Does your nonprofit reimburse travel for staff and volunteers?

One of our clients, a youth soccer organization, sends players to a national tournament. The trip entails paying for airfare for the teenagers and chaperones as well as meals and lodging while at the tournament location. Plus there are miscellaneous expenses such as mileage or cab fare to and from the airport, tips to bellhops, and other miscellaneous expenses.

A few questions came up as the organization’s director was planning the trip. He’s not alone. We’ve encountered a slew of issues around travel and opportunities to manage it better, starting with…

Lack of accountability for travel expenses

The IRS has rules for travel. Lots of rules. Unfortunately being a nonprofit organization does not get you out of these rules.

If you reimburse someone for travel or other expenses, you must do so under an “accountable plan” to avoid having the reimbursement be considered taxable wages.

An accountable plan means (IRS Publication 463):

1. Expenses reimbursed are for a nonprofit business purpose;
2. Expenses are accounted for within “a reasonable period of time,” say 60 days;
3. Any excess reimbursement or allowance is returned within a reasonable period of time, say 120 days.

To account for expenses, travelers need to provide:

• Detailed receipts showing date, vendor and what was purchased;
• An expense report documenting the business purpose, who was entertained, mileage driven, and other relevant information about the trip.

A “reasonable period of time” for providing the above documentation needs to be defined in your travel policies and procedures. Which brings us to….

No travel policies and procedures

We often run into nonprofit organizations winging it when it comes to travel reimbursement. With no travel policies and procedures, everyone is left to figure out what exactly can be reimbursed and what documentation, if any, is required. Can a glass of wine at dinner be reimbursed? Will the organization give travel advances? Will mileage be reimbursed and if so, what is the mileage rate? Which leads us to….

Understanding the standard mileage rate

Please note this section has been updated to provide corrected information regarding mileage reimbursement to volunteers.

Each year the IRS issues a new standard mileage rate for business miles and one for charity. The standard mileage rate for 2019 is

• 58 cents per mile “driven for business use,” and
• 14 cents per mile “driven in service of charitable organizations.”

These rates are updated each year. Here is a link to an IRS table of standard mileage rates.

Employees of nonprofit organizations may be reimbursed for business mileage based on the business rate. Mileage for volunteers, unfortunately, is capped at the charity rate of 14 cents per mile, a rate that has not budged in many years.

Costs for parking and tolls may be reimbursed in addition to mileage.

One small advantage for volunteers – they may be reimbursed for commuting mileage. Employees may not be reimbursed for the mileage of their normal daily commute to and from work.

As an alternative to the IRS standard mileage rates, actual expenses may be used for the portion of total miles driven that are business miles. Be sure to have receipts. Actual expenses differ for volunteers vs. employees:

• Volunteers – actual cost of gas and oil
• Employees – actual cost of gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments)

Because of the hassle involved, most people choose the mileage method. For more information, see IRS Topic No. 510 Business Use of Car.

To have mileage reimbursement excluded from taxable income, per the accountable plan rules, both volunteers and employees must provide complete documentation of the trip. This documentation includes

• Date(s) of travel
• Business purpose
• Destination
• Mileage driven

Volunteers and employees should submit receipts and other documentation to the charity for travel reimbursement.

Volunteers should keep a copy of receipts and travel documentation for their tax records. If the volunteer is reimbursed, this documentation supports the fact that the reimbursement is not taxable income. Unreimbursed volunteer travel expenses may be treated as a charitable contribution.

Mileage reimbursement rates paid by the organization and travel documentation requirements should be included in the organization’s travel policies and procedures. Travel policies and procedures can also clear up…

Confusion over travel advances

It’s a legitimate concern. As described in the youth soccer organization example at the start of this post, chaperones accompany young people on a trip to play in a multi-day soccer tournament in another state. Imagine the cost of eating out for 20 teenagers over several days! It might be asking a lot for the chaperones to pay for these expenses up front and then be reimbursed.

You could give the chaperones responsible for paying for meals a travel advance based on a per person budget for meals. The travel advance would need to be accounted for upon return and any excess funds returned to the organization.

Or you could give them an organization credit card, but that can be scary if there is no limit on the amount that can be charged.

Another option is a business purchasing card designed for small business.

Purchasing cards, called p-cards for short, act like a combination of purchasing card (with focus on business to business purchases) and credit card (allows for personal expenses such as travel and entertainment). P-cards must be paid in full monthly.

And here’s the best part – on P-cards you can set spending limits for card holders.

The P-card may also offer a mobile app to allow users to take a picture of their receipts and associate them with the purchases. No more saving little receipts then taping them to a blank piece of paper!

Two possible purchasing card programs to check out:

One Card from Capital One has a $35 annual per person fee, but that may be more than offset by the rewards component.

WellsOne Commercial Card has no fees, but also has no rewards program.

What travel management challenges have you experienced in your organization?  Travel is a broad topic. We could easily do a follow up post on other travel issues. We’d love to hear from you!