Nonprofits have a lot on their plates. While the focus is on their missions, nonprofit administrators also need to manage nonprofit travel expenses for employees and volunteers.
One easy way to pay employees is per diems, which means “per day.” Using per diems, workers and volunteers are paid back based on a daily rate instead of reimbursing them for each receipt.
This method of reimbursement is helpful because the process is made simpler since there's no need to manage receipts. However, here are a few best practices for how nonprofits can successfully use per diems and per diem management software to streamline their expense processes.
1. FEDERAL PER DIEM MEALS & RATES MADE simple.
To begin, check out the most recent federal per diem rates. Then, make yours the same or similar. The rates change based on geographic area, but you can find federal per diem rates at the General Services Administration GSA website. You can also download the official app provided by the GSA called Per Diem for Continental U.S. According to reviews, the app isn’t quite stable yet, but it’s a tool to keep an eye on for more features.
Use these tools to get more details on federal per diem meals costs and what counts as incidental expenses only. They'll use acronyms like "expenses m&ie," which means expenses for meals and incidental expenses for federal employees.
2. Be consistent.
You have options as to what your per diem will cover for federal travelers and nonprofits:
meals and incidentals (like food and the cost of an Uber);
meals, incidentals, and lodging (lunch, a shuttle from the airport, and a hotel room).
Pick one that will work best for you and make it a consistent policy (which means putting it on your reporting forms).
Implement a system that takes care of international per diem management. You need a system that can handles rates for incidentals and meals for your business inside and outside of the continental United States.
We advise that you look for per diem management that customizes the per diem based on whether you’re working with an employee or a volunteer. You can also customize per diems based on fiscal year budget, budgets for lodging and meals, and separations of meals and incidental expenses.
4. Give a little more (if you want).
You can increase your per diem rates a little more than the federal rate. If you use this option, remember that anything over the federal rate might mean that your volunteers or employees pay taxes on it. Be sure to look into the list of high cost cities so that you know the regular rates.
Remember, you need to have a written record to confirm per diem expenses. In this written record, the IRS identifies two main elements (via Publication 463):
Have detailed expense reports. The IRS requires that you keep a detailed record of expense reports. These expenses can be recorded in a log, statement of expense, trip sheets, accounting book, or similar record. These expense reports should include:
Where the expense took place (destination/location)
The purpose of the expense (lodging, travel, etc.)
Who the expense was made by
Keep a documented record of the expense. The IRS also requires that you keep a documented record of all expenses. These are typically in the form of an invoice or detailed receipt.
You have options when you’re implementing expense reimbursement software for your nonprofit. Let DATABASICS Time & Expense take care of your expense report automation and let our Expense Policy Rules enforcement do the online expense management heavy lifting for you.
Spend more time on your nonprofit goals and less time on manually managing complicated spreadsheets.
For more information, contact us or call (800) 599-0434.