Government contractor travel and expense policy: a template

1. Purpose and scope

1.1 This policy covers how [Company name] pays for and repays travel and other business expenses, and how they are charged to government contracts. It applies to [all employees] [employees and contractors who spend on the company’s behalf].

1.2 It is meant to be an accountable plan under IRS rules, so reimbursements under it are not wages unless it says so.

1.3 Where a contract’s terms are stricter than this policy, the contract’s terms apply to costs charged to that contract.

Note: Your company’s decision, built on a tax rule. An accountable plan has three rules: each expense has a business connection, it’s accounted for within a reasonable time, and any excess is returned (Treas. Reg. 1.62-2).

Note: A contract term to check. The FAR cost principles are the basis for reimbursable costs on cost-reimbursement contracts and the cost-reimbursement portion of time-and-materials contracts, for indirect cost rates, and for pricing whenever cost analysis is performed (FAR 31.103, 31.102). Payments under the Allowable Cost and Payment clause follow the FAR cost principles in effect on the date of the contract, and more than 30 agencies have adopted a rewritten Part 31 by class deviation under the Revolutionary FAR Overhaul, so check which text each contract follows.

2. Ask before you book or spend

Ask [your manager] before you book any travel or buy anything this policy doesn’t approve automatically. Travel charged to a contract is approved before anything is booked. An approval covers only the amount, purpose, dates and charge number approved.

Note: Your company’s decision. In Illinois an employer generally owes only expenses it authorized or required, unless it failed to follow its own written expense policy (820 ILCS 115/9.5).

3. Charge numbers

3.1 Every trip and expense names its charge number: the contract it is for, or [the overhead, G&A or business development account] when it isn’t for a contract.

3.2 [Contracts] [Accounting] issues charge numbers. If you’re not sure which applies, ask before you book.

3.3 Costs this policy calls unallowable go to the accounts in section 11, whatever the trip’s charge number.

Note: Follows the FAR, where a contract brings it in. A cost can’t be charged directly to a contract if costs for the same purpose in like circumstances are charged to an indirect pool (FAR 31.202), so classify travel the same way every time. How you classify it is part of your accounting practices: have your accountant confirm this section.

4. Trip requests and approval

4.1 A trip request gives your name and title; the dates; the places, by city; the purpose; the charge number; and an estimate for airfare, lodging, meals and incidentals, and ground transport.

4.2 The approval is recorded with the request: who approved it, when, and what was approved. No one approves their own trip or a trip they’re on.

4.3 [Trips up to $[X]: your manager. Above that: [title]. Trips charged to a contract: also [the program manager].]

Note: Follows the FAR, where a contract brings it in. Travel costs are allowable only if the date and place (city, town or similar) of the expenses, the purpose of the trip and the traveler’s name and title or relationship to the contractor are documented (FAR 31.205-46(a)(7)), and the contractor keeps records showing that costs claimed were incurred, are allocable to the contract and comply with the cost principles (FAR 31.201-2(d)). Who approves is your company’s decision.

5. Lodging, meals and incidentals

5.1 On travel charged to a government contract, lodging, meals and incidentals are paid up to the maximum federal per diem rate for the place and date: GSA’s rates in the 48 contiguous states and the District of Columbia, the Defense Department’s in Alaska, Hawaii and other non-foreign areas, and the State Department’s abroad.

5.2 Meals and incidentals are paid [as a per diem at the rate for the place] [at actual cost, against receipts, up to the rate], at [75%] on the days you leave and return.

5.3 No meals and incidentals are paid for travel of [12] hours or less. [On a trip of more than [12] hours that ends the same day, [75%] of the rate is paid.]

5.4 When the company or a host pays for one of your meals, that day’s meals and incidentals are reduced by [GSA’s amount for that meal].

