ELVIRA NEESFINANCIAL RISK ASSESSMENT MANAGERASSOCIATION OF UNIVERSITIES FOR RESEARCH IN ASTRONOMY, INC.July 11, 2013

I. Review AURA Reimbursement for Travel Expenses Policy

II. Review Circular A-122 (Cost Principles for Non-Profit Organizations)

III. Definition of Reasonable and PrudentIV. Responsibilities of the Reviewer(s)V. ScenariosVI. Questions

Section A – Policy

Non-employees on actual and reasonable expense reimbursement for meals are a select few.

Translation…non-employees should be reimbursed using per diem unless you are instructed otherwise. This will not and should not be a common occurrence.

Section B – Travel in General

1 – Travel at AURA expense must be approved in advance.

2a, 4d1 – Normal mode of air travel is by US commercial airlines, by customary standard commercial rate (coach or equivalent).

4d2 - Fly America Act requires use of U.S flag air carriers. See Federal Travel Regulations for more information.

2b – Use of private vehicles for official business trips MUST BE APPROVED IN ADVANCE by Center Directors or designee.

Why? Because the cost analysis needs to be done BEFORE the trip and NOT AFTER!

If use of the private vehicle is not cost advantageous to the Center, additional expenses incurred for employee’s use of private vehicle for their convenience IS NOT TO BE reimbursed. This includes related meals and lodging en route to the destination(s).

3 – An accounting will be made for all monies advanced for travel expenses and any remaining cash will be returned to AURA within 10 business days after returning from trip.

Accountable Plan Memo - IRS guidelines for an “accountable plan” require the substantiation of amount, time, use and business purpose of expenses within a REASONABLE TIME after the expenses are incurred.

Employees that do not account for expenses timely or return advances in accordance with the policy put AURA’s “accountable plan” status in jeopardy.

If an employee does not substantiate their business expenses or account for their Travel and Expense Report within a period of 60 days, the amount reimbursed must be treated as compensation, subject to tax withholding, and reported on the employee’s Form W-2.

If a pattern of abuse is noted by the IRS, the status is changed to a “non-accountable plan” and all expense reimbursements are treated as compensation, subject to tax withholding, and reported on employee W-2s.

The actions of a few can impact many!

4a3 – Meals are defined as expense for breakfast, lunch, dinner and related tips and taxes.

Alcoholic beverages, entertainment expenses, as well as expenses incurred for another person, are excluded. These are unallowable expenses!

4a4 - Incidentals include transportation costs between places of lodging or business to places where meals are taken.

4a5 - Meals provided by others must be excluded from the reimbursement request. This includes continental breakfast!

A meal provided by a common carrier does not affect your per diem.

4a6, 4a9 – No per diem reimbursement for those on travel status of less than 12 hours. Also, it is not typical to reimburse per diem if the destination is less than 50 miles away from employee’s place of employment.

Per diems can not be higher than the current federally published rates.

Per diems can not be for a lesser amount that does not fall within the breakdown.

4b – Include agenda/brochure for conferences/ meetings in supporting documentation.

Why? Recent regulatory audits have identified issues with substantiating the business purpose of an employee’s attendance at a conference.

Also, agenda/brochure utilized to support if meals are/are not provided.

4c1 – Actual and Reasonable lodging expenses are an allowable cost.

AURA allows a conference participant to stay in the “conference headquarters” hotel even if other, less expensive, hotels are available.

4c2 – The receipt must provide sufficient detail to determine the cost of the room and any other charges included on the bill.

5 – Travel insurance, entertainment, alcoholic beverages and goods or services for personal use are unallowable.

Section C – Rental Vehicles

Rental of vehicles must be approved in advance. Need is to be justified and can not be for the convenience of the employee.

Circular has 3 attachments:

Attachment A - General PrinciplesAttachment B – Selected Items of CostAttachment C – Non-Profit Organizations Not Subject To This Circular

In addition to knowing the specifics of the grant, you should also be familiar with Circular A-122.

Sorry, we’re not in Attachment C!

