Navigating Travel Reimbursement: Best Practices for Family Foundations

by: Kyle Anderson
July 3, 2023
Travel at airport with boarding pass

Family foundations often incur travel expenses related to their activities, such as board meetings, site visits, and philanthropy conferences. These expenses can be paid for by the foundation if they are directly relevant to its operations and mission, and if they are deemed reasonable and necessary. To ensure the appropriateness of these expenses, it is essential for foundations to establish a well-defined travel and expense reimbursement policy. This policy should clearly outline the activities eligible for reimbursement, specify the reimbursable expenses, and establish guidelines for documentation and approval.

Adhering to the Internal Revenue Service (IRS) guidelines for accountable plans can streamline the reimbursement process and ensure compliance. An accountable plan is a reimbursement arrangement that allows eligible employees and volunteers to be reimbursed for business-related expenses without the need for reporting them as taxable income. It sets forth certain criteria and requirements to ensure that expenses are substantiated, reasonable, and directly connected to the organization's operations. By following the IRS guidelines for accountable plans, family foundations can simplify their reimbursement process while maintaining compliance with tax regulations.

Under an accountable plan, reimbursements are not subject to income or payroll taxes, providing a tax-efficient approach for both the foundation and the individuals seeking reimbursement. To meet the IRS guidelines for filing reimbursement expenses under an accountable plan, several criteria should be considered:

1. Thorough Documentation: Expenses should be thoroughly documented with invoices and receipts to provide clear evidence of business-related expenses.

2. Timely Submission: Employees and volunteers should seek reimbursement for expenses within a reasonable period, usually within 120 days. This ensures prompt processing and avoids delays.

3. Unspent Money: Employees and volunteers must return any unspent money within 60 days, particularly if the organization provides cash advances. This helps maintain accurate financial records.

Creating a clear and effective travel reimbursement policy requires prioritizing documentation. It is common for large organizations to use a web-based form for expense reimbursement while small organizations are more likely to use a hard copy paper form. Regardless, the form should capture essential information such as the payment date, cost, nature of the expense, relevance to the organization's mission, and the beneficiary of the expense.

Additionally, it is important for the travel expense policy to identify non-reimbursable expenses to avoid any misunderstandings or potential misuse of funds. Non-reimbursable expenses refer to specific categories of expenses that the foundation does not cover. Examples of non-reimbursable expenses may include baby-sitting, pet care, sporting events, and expenses related to vacation or personal days taken before, during or after a business trip. It is crucial to clearly communicate these non-reimbursable expenses to employees and volunteers to avoid any misunderstandings and ensure compliance with the foundation's reimbursement policy.

Issuing travel advances is a common practice among organizations. To manage this effectively, the travel reimbursement policy should outline expectations and provide clarity. For instance, the policy may state that only a portion of the advance will be issued before the trip, with the remaining amount reimbursed upon submission of supporting documentation. It should also address actions to be taken if the advance exceeds the actual trip costs or if employees fail to provide documentation.

Once the travel reimbursement policy covers all relevant aspects for your organization, it should be approved by management or the board of directors. Including it in an employee handbook or other relevant documents ensures widespread awareness and understanding among employees. Consistent application of the policy is essential to minimize disputes and ensure compliance. Administrators responsible for reimbursement should be well-versed in the policy and refer directly to it when addressing reimbursement-related matters.

Having a clear and effective travel reimbursement policy in place keeps people accountable and ensures the organization's compliance with all legal and regulatory requirements. By implementing best practices, leveraging technology, and promoting transparency, family foundations can streamline their travel and expense reimbursement processes, allowing them to focus on their mission and impact. To see an example of a travel expense policy for family foundations, you can check out our downloadable accounting forms page where you will find a professional and customizable Travel Expense Policy Word document. This template can be easily customized to suit your organization's specific needs.

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