5.5 Lodging taxes are paid [on top of the lodging rate, on the room rate that is paid] [within the lodging rate].

5.6 Travel not charged to a contract follows [the same limits] [these limits: [X]].

Note: Follows the FAR, where a contract brings it in. Lodging, meals and incidentals are allowable only up to the maximum per diem rates in effect at the time of travel (FAR 31.205-46(a)(2)). On days with no lodging and on partial travel days, such as the days you leave and return, the maximum rates generally aren’t a reasonable daily charge, so a downward adjustment is normally required; it needn’t follow the federal method, but it must be reasonable (31.205-46(a)(6)). DCAA’s guidebook treats the ceiling as one daily total of lodging plus meals and incidentals.

Note: Your company’s decision, modeled on the federal travel rules. Federal travelers get per diem only on travel of more than 12 hours, 75% of the meals and incidentals rate on the days they leave and return, and lodging taxes repaid separately on the allowable room rate (41 CFR 301-11.1, 301-11.101 and 301-11.27). From October 1, 2026, GSA’s standard rate is $113 a night for lodging, before taxes, and $68 a day for meals and incidentals; GSA publishes what each meal is worth for 5.4 ($28 for dinner at the $68 rate). For tax purposes, a per diem counts as substantiated up to the federal rate for the place, if travelers record the time, place and business purpose (Rev. Proc. 2019-48).

6. Above per diem

6.1 Lodging, meals and incidentals above per diem on travel charged to a contract are allowed only in special or unusual situations, such as [a conference at its hotel] [a special event that has driven up prices near the site] [mission requirements], and up to [the federal actual expense ceiling, 300% of the maximum per diem rate] [$[X] a day].

6.2 Ask first. Your request includes a written justification: the situation, the rates you found and why a room at the per diem rate won’t work. [An officer of the company] [[Title], as an officer’s designee] approves it before you book.

6.3 Keep a receipt for each expense of $75 or more. [Finance] keeps the approved justification with the trip.

6.4 If the company expects to go above per diem repeatedly, or on a continuing basis, in one area, [Contracts] asks the contracting officer for approval in advance.

6.5 A hotel’s going rate is not, by itself, a reason to go above per diem.

Note: Follows the FAR, where a contract brings it in. Actual costs above per diem are allowable in special or unusual situations, up to the higher amounts federal civilian employees may be paid, when one of the federal conditions for actual expense exists, a written justification is approved by an officer of the contractor’s organization or designee, a receipt is kept for each expenditure of $75 or more and the approved justification is retained; repeated or continuing use in one area needs the contracting officer’s advance approval (FAR 31.205-46(a)(3)). The federal conditions include lodging at the place where a conference is held, special events that have driven up costs nearby when commuting from cheaper lodging would eat the savings, and mission requirements, and the federal ceiling is 300% of the maximum per diem rate (41 CFR 301-11.300 and 301-11.303).

Note: A contract term to check. The Revolutionary FAR Overhaul’s Part 31, which the Defense Department and many other agencies have adopted by class deviation, says “unusual situations” and has the justification approved by “an official of the contractor’s organization.” Name the approver in 6.2 to fit the text each contract follows.

7. Airfare

7.1 Book [economy] at the lowest priced fare available during normal business hours for your dates, [at least [14] days ahead when you can,] through [booking channel].

7.2 Keep a record of the fares offered when you booked [a screenshot or the booking tool’s list].

7.3 A higher fare is allowed only when the lowest would mean circuitous routing, travel at unreasonable hours, excessively prolonged travel, costs that offset the savings, accommodations not reasonably adequate for your physical or medical needs, or a fare that can’t meet mission requirements. Write down which, and why, and get [title]’s approval before you buy.

7.4 Upgrades, seat fees and change fees for personal reasons are yours.

Note: Follows the FAR, where a contract brings it in. Airfare above the lowest priced airfare available to the contractor during normal business hours is unallowable unless one of these conditions applies and is documented and justified (FAR 31.205-46(b)). Advance booking and who approves an exception are your company’s decisions.

