CEO Expense Approval

CFO routine and ordinary expenses up to a threshold, BOD any large amounts or items outside the norm. If there are perks, an attempt should be made to put into the CEO's agreement rather than have it appear as questionable T&E.

If you have an audit committee I would recommend coming to a written understanding with them that the CFO will approve and lay out some parameters in which the CFO can and cannot approve. If you do not have an audit committee, try to come to an understanding with independent directors. Also note: approval may have been lax in the past but I would step up the oversight if I were you. If you get in an M&A situation or in a dispute when an officer leaves, there will be extreme bright lights on travel reimbursements and the CFO is the one who will look bad if approval of questionable items has been routine.

Public company? Private? CEO's equity position?
Big difference, and risks.

Outside of clear, objective standards that apply to all executives in terms of dollar amounts and expense types, a process should be established so that the audit committee chair, independent lead director or board chair, or other designated independent director approves the expenses. This is because CFOs or other subordinates are not in a position to deny approval. Unfortunately, I have seen this scenario play out numerous times.

One great way to see if your current process is working effectively and to have support for changing the process is to have Internal Audit (assuming functional reporting to the audit committee) or an external audit consultant like Protiviti conduct an executive expense audit and make recommendations based on those results.

This can be a tough one with a difficult CEO. It is hard to involve the Board in such a day-to-day activity as expense reports, even if just for the CEO. I would suggest it starts with a well established process and policies. It should be clear what the policies are - for example what spending limits are there for employees and types of expenses? And this can even be designed to accommodate for higher limits for executives such as the CEO. At a minimum, you can use IRS rules as boundaries for things like receipt backup that need to apply to even the CEO.

Secondly, I think you want a clear process that highlights these rules to employees as they are doing their expenses in addition to any policy manual (unfortunately, manuals are rarely absorbed by employees and any changes to policy are further missed). And the process should highlight any overages or other policy violations to submitters and reviewers - this essentially serves as an acknowledgement by employees that they have submitted something out of policy and to reviewers that they have approved this exception. You can do this manually with signatures in your process or it can be handled in an automated solution.

And finally, any exceptions should be part of your records. Again, this can be manual in paper or should be part of an automated solution that shows exceptions to policy and who approved those exceptions. For the CEO, the CFO should definitely a documented reviewer in addition to the normal Finance check.

I would say it is tough to involve a BoD in any of this unless they become interested in either process controls or T&E spend. Then the process and data can be part of the discussion as evidence that Finance is doing their part. If they see problems, they may institute more direct oversight of CEO expenses.

Thank you for all your insightful comments.
@ John P. Hart - The context is a municipal government with 500 FTEs. There is no internal audit function established and no Audit Committee on the board. Council meets once a month which has a standing Finance Committee.

Oh My, Municipal Government!
This person is treading on thin ice. This is the kind of stuff that newspapers and local TV news love to dig into. And the repercussions can reach up to the board and Council. Politics can get real messy. This info in a political rival's hands can blow-up big-time! And as an Accounting Supervisor, you could get squeezed too. Proceed cautiously, but in this case you're working for the tax-payers.

Good advice by others as to the practice & practicality.

There must be some type of written policies. If not, how does the CFO determine how to approve other staff's expenses? Having worked for govt. I know how sticky this can be. The CFO should be reviewing them and if they are doing something questionable, make sure your name is nowhere on the report and possibly report to your state auditor if you see no alternative. A muni with that number of FTEs must have an annual audit.

As CFO I have always approved CEO expenses, and denied approval many times when submissions were outside of established policy. Even as Divisional Controller at public companies I was the approver (or disapprover) of the Divisional Manager's expenses.
The worst kind of manager is one who abuses an established policy, and most well written policies give manager discretion for exceptions.

As the CFO, I generally have reviewed and approved the CEO's expense reports. If you expect that you will have conflict doing this for the CEO, it might mean that you need to find a new job. A CEO that does not accept this level of simple control, will be hard to manage or work with when something gets more complicated.

@John P. Hart:

Oh contraire. I'm CFO at a transit district and I have faced this for years. I've worked at other governmental agencies and have seen similar situations all too often. My AGM position requires that I interact with colleagues at many other public agencies and, in sharing my own situation with them, I've learned that it's going on all over the place.

However, in my many years of experience, I can tell you that, even when exposed there is little repercussion. The perps either deny knowledge and sell their co conspiritors down the river (most likely politicians involved) or, they are allowed to resign and they will soon pop up as executives at some similar agency as though they are innocent of any wrong doing.

I could fill this entire forum with links to news stories of where high level, government employees have been found to be abusing the public trust and yet, there was minimal persecution and no prosecution.

The half of my career I've spent in government - three different agencies over seventeen years - compared to the eighteen years I spent in private industry that is considered "evil" by so many governmental types - has made me the most anti-government person I know.

In fact, you know the "find what you love and do it" mantra in job seeking circles? I plan to retire soon and when I do, I'm going to start a citizens' movement to uncover local agency legal and ethical antics and expose them for the thieves they are.

But sadly, from experience in working with the press and the public, I can tell you that, most people just don't care. They feel powerless and are not willing to do anything about it.

To the OP: Welcome to the club. I hope you'll fight the good fight. I suggest "gorilla war" aka Edward Snowden style. Leaks can make the problem move on even if they won't result in any concept of justice.