a lot of buzz about the new Local Government Travel Expense Control Act, as local boards attempt to fully understand the scope of impact on policy and compliance before the law goes into effect in 2017. Illinois Governor Bruce Rauner actually signed House Bill 4379 into law last July after it passed both chambers of the General Assembly unanimously during the spring legislative session.
The intent of the legislation is loud and clear – the bill is specifically aimed to safeguard against excessive travel and eliminate entertainment expenditures by units of local government, such as non-home rule municipalities, townships, community colleges and school districts. (Home rule is defined as a County which has a chief executive officer elected by the electors of the county and any municipality which has a population of more than 25,000. Other municipalities may elect by referendum to become home rule units.)
HB4379 states that “units of local government shall, by resolution or ordinance, regulate travel, meal, and lodging expenses of officers and employees including: (1) the types of official business for which travel, meal, and lodging expenses are allowable; (2) maximum allowable reimbursement for travel, meal, and lodging expenses; and (3) a standardized form for submission of travel, meal, and lodging expenses.”
In reviewing the Act and numerous narratives on its impact, it appears to be more about disclosures than limitations. Some expenses may only be approved after specified documentation has been submitted and the expenses are approved by a roll call vote of the governing board. Additionally, any expenses submitted over the new limits due to extraordinary circumstance or emergency may also be approved by a vote at an open meeting.
The law does, however, prohibit reimbursement for entertainment expenditures. Entertainment is broadly defined to include “shows, amusements, theaters, circuses, sporting events or any other place of public or private entertainment or amusement unless ancillary to the purpose of the program or event” and could encompass just about anything for a prohibition.
The Act requires that “Official Business” be defined by ordinance or resolution. It leaves it up to the agency to determine that definition. A sample ordinance from the Illinois Municipal League (IML) states that “public business means expenses incurred in the performance of a public purpose which is required or useful for the benefit of the City/Village to carry out the responsibilities of City/Village business.”
Maximum Allowable Reimbursement
The Act also requires limitations on reimbursement levels. Again, it leaves those determinations to the discretion of the agency. A sample Township Officials of Illinois (TOI) ordinance provides three options: 1—limitations are set by the State Travel Control Board; 2—limitations are set by the GSA and used by the IRS; 3—limits are simply established by the governing body itself.
Approval of Expenses
The governing board must approve by roll call vote any reimbursement that exceeds the amounts specified by the unit of government, or if the expenses are for one of the board members themselves. The board approval may occur either before or after the travel occurs.
Documentation of Expenses
This final section appears to be the focus of the Act and aims for a standardized form that assures full disclosure and reporting consistency over time. Although the Act consistently refers to reimbursement, it also requires an advance estimate if the expenses have not yet been incurred, such as travel per diem. As for the usage of a credit card, the law requires receipts for reimbursement if the expenses have already been incurred along with the disclosure of the individual’s name, title/office and the dates involved. (The State allows for a signed type written statement certifying the expenses if a receipt is not available.) Essentially, those individuals who receive advances, be they at a per diem or other rate, need to submit a list of expenses in advance, and those who seek reimbursement need to provide adequate documentation. Lastly, be aware, all documentation submitted as proof for reimbursement shall be subject to disclosure under the Freedom of Information Act.
John Kasperek Co., Inc. is advising our government clients on the development of their resolutions now for January or February approvals to avoid significant inconveniences. The Act’s mandated resolutions/ordinances must be approved by local public agencies prior to June 29, 2017; however, all travel related expenses will require approval by formal roll call vote after March 1, 2017, if no such policy is in place. If the resolution/ordinance is not approved by June 29, 2017, no travel, meal or lodging expenses will be permitted to be paid by the local public agency.
As always, these are the opinions of John Kasperek Co., Inc. and you should consult your attorney and/or tax professional to best determine how the law affects your unique situation.