How Companies Handle Per Diem, Mileage, and Expenses Alongside Timecards So Project Costing Stays Complete

Project costing is only complete when every cost that touched a project is captured, coded, and reconciled against the hours worked. Labor hours on a timecard account for one piece of that. Per diem, mileage, and out-of-pocket expenses account for the rest. The problem most mid-market organizations run into is that these two categories live in different systems, get submitted on different schedules, and get reviewed by different people. By the time finance tries to close a project, the timecard data is in Deltek or Dynamics and the mileage log is in someone's inbox.

Last reviewed: June 2026

That gap has real consequences. Unbilled reimbursable costs reduce project margin. Missing documentation fails a DCAA floor check. Per diem allocated to the wrong cost objective creates a finding in an incurred cost audit. None of these are abstract risks for government contractors or nonprofits running grant-funded projects.

This post covers how companies actually structure this, what the common failure points are, and what a unified system looks like in practice.

How Do Companies Track Per Diem Alongside Timecards?

Companies that get this right treat per diem as a cost element on the same timecard entry, not a separate submission in a separate system. When an employee records hours against a project on a given day, the system should also capture whether that employee was traveling, which per diem rate applies, and which cost objective gets charged.

Per diem rates for U.S. government contractors are typically set by the GSA (General Services Administration), which publishes location-specific lodging and meals-and-incidental-expenses (M&IE) rates by fiscal year. For 2026, the standard Continental U.S. M&IE rate is $68 per day, with higher rates for high-cost localities such as New York City, San Francisco, and Washington D.C. (GSA, FY2026 Per Diem Rates). Contractors whose per diem policy follows GSA rates need their time-and-expense system to apply those rates automatically based on destination, not require employees to look them up manually.

In practice, most organizations handle per diem in one of three ways:

• Fixed per diem allowance. The employee receives a set daily amount for travel days regardless of actual spending. No receipts required for the per diem portion. Simpler to administer, but the allowance must not exceed GSA rates if the costs are being charged to a government contract.
• Actuals with GSA cap. The employee submits actual lodging and meal receipts, capped at GSA rates. Requires more documentation but gives the organization a clearer picture of actual travel costs.
• Hybrid. Lodging is reimbursed at actuals; M&IE is paid as a fixed daily allowance. Common in government contracting because it separates the two cost types, which DCAA auditors examine differently.

Whichever structure you use, the critical requirement is that per diem charges tie to the same cost objective as the hours worked that day. An employee who bills eight hours to Contract A and then submits per diem to a general overhead account has created an allocation error that DCAA will question. Per diem follows the labor charge.

How Is Mileage Reimbursement Tracked for Project Costing?

Mileage reimbursement for project costing requires three pieces of information: the number of miles driven, the purpose and destination, and the project or cost objective to which the miles should be charged. The IRS sets the standard business mileage rate annually; for 2026 the rate is 72.5 cents per mile, up from 70 cents in 2025 (IRS Notice 2026-10, December 2025).

For government contractors, mileage charged to a contract must be allocable to that contract under FAR 31.201-4. That means the trip must have a direct, demonstrable connection to the contract work. Driving from the office to a client site to perform contract work: allocable. Driving from home to the office: not allocable (it's commuting, and commuting is not a reimbursable cost under FAR).

The documentation requirement under DCAA is specific. Auditors look for a contemporaneous mileage log that records the date, origin, destination, business purpose, and miles for each trip. "Contemporaneous" means recorded at or near the time of the trip, not reconstructed from memory at month-end. A system that lets employees log mileage from their phone immediately after a site visit produces defensible records. A spreadsheet filled in on the last day of the month does not.

From a project costing standpoint, mileage charges should post to the same project code as the work performed during that trip. DATABASICS links mileage entries to the same project and cost objective as the timecard entries for that period, so when finance pulls a project cost report, labor and travel costs appear together rather than requiring a manual merge from two separate systems.

Why Does Project Costing Break Down When Time and Expense Systems Are Separate?

When timecards and expense reports live in different systems, project costing requires a manual reconciliation step that almost every organization handles inconsistently. Finance has to pull timecard data from one system, expense data from another, match them by employee and date, and verify that the cost objectives align. That process takes time, introduces errors, and breaks down completely when the two systems use different project code structures.

