Wednesday, June 27, 2012

GSA Revises Local Mileage Reimbursement Rates

We were visiting a client late last week and noted that they were still using an old rate for reimbursing employees for using privately owned vehicles (POVs) for company business. Many companies have tied their reimbursement policies into rates published by GSA (General Services Administration). Some companies check these rates at the beginning of the year and forget to monitor them for changes throughout the year.

GSA revised the local mileage rate effective April 17, 2012 from 51 cents to 55.5 cents per mile. Companies that have pegged their reimbursement policies to the GSA rate should note the change. FAR does not require companies to follow the GSA local mileage reimbursement rates. It only requires that reimbursement be reasonable. Most companies however, tie their policies into either the GSA rate or the IRS rate (there are often differences between the two) as a matter of convenience.

Sometimes these reimbursement rates fall. In January 2010, the GSA reimbursement rate fell from 55 cents to 50 cents per mile. One company failed to make corresponding changes to their own policy until later in the year. Consequently, the company reimbursed employees for their POV usage at the old rate and subsequently charge the cost to Government contracts.

The auditors (a commercial accounting firm hired by DoE to conduct incurred cost audits) made an issue of this, claiming that the costs were unreasonable and threatened to issue a system deficiency report because the contractor had not adjusted its reimbursement rates downward. Ultimately things ended well for the contractor but there was a lot of time and effort spent in resolving the matter. The incident does illustrate the need to stay abreast of changes in regulations and reimbursement caps.

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