Developing a Travel Policy
Under the rules applicable to private foundations, directors or trustees and staff members may be reimbursed for reasonable and necessary expenses incurred in connection with the foundation's charitable activities. Such expenditures fall under the heading of administrative costs and will generally count toward the foundation's minimum distribution requirement, or payout.
What are "reasonable and necessary" expenses? They are expenses that are necessary for the foundation's operation and reasonable in amount. If that definition does not clarify the issue for you, do not feel alone; determining what appropriate expenses are is difficult and depends on assessment of the foundation's activities and finances and the role that employees and directors play. Remember, too, that what seems reasonable and necessary to one group of people may seem stingy or lavish to others. We often suggest that foundation managers consider whether they would feel comfortable justifying a particular expenditure to board members, the IRS, a state attorney general, or the local newspaper before they undertake it.
Difficult as it may be, however, it is important to develop—and stick to-—clear foundation policies on expenses. State regulators tell us that when they examine a foundation's expenditures, they look for evidence that foundation managers have thought about the various areas in which expenses arise and have developed a reasonable policy to guide spending. Following are some of the questions that may be raised when considering what administrative expenses the foundation will cover for employees and directors who travel on behalf of the foundation.
Meeting Locations
Meetings should be planned at sites that are convenient, economical and conducive to the work being done. The foundation may wish to set a maximum hotel room rate and provide parameters for appropriate on-site meal prices. If foundation personnel travel frequently, the foundation may wish to negotiate for discounted rates with a certain hotel chain or in a particular city. As telecommunications capabilities increase, we can expect more meetings to take place without all participants being physically present—a potentially cost-saving development.
Airline Travel
Many corporations insist that their employees fly coach class absent very special circumstances. Are there any circumstances under which the foundation's employees or directors should fly other than coach? Some factors to consider may include the length of the flight or whether the employee or director has a medical condition that requires him or her to have more space. Should the policy encourage travelers to stay over on Saturday nights or take other measures that decrease fares? Does the foundation wish to require that all travelers make arrangements through a limited number of agencies so costs can be monitored?
Ground Transportation
What methods of ground transportation will the foundation permit? Should travelers be encouraged to share rides? What will the foundation pay if an individual drives their own car? (The mileage allowances provided annually by the IRS may be a good guide.)
Spouse Travel
In general, spouse travel expenses may not be charged to the foundation (exceptions arise when the spouse is also a foundation employee or is performing necessary services for the foundation). Indeed, paying spouse travel expenses will in many cases be an act of self-dealing for the foundation unless treated as compensation to the foundation managers. A travel policy should set forth circumstances in which it will be permissible to include spouses in foundation events and how expenses are to be handled.
As expenditures by charities come under heightened scrutiny from federal and state authorities and the press, foundations can contribute positively to the charitable sector's image by stressing their tradition of responsible and effective philanthropy. Carefully considering how charitable dollars are spent is part of that effort.