A few key points from Circular A-122:

General Principles

Factors affecting allowability of costs include:

Be reasonable for the performance of the award and be allocable under these principles.

Conform to any limitations or exclusions set forth in these principles or in the award as to types or amount of cost of items.

Be adequately documented.

A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs.

Example: The traveler parks in the economy lot at the airport rather than in the more expensive garage.

Consideration should be given to:

Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award.

Whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the organization, its members, employees, and clients, the public at large and the Federal Government.

REASONABLE

Not extreme or excessiveModerateFairPossessing sound judgmentSensibleRationalCommon sense

PRUDENT

Wise in handling practical mattersExercising good judgmentExercising common senseCareful about conductActing with or showing care and thoughtPractical

Determine expenses have a business purpose, are allowable and that documentation is in accordance with policy and funding agency rules and regulations.Documentation should support the following:

Who traveled or attended the eventWhat type of event or activityWhen the event or activity took placeWhere the event or activity took placeWhy the expense was incurred

Examples of unallowable costs that you may encounter when reviewing Travel Expense Reports include, but are not limited to:

Goods or services for personal useAlcoholic beveragesEntertainment costs

Source: A-122, Attachment B

Determine that expenses were incurred in travel status on AURA business.

This is made difficult when an employee makes a trip that includes both personal and business travel.

Clearly document personal travel dates and expenses relating to those dates that were excluded from the reimbursement.

Company funds are not to be used to reimburse personal expenses.

Determine that expenses are charged to the correct GL account

Non-travel related expenses are not to be reimbursed using the Travel Expense Report.

Normal procurement policies and procedures are not to be circumvented.

Inform (educate) the employee that they must follow normal procurement policies and procedures before the non-travel related expense is to be reimbursed. NO EXCEPTIONS.

An employee travels to Germany for a business related conference that starts on 12/6 and ends on 12/10. The employee chooses to extend their stay in Germany until 12/17 to do some sight seeing. On 12/17, a severe snowstorm hits Germany. All flights are grounded. The employee is stranded until 12/22 when flights resume.

Can the employee claim lodging, per diem and other related expenses for the period 12/17-12/22?

No, the employee chose to extend the trip and take personal time off. Any expenses incurred from 12/12 – 12/22 are personal in nature and unallowable.

An employee travels to France for a business related conference. The employee has booked a hotel for 6 nights. The employee chooses to take their spouse and 2 small children. An additional occupancy fee of 5 Euro per person is charged by the hotel.

Can the employee claim reimbursement for the additional occupancy fee?

Assume the employee included the additional occupancy fee in the lodging amount by day. How would you as the reviewer be able to identify the expense?

No, the additional occupancy fee is a personal expense and is considered an unallowable cost.

It is common for countries other than the US to charge additional occupancy fees when there is more than 1 person. Typically, foreign hotel receipts state the number of occupants. If more than 1 occupant is listed, a quick check of the hotel’s website will confirm if there is an additional fee.

An employee travels to Chicago for a business related conference. The employee is staying at a hotel that is not far from the airport and within walking distance of the conference site. The employee chooses to rent a vehicle for the length of the visit at a cost of $500.

Can the employee claim reimbursement of $500 for the rental vehicle?

No, the expense was neither reasonable or prudent. The use of a rental vehicle can not be for the benefit of the employee. The expense incurred for a taxi to/from the airport would have been significantly less than $500. The rental car expense is unallowable.

An employee travels to San Francisco for a business related conference that starts on 12/6 and ends on 12/10. The employee travels to/from the destination on 12/5 and 12/11. The conference agenda indicates that breakfast and lunch are provided on 12/6-12/10. In addition, a welcome reception with appetizers takes place on the evening of 12/6.

What is the allowable per diem assuming the M&IE rate for San Francisco is $71 (Breakfast -$12, Lunch $18, Dinner - $36, Incidentals - $5)?

The employee can claim $311.50. The breakdown by day is as follows:

12/5, 12/11 53.2512/6 - 12/10 41.00

Appetizers provided on 12/6 do not constitute dinner.

