Have questions regarding what travel costs are allowable? Do you think the travel regulations say you can never have first-class airfare reimbursed? Or do you think the regulation says you are restricted to a compact rental car? For the answer to these questions and more, check out our video on travel regulations and myths!
Today, we will discuss travel costs, specifically what the regulation says and some common myths. Before we take a look at some of the common myths regarding the allowability of travel, let's take a look at what the regulation says.
According to FAR 31-205-46, travel costs incurred by contractor personnel in connection with official company business are allowable, subject to limitations. FAR 31-205-46 does not incorporate government travel regulations such as the federal travel regulations (FTR), joint travel regulations (JTR), and standardized regulations in their entirety. It only includes the definition of lodging, meals, and incidentals, maximum daily per diem amounts, and special or unusual circumstances where higher per diem may be justified.
That's it. None of the other government travel regulations are required of contractors. However, contractors can choose to use other federal travel regulations or joint travel regulations as travel guidelines as company policy, or as a reasonableness benchmark.
Hotels, meals, and incidentals are limited to total daily per diem amounts for lodging, meals, and incidentals. This is stated in the federal travel regulations for travel within the contiguous 48 U.S. states, the joint travel regulations for travel in other states and U.S. territories outside the contiguous 48 U.S. states, and in the State Department's standardized regulations for overseas locations. Contractors are limited to total daily per diem amounts.
This means that it does not matter how much is spent per segment of the day, such as breakfast, lunch, or dinner, as long as the total amount does not exceed the maximum daily per diem. For example, if the daily meals and incidentals per diem is $75, it does not matter how much is spent per meal as long as the total amount does not exceed $75. Contractors may choose to reimburse hotels, meals, and incidentals on a fixed per diem basis or actual expense basis, which requires detailed documentation or some combination of the two, meaning fixed meals and incidentals and actual lodging.
Hotels are always reimbursed at actual and require a hotel receipt regardless of the amount. If a contractor chooses to use a fixed per diem plan for reimbursement for meals and incidentals, detailed documentation is not required since the presumption is that the costs are reasonable given that they fall within the appropriate travel regulation ceilings. If it's the contractor's policy to use fixed per diem, then the government only needs to see proof that travel occurred, not the actual costs incurred, except for the hotel.
Proof of travel could be something as simple as a hotel receipt from the trip. Now, of course, the government wants to see actual costs incurred, but if the contractor has a policy of reimbursing at fixed per diem and does not require detailed documentation, then the government must accept that. Also, the federal travel regulations now state that lodging taxes can be reimbursed as a separate expense since they are no longer included in the lodging ceiling, and the same goes for laundry expenses.
They are no longer included in incidentals, so laundry expenses can be reimbursed at actual cost. However, the FAR does state one exception, and that is that maximum per diem is not reasonable on days where no lodging costs are incurred or on the first or last day of travel. This means that contractors must provide a reasonable reduction to the maximum per diem rates per DCAA.
Now that we've gone through the regulations, let's take a look at our first travel myth.
Myth #1 – There is a 14-hour Rule for International Flights Allowing Business Class Airfare
There is no such rule. Let's take a look at what the regulation says.
According to FAR 31-205-46, contractors are limited in selecting the lowest available airfare during normal business hours, with exceptions that require justification and documentation. Documenting at the time of purchase is crucial in order to prove that you selected the lowest available fare at the time of purchase. It is incredibly important to document the time of purchase because airfare prices are constantly changing, and if you document at the time of purchase, that's how you can prove that you selected the lowest available airfare at the time.
However, there are some exceptions to selecting the lowest available airfare, and those include circuitous routing, flights at unreasonable hours, flights that excessively prolong travel, flights that increase travel costs that offset travel savings, the physical or medical needs of the traveler, and mission requirements. For any exception to selecting the lowest available airfare, there must be justification and documentation for doing so, as DCAA likes to see that the exception is approved at a higher level than the direct supervisor of the employee.
Myth #2 – For International Flights, the Lowest Available Carrier Rule (Domestic or Foreign) Applies
This is not true.
Contractors must consider the Fly America First Act when selecting international airfare. The Fly America First Act is the exception to the lowest available airfare rule, and it states that contractors must select U.S. Flag Carrier Airlines when selecting international airfare if applicable. For example, say your two flight options overseas are Qatar Airlines and Delta Airlines.
In order to be reimbursed, you need to select the Delta Airline option, even if it is $3,000, versus the Qatar option, which is $2,000. Because of the Fly America First Act, you must select the Delta Airlines flight because they are U.S. Flag Carrier, even though they are more expensive. The government will pay attention to this during an audit, so documentation of this is critical.
Myth #3 – Lowest Available Airfare Documentation Requires Multiple Quotes from Multiple Sources (Such as Travel Agencies, Expedia, etc.)
There is no requirement to have multiple quotes.
The government just wants to see that the selected flight was the lowest available at the time, meaning they only need to see that the selected flight was the lowest price available. Most travel agents can just print the screen of available flights they use for the contractor, and DCAA has accepted this in most cases.
Myth #4 – Lowest Available Airfare Will Never be First-Class Airfare
In certain circumstances, the lowest available airfare could actually be first class, as it could be the only option available. Now, DCAA expects contractors to adequately plan travel 14 days in advance when tickets are cheaper. However, a scenario could arise where a client asks you to fly out one day before the travel occurs, and you have no choice but to book the first-class option as it is the only one available.
For any instance where you need to book travel immediately, gather documentation and justification for doing so. It is not technically required to do so at the moment; however, it is better to take care of that right away than trying to scramble years later during an audit to find documentation of the travel.
Myth #5 – Flight Change Fees are Unallowable Unless Approved in Advance
This is not true.
In the event that cancellation or change fees occur, as long as the original flight was the lowest one available at the time, then those fees are allowable. The same goes for luggage fees. As long as the original ticket purchased was the lowest one available, luggage fees are allowable. Remember, it is crucial that when selecting airfare, you document the flight selected at the time of purchase to prove that you selected the lowest available fare.
Myth #6 – Reimbursed Travel Can Never be for a Non-Employee
This is not true.
The contractor could have consultants that they engage, and their travel can be reimbursed as long as it is for official business for the contractor. For any contractor personnel traveling on official company business, the cost can be reimbursed as long as the following information is documented. The date and place of the trip, meaning the city, town, or other similar designation, the purpose of the trip, the names of the people on the trip, and the relationship to the contractor.
Myth #7 – Contractor Employees are Restricted per the FTR/JTF to a Compact Car Rental
This is not true as the regulation says nothing about the choice of rental car.
However, contractors do need to document and justify their rental car choice, as DCAA likes to go after this area based on reasonableness.
Myth #8 – Individual Employees Do Not Need to Have Travel Authorized by a Supervisor for Each Trip
This is not true, as DCAA expects to see an estimate of the trip expense and approval by the direct supervisor for each trip.
The FAR only requires documentation and approval of exceptions like lowest airfare and lodging over per diem. We still recommend contractors have some sort of policy in place to collect travel authorization, even if it is just a supervisor email. Also, many contracts require advance approval for all travel, and DCAA has been questioning it of late.
In conclusion, it is crucial for contractors to have policies in place that address how employees approach travel, travel documentation, and how employees are trained to follow the company's travel policy.
Remember, when it comes to travel, the most important thing to remember is to document everything. Documenting now will prevent a headache during a future audit. Remember, when it comes to travel, it is incredibly important to document, document, document, document, document, document, and last but not least, document.
If you're worried about your travel policies or how you document travel, please reach out to us at Redstone Government Consulting. We are happy to assist you.
