Principle 25

A charitable organization should establish clear, written policies for paying or reimbursing expenses incurred by anyone conducting business or traveling on behalf of the organization, including the types of expenses that can be paid for or reimbursed and the documentation required. Such policies should require that travel on behalf of the organization is to be undertaken cost-effectively.

A charitable organization’s travel policies should be unambiguous and easy to follow, and should reflect the organization’s principled judgment about what it considers “reasonable” expenditures for individuals who travel to conduct business on its behalf. These policies should include procedures for properly documenting expenses incurred and their organizational purpose.

As a general practice, travel policies should ensure that the business of the organization is carried out in a cost-effective manner. Decisions on travel expenditures should be based on how best to further the organization’s charitable purposes, rather than on the title or position of the person traveling. Charitable funds generally should not be used for premium or first-class travel, but boards should retain the flexibility to permit exceptions when they are in the organization’s best interest. Such exceptions, if any, should be explicit, consistently applied, and transparent to board members and others associated with the organization.

An organization’s policies should reflect the requirements and restrictions on travel expenditures imposed under current law. Payments of travel, or entertainment expenses for federal, state or local government officials must be reported on the organization’s annual IRS Form 990. Some travel expenses may be considered as part of reportable compensation, such as the cost of leasing vehicles on behalf of key employees if the vehicles are used for personal purposes (such as commuting). The detailed guidance provided in IRS Publication 463: Travel, Entertainment, Gift and Car Expenses should serve as a guide for managers of charitable organizations in avoiding lavish, extravagant, or excessive expenditures.