Policy handbook
Copy, edit and adopt. Adjust the limits to your own spend history before rollout.
1.0Purpose and scope
This policy governs travel and business expenses for employees, volunteers and board members whose costs are paid by the organization. Every dollar we spend is a donor's or funder's dollar, so costs must be reasonable, necessary for our mission and charged to the right fund. The policy also meets IRS accountable plan rules and, for federal awards, the cost principles in Uniform Guidance (2 CFR Part 200).
2.0Roles and approvals
Supervisors approve their staff's expenses, and the grants manager confirms that any cost charged to a restricted or federal fund is allowable under that award. The finance director reviews all reports, and the executive director approves reports above $1,500. The board treasurer approves the executive director's expenses, and the board chair approves the treasurer's. No one may approve their own expenses.
3.0Donor-restricted funds
Expenses may be charged to a restricted fund only when the restriction permits that type of cost, as documented in the gift agreement or grant letter. Staff must name the fund on each expense line, and the grants manager will move any cost the restriction does not allow to unrestricted funds. Donor cultivation, fundraising events and board hospitality are always paid from unrestricted funds.
4.0Federal awards and Uniform Guidance
Travel charged to a federal award must be necessary for the award, follow this policy consistently and stay within GSA per diem rates unless the award terms say otherwise. Foreign air travel on federal funds must use U.S. flag air carriers as the Fly America Act requires, with documented exceptions. Alcohol, entertainment and gifts are never charged to federal awards. Staff must keep records that support single audit testing.
5.0Booking and lodging
Staff should book the lowest reasonable airfare and a standard room at or below the GSA locality rate, plus taxes, and attach the itemized folio. Shared rooms at staff retreats are encouraged where staff agree. Conference hotel blocks are acceptable even when slightly above the GSA rate if the grants manager confirms the cost is reasonable, and the reason is noted on the report.
6.0Meals and per diem
Staff traveling overnight receive meals and incidentals at the GSA M&IE rate for the locality, at 75% on the first and last days, reduced for meals provided by conferences or hosts. Per diem does not require meal receipts, but staff must record dates, places and purpose. Donor and partner meals are reimbursed at actual cost up to $58 per attendee from unrestricted funds.
7.0Alcohol and entertainment
Alcohol and entertainment are never reimbursed from restricted funds or federal awards. Donor cultivation events approved by the executive director may include alcohol and modest hospitality paid from unrestricted funds, and the event budget must list the expected attendees. Entertainment is nondeductible under the Tax Cuts and Jobs Act of 2017, which matters for any taxable activity, and it must be recorded accurately in our functional expense reporting.
8.0Ground transport and mileage
Staff should use transit, shared rides or compact rentals. Personal vehicle use by employees is reimbursed at the IRS standard mileage rate, or the GSA rate on federal awards when that is lower, with each trip logged by date, destination and program. Commute miles are personal. Volunteers who drive for the organization may receive mileage reimbursement or deduct unreimbursed mileage at the charitable rate.
9.0Board travel
Board members serve without compensation, and the organization reimburses only reasonable travel to attend board meetings and represent the organization, under the same caps and receipt rules as staff. First-class travel and companion travel are not reimbursed. Board members may choose to waive reimbursement and should speak with their own tax adviser about whether unreimbursed travel counts as a charitable contribution.
10.0Gifts and personal expenses
Gifts to donors, partners or speakers are limited to $25 per recipient per year, paid from unrestricted funds and logged with the recipient's name. Staff gifts for life events follow the human resources guideline. Personal items, upgrades, companion travel, in-room entertainment and personal days added to a trip are not reimbursable, and personal charges on a folio must be removed before submission.
11.0Receipts, timing and returning excess
Expenses must be submitted within 60 days after they are paid or incurred, with amount, date, place, purpose and fund for every line. Itemized receipts are required for all lodging, any expense of $75 or more and any grant-funded expense of $25 or more. Advances are issued no more than 30 days before travel, and unspent amounts must be returned within 120 days after the expense was paid or incurred.
12.0Audit, pushback and exceptions
The finance team reviews every report, and every flag raised by audit software is reviewed by a person, including costs charged to a fund that does not allow them. The software may draft clarification requests citing this policy, but the finance director approves each message before it is sent. Exceptions require written executive director approval, and exceptions on federal awards also need the grants manager's sign-off.
13.0Consequences
Honest errors, such as charging a cost to the wrong fund, are corrected through the review process. Repeated violations lead to a meeting with the finance director and may result in loss of card privileges. Misusing restricted or federal funds can put grants at risk and must be reported to the executive director and the board treasurer. Deliberate falsification is grounds for termination or board removal.