8. International flights

On a contract with the Fly America clause, international flights charged to it use U.S.-flag airlines when they are available. If you can’t, [Travel] attaches a statement to the voucher explaining why.

Note: A contract term to check. The clause (FAR 52.247-63) goes in contracts where government-financed international air travel may occur, but not in contracts awarded under simplified acquisition procedures or for commercial products (FAR 47.405), and FAR 47.403-1 sets out when a U.S.-flag carrier counts as unavailable.

9. Ground transport and mileage

9.1 Use [transit, taxis or rideshare] where practical. Rent a car [mid-size or smaller] when it costs less or the trip needs one, and refuel it before you return it.

9.2 Driving your own car for business is repaid at [the IRS business standard mileage rate in effect on the date of the drive] [[X] cents a mile], plus business parking and tolls. Record each drive’s date, start and end, purpose and miles.

9.3 Driving between home and your regular workplace is commuting and isn’t repaid. [The drive between home and the airport for a business trip is repaid.]

Note: Your company’s decision, within a FAR rule. Transportation can be charged at mileage rates, actual cost or a combination, if the result is reasonable (FAR 31.205-46(a)(1)). GSA’s rate for federal travelers and the IRS business rate are both 72.5 cents a mile through June 30, 2026 and 76 cents from July 1.

10. Meals with guests

10.1 A meal with guests needs a business purpose, someone from the company there, and each guest’s name, company and title. It is repaid up to $[X] a person, with the itemized receipt.

10.2 It is charged to [the business meals account] [and never to a contract] [and to a contract only when [Accounting] confirms it can be].

10.3 Your own meals while traveling follow section 5. A meal with government employees also follows section 12.

Note: Your company’s decision. Whether a meal with guests is allowable depends on its purpose and your contracts; meals that go with entertainment are unallowable (FAR 31.205-14). Keeping every meal with guests off contracts is the simplest rule to apply and to audit.

11. Unallowable costs

11.1 These are never charged to a contract, directly or through overhead:

• Alcoholic beverages.
• Entertainment, such as tickets to shows or sports events and social activities, with the meals, lodging, rentals, transportation and gratuities that go with it.
• Memberships in social, dining or country clubs.
• Gifts.
• [Fines and penalties.]
• [Other costs your accountant lists.]

11.2 Each has its own account: [alcohol] [entertainment] [gifts] [meals with guests]. Submit itemized receipts, so these items can be found. A receipt that mixes them with other costs is [split by line] [charged in full to the unallowable account].

11.3 You are still repaid for approved costs in this section. They are the company’s costs, not a contract’s. [Alcohol is repaid only [with a meal with guests, up to $[X] a person] [never].]

Note: Follows the FAR, where a contract brings it in. Alcoholic beverages, entertainment and its directly associated costs, social, dining and country club memberships, and gifts are unallowable (FAR 31.205-51, 31.205-14 and 31.205-13(b)). Expressly unallowable costs, with directly associated costs agreed to be unallowable, are identified and excluded from any billing, claim or proposal applicable to a government contract (FAR 31.201-6), and unallowable indirect costs in a final indirect cost rate proposal can bring penalties (FAR 42.709-1). Which other costs are unallowable on your contracts is your accountant’s list, not this template’s.

12. Gifts and dealings with government employees

12.1 Don’t give government employees gifts, meals or entertainment [of any value] [worth more than $20 an occasion, or more than $50 a year from the company and all its employees together, and never cash or a cash equivalent, such as a gift card issued by a card company or bank].

12.2 Never offer anything to obtain a contract or favorable treatment.

12.3 Report any gift or meal given to a government employee to [Compliance] [title] within [X] days.

Note: Your company’s decision, within federal rules that bind the employee. Executive branch employees may accept unsolicited gifts of $20 or less per source per occasion and $50 a year from any one person, never cash or investments such as stock; gifts from a company’s officers and employees count together with the company’s, and a gift card from a card company or bank counts as cash (5 CFR 2635.204(a)). The Gratuities clause, where a contract has it, lets the government terminate the contract if the company offered or gave a gratuity intended to obtain a contract or favorable treatment (FAR 52.203-3).

