Tracking travel expenses and reimbursements can become complicated for nonprofit organizations and religious institutions. With limited budgets and scrutiny on finances, charitable groups need clear policies that balance simplicity for staff with appropriate financial oversight. This article explores common options like per diem allowances versus accountable expense reimbursement plans, along with hybrid approaches.
Per Diem Allowances Offer Simplicity
Providing per diem allowance rates is one approach for covering employee travel costs. Per diem means a fixed daily amount is given to each traveler to use for expenses like meals, lodging, and local transportation. Common per diem categories include hotel rates, meal allowances, mileage rates for personal vehicles, and incidental costs.
The major benefit of per diem allowances is simplicity for both travelers and administrators. Employees don't have to save and submit receipts for all expenditures. The nonprofit doesn't have to closely match receipts to expense reports. Travelers can pocket any difference if they manage to spend less than the per diem amounts.
However, there are limitations on what types of expenses can be covered by per diems under IRS regulations. Costs like airfare, rental cars, and conference fees generally cannot be reimbursed this way. Per diem rates also cannot exceed federal limits without becoming taxable income. These maximums differ by travel destination and are adjusted for inflation annually.
Accountable Reimbursement Plans Allow Oversight
On the other end of the spectrum, nonprofits could enact accountable reimbursement policies for travel. Under accountable plans, travelers pay expenses up front, save all receipts, and submit documentation after trips. The organization then reviews the expense report and reimburses the employee for costs adhering to policy guidelines.
For instance, a church or museum may define appropriate reimbursable expenses as lodging up to $150 per night, meals up to $75 per day, economy airfare, midsize rental cars, and local transportation like taxis, trains, or parking. Each receipt would need to be itemized and matched to the report.
While more administratively burdensome, accountable reimbursement allows nonprofits to maintain tighter control over expenditures. It also avoids tax issues associated with per diems. Software tools can potentially help streamline submission and approval of expense reports.
Hybrid Approaches Combine Per Diem and Reimbursements
Given the different trade-offs involved, many charitable organizations utilize a hybrid approach combining aspects of both per diem allowances and accountable reimbursements for travel expenses.
For example, a nonprofit could provide per diem rates for meals and lodging but require receipts for air travel. Others may use per diem for domestic trips but accountable reimbursements for international travel. Some nonprofits provide a per diem meals allowance but reimburse lodging based on receipts.
Hybrid policies aim to get the simplicity of per diem for some costs while maintaining oversight on major expenses. There are various ways to design blended travel reimbursement systems. The optimal mix depends on the organization's specific travel patterns, accounting capabilities, and budget.
Importance of Consistent Compliance and Enforcement
Whatever travel expense policies a nonprofit lands on, consistent compliance and enforcement are crucial for smooth accounting. Approval procedures, categories of reimbursable expenses, exclusions like alcohol, and documentation standards should be clearly established and regularly communicated to all staff and volunteers.
Policies should be crafted based on a review of regulations that apply to the nonprofit, such as federal per diem limits or grant restrictions. It also helps to consult accountants, auditors, and tax professionals when initially forming travel reimbursement plans. Their guidance can spotlight potential pitfalls or simpler alternatives.
Periodically reviewing the effectiveness of existing travel policies can ensure they evolve appropriately as the organization's activities change over time. For instance, technological improvements may enable easier expense tracking today than even 5 years ago.
With well-designed policies and concerted compliance efforts, tracking travel expenses for nonprofits need not be overly painful or risky. The aim is finding the optimal balance for your organization between simplicity for busy employees and oversight important for public trust. Being purposeful and diligent upfront when crafting travel reimbursement plans pays dividends every time a staffer hits the road.
