Federal Acquisition Regulation (FAR) 31.205-46 states Travel Costs incurred by contractor personnel in connection with official company business are allowable; however, travel costs may be deemed unallowable if the rules are not followed properly. It is imperative for a business with government contracts to understand the rules and regulations of travel costs. If not accounted for properly, a company may be subject to costly penalties and fines. Travel Costs include:
- Incidental Expenses
Transportation costs may be based on mileage rates, actual costs, or a combination of both. Airfare is a subset of transportation due to its unique rules and regulations explained below.
Costs for lodging, meals, and incidental expenses may be based on per diem, actual costs, or a combination of both. As long as travel expenses are deemed reasonable, each expense may be reimbursed at actual cost with valid documentation. For example, it is unlikely for a $1,000 meal to be reasonable. Also, alcohol is always going to be unallowable. Best practice is for employers to give their employees per diem. Having a per diem reduces an employer’s liability substantially. For instance, employers will not have to collect documentation such as receipts for each transaction made by the traveling employee. In addition, an employee can spend his/her per diem however desired. There is a ceiling for how much per diem can be paid out per day and varies throughout the US. A list of per diem rates is provided by the General Services Administration (GSA) and can be viewed at http://www.gsa.gov/portal/category/21287.
As mentioned above, airfare travel costs have additional rules and regulations. Mainly, airfare costs are restricted to the lowest available fare to the contractor (unless special circumstances arise). Lowest means absolute lowest price at the time of booking. This limits a contractor from being biased towards a particular airline. Change fees or cancellation fees are allowable but must be held to a minimum. DCAA expects contractors to adequately plan travel to avoid such fees.
With that said, regardless of which route taken, all contractors must document 1) Date and place of trip, 2) Purpose of Trip, and 3) Name of employee and relationship to contractor.
TGG Accounting can help your business set policies and procedures to efficiently and accurately account for government contracting, including unallowable and allowable costs. Contact a professional at TGG today.Written by: Holden Smetana TGG Accounting