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Developing a Sound Credit Card, Travel, and Reimbursement Policy for Your Labor Organization

 

The Office of Labor-Management Standards (OLMS) of the U.S. Department of Labor (DOL) enforces certain provisions of the Labor-Management Reporting and Disclosure Act (LMRDA) to safeguard union assets, including monitoring of credit card use, travel and reimbursed expenses.  It is essential to have a documented set of policies in place along with measures to ensure compliance. This article will outline recommendations and other best practices to consider when establishing these policies.

Credit Card Policy

One of the first things to consider when developing a credit card policy is to determine who is going to be issued a card.  For example, will there be a card for each officer and one for the office or just one for the office?  When credit cards are used properly, they are convenient for the users and official union business expenses (other than automobile and meal expenses) that are charged to the credit card do not have to be reported to the officer or employee on the annual Form LM-2 (DOL reporting), unlike direct reimbursements, which are reported directly to the officer or employee.

Labor organizations need to establish limits for each of the officers and employees receiving cards.  A labor organization in good financial standing would be expected to pay the full credit card balance monthly so the limit should be set at no more than two high level months of charges.  For those individuals that travel more frequently, a higher limit may be established compared to an employee who rarely travels.

The policy should clearly state that the card should only be used for official union business and should not be used for personal charges.  The policy should also address consequences if there is abuse including charges posted that are personal in nature or are not adequately substantiated.  Consequences, in addition to the repayment of personal expenditures, can include the revocation of credit card privileges.

Each credit card holder must provide detailed documentation to support each credit card charge.  The line item alone on the credit card statement does not constitute proper supporting documentation.  A receipt must clearly identify who the transaction was with, what the transaction was for, and when, where and why the transaction occurred.  A restaurant receipt by itself for meal and entertainment expenses is not sufficient.  The restaurant receipt must be accompanied with an explanation of the purpose of the meeting and the parties in attendance.  This can usually be written on the back of the receipt, otherwise a separate written record supporting the expense should be attached to the receipt.  Be specific on the purpose of the meeting.  A description of “union business” is not acceptable.  For hotel bills that report line items other than lodging such as room service, also require detailed receipts.  The hotel bill alone is not acceptable.

For gasoline purchases, the DOL requires substantiation of business miles versus non-business miles and requires the officers and employees to maintain logs identifying daily the locations traveled, the number of miles used for the business trips and the purpose of the travel.

Travel and Reimbursement Policy

A sound travel and reimbursement policy should address the following areas:

  • Airfare – Need to determine if it will be limited to coach or will there be exceptions allowing for upgrades for transcontinental travel.
  • Car – Travel by car (not owned by the labor organization) is addressed when the cost of using an automobile after applying the standard Internal Revenue Service (IRS) mileage rate exceeds the cost of coach travel. The policy could specify that any travel by vehicle that exceeds the cost of coach airfare requires Board approval prior to incurring the additional cost or simply state automobile costs that exceed the cost of coach airfare will not be reimbursed.
  • Rental Car – Costs are usually allowed only when the cost is less than taking a taxi. Reimbursement will only be for the allowable travel days; however, for travel of more than three days, weekly rates may be comparable.
  • Spouses – The policy could prohibit the use of the labor organization assets for spousal travel or can state that spousal expenses paid by the labor organization will be approved by the executive board on an individual basis in advance of the meeting dates. Should the labor organization pay for expenses on behalf of a spouse, the amount is taxable to the officer or employee of the spouse.
  • Lodging – Determine whether the organization wants to establish limits on the daily cost of lodging.
  • Alcoholic Beverages – Policy can be silent regarding this matter, restrict the number of drinks to one or two per meal or prohibit the consumption of alcohol entirely.

­Handling Out-of-Town Expenses

Other than airfare and lodging, a labor organization’s policy should state if it will provide a daily per diem for meals and incidental expenses or if the employee is required to account for these expenses for reimbursement.

Using a per diem to cover meals and incidental expenses requires establishing a daily limit amount for the number of travel days.  A per diem allowance would need to be treated as wages with taxes taken out for per diem rates in excess of the rates set by the General Service Administration (GSA) and the Department of State within their respective jurisdictions for lodging and meals and incidentals expenses.   The Internal Revenue Service (IRS) honors the rates set by the GSA. Rates vary depending on the location of the travel and can be found at www.gsa.gov/perdiem.

The officer or employee can deduct their costs (actual costs less GSA limit) on their personal tax return at the end of the year; however, depending on the person’s tax circumstances, there may be no tax benefit for the deduction.  If the labor organization does not reduce the taxable wages by the GSA limit, all out-of-pocket expenses can be deducted on the employee’s personal tax return.

For labor organizations that do not allow a per diem approach and require a full accounting for all travel expenses, advances for upcoming travel costs are permissible and should have a stated policy.  There is nothing that prohibits labor organizations from advancing the officer or employee funds for out-of-pocket expenses such as meals, lodging (if not paid directly by the organization), taxis and other incidental expenses.  If advances are allowed, a daily amount should be determined and documented in the policy. Advances should be remitted to the individual as close to the date of travel so the payment is not construed as a loan, which is not permitted by the DOL. The accounting by the individual receiving the advance should be completed in the form of an expense report as soon after the travel is completed.  If the advance exceeded the out-of-pocket expenses, the balance is payable by the individual back to the labor organization.  When a labor organization requires the officer or employee to account for all expenses up to daily limit, the labor organization is instituting an accountable plan and the expenses incurred by the officer or employee are not taxable.

As discussed in the credit card policy section, proper documentation is required for the reimbursement of expenses.  It is recommended that all receipts be provided as the Department of Labor has no minimum dollar threshold.

Credit card and travel and reimbursement policies are a starting point for establishing consistent guidelines to comply with DOL reporting requirements.  Should circumstances change such that certain parts of the policy require modifications, policies can be amended at any Board meeting.

For these policies to work, labor organizations need to set the tone at the top of the organization to establish the proper oversight to ensure compliance.

If you have questions, or would like more information on developing a sound credit card, travel and reimbursement policies for your labor organization, please contact info@calibrecpa.com.

Written by Howard H. Simon, CPA | Partner