Recommended limits
| Category | Limit | Note |
|---|---|---|
| Domestic hotel (per night) | Lower of GSA locality rate or actual; $189 where no GSA rate applies | Federal awards always use the GSA rate unless the award terms say otherwise. |
| International hotel (per night) | State Department locality lodging rate | Program site visits abroad follow the funder's budget when it is lower. |
| Daily meals (traveling) | GSA M&IE rate for the locality; 75% on travel days | Meals provided at a conference reduce the per diem. |
| Client meal (per attendee) | $58 for donor and partner meals | Paid from unrestricted funds only. Never charged to a grant. |
| Domestic airfare | Lowest available economy fare | Board members follow the same rule when the organization pays. |
| International airfare | Economy; U.S. flag carrier on federally funded trips (Fly America Act) | Keep the routing and carrier documentation in the trip file. |
| Ground transport | Transit or standard ride-share; compact rental when needed | Shared rides to the same meeting are expected. |
| Personal vehicle mileage | IRS standard mileage rate; GSA rate on federal awards if lower | Volunteers may receive the charitable mileage rate instead; see the FAQ. |
| Alcohol | Not reimbursable from restricted or federal funds | Donor cultivation events may include alcohol from unrestricted funds with ED approval. |
| Receipt required at | $25 on any grant-funded expense; $75 (IRS threshold) otherwise | Funders and single audit testing expect receipts for small items. |
| Pre-approval required at | Every out-of-town trip and any expense charged to a restricted fund | The grants manager confirms the fund allows the cost. |
IRS Accountable Plan clauses
Keep these in the handbook so reimbursements stay excluded from wages under IRC § 62(c) and Treas. Reg. § 1.62-2.
- A1The organization reimburses only expenses with a business connection to services the employee performs for the organization, as Treas. Reg. § 1.62-2 requires for an accountable plan.
- A2Meals and incidentals paid at or below federal per diem rates are deemed substantiated as to amount when the employee records time, place and business purpose, consistent with Rev. Proc. 2019-48.
- A3All other expenses must be substantiated with amount, time, place and business purpose within 60 days after they are paid or incurred, meeting the fixed-date safe harbor in Treas. Reg. § 1.62-2(g)(2).
- A4Itemized documentary evidence is required for every lodging expense and any other expenditure of $75 or more, as Treas. Reg. § 1.274-5(c)(2)(iii) provides.
- A5Advances exceeding substantiated expenses must be returned within 120 days after the expense is paid or incurred, and unreturned amounts are included in the employee's W-2 wages subject to withholding and FICA.
Common pitfalls in nonprofit
- Charging donor cultivation dinners to a program grant. Restricted funds rarely allow fundraising costs, and the misallocation surfaces when the funder asks for a budget-to-actual report.
- Booking foreign travel on a federally funded trip with a foreign carrier and no documented exception. The airfare may be disallowed and charged back to unrestricted funds.
- Paying board members a flat travel allowance without receipts. A flat amount without substantiation can turn into taxable compensation that needs to be reported.
- Letting the executive director approve their own expenses. Funders, auditors and Form 990 readers expect the board to review executive spending.
- Skipping the meal deduction when a conference provides lunch. Full per diem on a federal award looks like an overcharge in single audit testing.
Questions
Volunteers can be reimbursed for mileage with a mileage log. Reimbursement up to the charitable mileage rate is generally not income to the volunteer. Anything above that rate may be taxable to them. Volunteers who are not reimbursed may be able to deduct mileage at the charitable rate on their own return. Keep the log, the rate used and the program on each reimbursement.
Often yes, if staying at the conference hotel is reasonable and the award terms do not prohibit it. The grants manager should document why, such as the conference rate of $231.40 being lower than nearby alternatives or the schedule requiring on-site lodging. Without that documentation, the amount above the GSA rate is safer charged to unrestricted funds.
The board treasurer approves them, and the board chair approves the treasurer's own expenses if the treasurer is reimbursed. A quarterly summary of executive expenses goes to the finance committee. This keeps approval outside the reporting line and gives the board a record when preparing Form 990, which asks about certain travel benefits provided to officers and key employees.
The grants manager moves it to the correct fund or to unrestricted funds before the month closes and notes the correction. The employee is not penalized for an honest coding error. If the error affects a federal award that has already been drawn down, the finance director corrects the next draw or report and keeps the documentation for the single audit.