There may come a time when members of your organization have to travel. Travel costs money, so how would a nonprofit or church track those expenses? Below, we cover the per diem style and the accountable plan style.
Per Diem
Consider per diem as an allowance for food and lodging. Employees receive X amount of money to spend, and they get to keep whatever is left. Because they can be extra frugal to keep leftover money, employees generally prefer this option. They also don’t have to submit receipts. This makes per diem easier for whoever performs accounting for your organization since they aren’t required to match receipts to charges.
A drawback to this approach, however, is there is a limit to the amount of per diem money you can give to an employee before it becomes taxable income. Those rates change from city to city. There is also a standard amount for counties or cities not listed on the site.
Accountable Plan
An accountable plan, or a credit card/expense reimbursement, requires employees to submit receipts after the trip. Unlike per diem, there’s no threshold on the amount the traveler can spend. However, certain travel expenses might be considered “lavish or extravagant,” and not qualify.
When following this method, it’s important to enact a policy about what people can spend money on. Then you need to ensure people follow it. You don’t want people spending more money than they have to.
Here are some tips when using an accountable plan:
- Itemized receipts are considered a best practice. They are required for organizations under the regulations of the Department of Labor (DOL) and expenditures covered by federal funding.
- Provide an explanation of the business purpose, as well as a list of who was in attendance for meals.
- Be aware of specific exclusions in the policy. For example, alcohol may be excluded for expenditures covered by federal funding.
Depending on the overall amount of employee travel at an organization, the accountable plan approach can create a substantial administrative burden. However, there are several software packages that can help. With the ability to upload and route receipts from a cell phone, you can speed up the time it takes to receive supporting documents. These programs can also tighten approval process controls.
Using A Combination Of Both For Travel Expenses
Many organizations choose a combination of per diem and an accountable plan. If you choose that approach, keep in mind employees traveling on per diem must subtract any meals that are otherwise provided, such as those offered as part of an attended meeting or conference. Double dipping is not allowed by any regulatory body.
Choosing the best type of plan for travel expenses can be a complex decision. A good place to start is to look at the regulations that apply to your organization prior to implementing or making any changes. It’s always a good idea to discuss proposed changes with your auditor or accounting professional before implementing them.
And remember, whether it’s per diem, accountable, or a combination, the most important thing is consistent enforcement of your policy.