An employee travels to Miami for a business related conference that starts on 12/6 and ends on 12/10. The employee travels to/from the destination on 12/5 and 12/11. The conference agenda indicates that breakfast and lunch are provided on 12/6-12/10. In addition, a banquet is held on the evening of 12/8. The banquet features a comedy troupe and is strictly social in nature. The employee chooses to attend the banquet at an additional cost of $75.

Based on the information provided, what are the allowable expenses for the duration of the trip? Assume the M&IE rate for Miami is $66 (Breakfast - $11, Lunch $16, Dinner - $34, Incidentals - $5).

The employee can claim $260. The breakdown by day is as follows:

12/5, 12/11 $49.5012/8 5.00

12/6, 12/7, 12/9, 12/10 39.00

The employee can not claim the dinner portion of the per diem or the banquet fee. The definition of meals specifically excludes alcoholic beverages and entertainment expenses.

Entertainment expenses - A-122 states that “costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation and gratuities) are unallowable.”

An employee travels to Los Angeles for a business related conference that starts on 12/6 and ends on 12/10. The conference brochure lists several recommended hotels with a conference rate of $150 per night, excluding taxes. Rather than stay at the recommended hotels, the employee chooses to book a room at a hotel closer to the beach for $200 per night, excluding taxes.

What is the allowable lodging expense that the employee can claim for his/her stay in Los Angeles?

The employee can claim allowable lodging expenses of $750 (150*5), plus tax.

The employee is not to be reimbursed $200 a night, because the decision to stay at a more expensive hotel (not conference headquarters) was not reasonable or prudent.Note: AURA policy allows a conference participant to stay in the “conference headquarters” hotel even if other, less expensive, hotels are available.

A Tucson employee is scheduled to travel to a business related conference in Las Vegas. The employee is staying at the hotel that will host the conference. The employee has decided to stay an extra 3 days after the conference ends to gamble and shop. Rather than fly, the employee chooses to drive to Las Vegas using their personal vehicle. The cost of a round trip ticket to Las Vegas is $147.

As the reviewer, what issues do you need to consider before approving the employee’s mileage reimbursement claim?

The reviewer should consider the following:

Did the employee’s pre-approved travel request include mileage reimbursement? Does the actual cost exceed the customary standard commercial rate (coach or equivalent) airfare?Did the employee exclude the mileage relating to the personal days in Las Vegas?Did the employee claim related fees such as parking? Did the employee claim reimbursement for fuel?Did the employee utilize the correct rate?

An employee is attending a conference in Russia. The conference schedule includes a visit to an observatory. Temperatures at the observatory are expected to be in the low 20s. A few days after the employee returns, he submits a Travel Expense Report with other expenses of $173.50 for the purchase of a blanket and coat. You follow up with the employee to get more information and are told that the purchase was a necessary business expense because he needed to protect himself from the elements.

Is this an allowable expense? If yes/no, why?

No, costs of goods or services for personal use of the organization’s employees are unallowable regardless of whether the cost is reported as taxable income to the employees (A-122).

An employee travels to Miami for a business related conference. The employee takes a taxi to/from the airport/hotel at a cost of $50 each way. The conference is held at the hotel and no meals are provided during the conference. The employee chooses to eat at the hotel for breakfast and lunch, but takes a taxi to a restaurant a few blocks away from the hotel for dinner. The fare to/from the hotel/restaurant is $5.

Assuming the conference is held from Monday through Friday and the employee travels to/from the destination on Sunday and Saturday, how much can the employee claim on the Travel Expense Report for taxi related expenses?

The employee can claim the taxi fare to/from the airport/hotel of $100.

The employee CAN NOT claim the taxi expense incurred to go to/from the restaurant/hotel as this is already covered by the incidentals portion of the M&IE.

Audits conducted by the NSF, OIG, DCAA areavailable to the public either by request or posted on the respective websites.

When approving Travel Expense Reports or any other expense, ask yourself if you would feel comfortable defending the expense if it were to be featured on the front page of the paper.

When in doubt, ASK!