The specific failure points:

• Timing mismatch. Employees submit timecards weekly but expense reports monthly. By the time the expense data arrives, the timecard period is closed. Finance has to decide whether to post the expense to the current period or reopen the prior period, neither of which is clean.
• Cost objective misalignment. The employee charges hours to Project 1234 on the timecard. The expense report goes to a default travel cost center because the employee didn't know to code it to the project. The project cost report shows only labor, not travel. The project looks more profitable than it is until someone catches the error at invoice time.
• Missing mileage. Employees who drive frequently forget to log trips or decide the reimbursement isn't worth the paperwork. That mileage is a real cost. If it's reimbursable under the contract, the company is absorbing it unnecessarily. If it's not being claimed but should be, the project margin is understated.
• Audit exposure. DCAA auditors conducting a floor check will ask employees how they record their time and whether their expense records match their timesheets. When the two systems produce records that don't obviously connect to the same work, that's a finding waiting to happen.

What Does a Unified Time and Expense System Do for Project Costing?

A unified system is one where employees record hours, per diem, mileage, and out-of-pocket expenses against the same project codes in the same interface, and where approved data posts to the ERP with consistent cost objective coding across all cost types.

In DATABASICS, timecards and expense reports share the same project and cost center structure. An employee traveling for project work records hours on the timecard, per diem for the travel days, and mileage for any site visits, all linked to the same project code. The approval workflow covers all three. When the project manager approves, everything posts to Deltek Costpoint, Sage Intacct, or NetSuite with matching project and cost objective codes via direct ERP integration. Finance doesn't merge data from two systems because there's only one system.

The practical effect on project costing:

• Project cost reports include labor, per diem, mileage, and other expenses in a single view, without a reconciliation step
• Unbilled reimbursable costs surface in real time, not at invoice close
• Cost objective errors are caught at submission, before they reach the approver
• Audit documentation for both labor and travel is in one place, with the same timestamp and approval trail

How Do Nonprofits and Grant-Funded Organizations Handle This Differently?

Nonprofits managing grant-funded programs face the same structural challenge as government contractors, with one additional layer: grant restrictions. Most grants specify which expense types are allowable, what the indirect cost rate is, and what documentation is required for reimbursement. Per diem and mileage charged to a grant have to be allowable under that grant's terms, not just reasonable under IRS guidelines.

For a nonprofit with multiple active grants, the cost allocation question gets complicated quickly. An employee who works across three grant-funded programs in a single week needs their time, per diem, and mileage allocated to each program in proportion to the work performed. A system that handles time but not expenses, or expenses but not by grant, forces finance to run the allocation manually.

The documentation requirement for most federal grants follows OMB Uniform Guidance (2 CFR Part 200), which requires that costs charged to federal awards be allowable, allocable, and reasonable. Travel costs, including per diem and mileage, must meet all three tests. The same contemporaneous documentation standard that DCAA requires for government contractors applies here: the expense record needs to exist when the expense occurs, not when the grant report is due.

The Practical Checklist: What a Complete Project Costing Setup Requires

If you're evaluating whether your current setup handles all of this correctly, these are the specific questions to ask:

• When an employee submits per diem, does it automatically link to the same project as their timecard for that period, or does it require a separate coding step?
• Does your mileage log capture date, origin, destination, business purpose, and miles, or just miles?
• Are expense submissions reviewed on the same schedule as timecards, or do they run on a different cycle that creates timing gaps in project cost reports?
• When an approved expense is posted to your ERP, does it carry the same project and cost objective codes as the associated labor, or does it require a manual mapping step?
• If a DCAA auditor asked to see all costs charged to a specific contract in a specific period, could you produce that in one report, or would you need to pull from two or more systems?

If any of those answers involve a manual step, a workaround, or "it depends on who's entering it," that's where your project costing is leaking. Not because the people are careless, but because the system isn't built to prevent it.

For organizations where this matters, the right setup isn't complicated. It's a single platform where time and every associated cost type live together, post to the ERP together, and produce audit documentation together. The complexity in government contracting and grant management is real. The tooling doesn't have to add to it.

Book a demo to see how DATABASICS handles per diem, mileage, and timecards in a single system.