Wednesday, February 17, 2010

Travel Costs - Documentation Required

It is well known that allowable costs for lodging, meals, and incidental expenses is limited to maximum reimbursements listed in the Federal Travel Regulations (FTR) for travel in the lower 48 and in the Joint Travel Regulations (JTR) for overseas travel including Alaska and Hawaii. Unfortunately, more than a few contractors forget that the cost principle covering travel costs also includes specific documentation requirements.

FAR 31.205-46(a)(7) states that travel costs shall be allowable only if the following information is documented:
  • date and place of the expense
  • prupose of the trip
  • name of person on trip and that person's title or relationship to the contractor
Contractors who fail to maintain this documentation are at risk of having the costs suspended or disapproved.

One of the first tests an auditor is trained to perform is to assess the availability and adequacy of documentation. Sometimes, adequacy is a subjective assessment. Other times, such as in the travel cost principle, the adequacy of documentation determination is very objective - date, location, purpose, and name/title.

Auditors will look for contemporaneous documentation - documentation prepared at the time of travel. Some contractors attemp to prepare documentation after the fact, sometimes years after the fact. There are several problems with this practice. First, auditors will consider it a high risk area and increase the level of transaction testing. Second, after-the-fact documentation preparation is time consuming. Thirdly, trying to "remember" the purpose of the trip months or even years after the fact is very difficult. Finally, sometimes, everyone who might remember trip details have left the company.

To avoid problems in this area, contractors should examine their travel policies and procedures to ensure that the required documentation is captured and maintained.

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