13. Receipts and documentation

13.1 Submit an itemized receipt for every night of lodging and every expense of $[75] or more [, and for every expense charged to a contract], with its purpose and charge number. A card slip isn’t enough where the items matter, as on a restaurant bill.

13.2 A hotel bill must show the hotel’s name and location, the dates and separate charges for the room, taxes, meals and anything else.

13.3 For a missing receipt, submit a signed statement of the amount, date, place and purpose [, approved by [title]].

13.4 Photos and scans are fine. [Keep paper originals [for one year after scanning] [as [Finance] asks].]

Note: Follows tax rules and the FAR. The IRS requires a receipt for every lodging expense and for any other expense of $75 or more, and accepts a hotel bill that shows the name, location, date and separate amounts for lodging, meals and telephone (Treas. Reg. 1.274-5(c)(2)(iii)); the FAR requires a receipt for each expenditure of $75 or more above per diem (31.205-46(a)(3)). On contracts with an audit and records clause, images of records are accepted when the imaging is reliable and indexed and the originals are kept for at least a year after imaging (FAR 4.703(c)). Illinois requires a signed statement for a missing receipt.

14. Deadlines and payment

14.1 Submit expenses within [30] days of the trip’s end [, and expenses charged to a contract before [the billing cutoff]]. Claims more than 60 days old [are paid through payroll as taxable wages] [need approval from [title]].

14.2 Return any advance or overpayment within [120] days of the expense.

14.3 Approved claims are paid within [X] days of approval.

Note: Your company’s decision, within tax rules and state law. IRS rules treat an expense accounted for within 60 days, and any excess returned within 120 days, as within a reasonable period (Treas. Reg. 1.62-2(g)). Illinois allows 30 days to submit unless a written policy allows more. Check state law before refusing a late claim.

15. Approvals

Expenses within this policy are approved [automatically] [by your manager]. Approval comes first for:

• [Trips charged to a contract: [your manager] [and the program manager].]
• [Anything above per diem: an officer or designee, as section 6 says.]
• [Airfare above the lowest fare: [title].]
• [Meals with guests above $[X] a person: [title].]
• [Anything over $[X] or outside this policy: [the chief financial officer].]

No one approves their own expenses or a trip they’re on. The chief executive’s expenses are approved by [the chief financial officer] [the board chair].

Note: Your company’s decision. An approval under this policy is the company’s internal control, not a finding that a cost is allowable or allocable on a contract. That is decided under the contract and its cost principles, and the government can review it: no presumption of reasonableness attaches to a contractor’s costs, and if one is challenged the contractor must show it is reasonable (FAR 31.201-3(a)).

16. Records

[Finance] keeps each trip’s request, approval, any justification and contracting officer approval, receipts, expense report and coding together for [X] years [, or longer where a contract requires].

Note: Follows the FAR, where a contract brings it in. On contracts with an audit and records clause, contractors keep records available for 3 years after final payment or, for certain records, the periods in FAR 4.705, whichever expires first, and longer where a contract clause says so (FAR 4.702 and 4.703). Tax rules set their own periods: ask your tax adviser.

17. State and local law

Where a state or local law gives employees more, such as reimbursement of all necessary expenses or a shorter payment deadline, that law applies. [List your states and cities.]

Note: State law, which this template can’t settle for you. California requires employers to indemnify employees for all necessary expenditures or losses incurred in direct consequence of their duties (Labor Code 2802), and an agreement to waive that is void (2804). Illinois requires reimbursing necessary expenditures within the scope of employment, submitted within 30 days unless a written policy allows longer, and a policy’s limits can’t amount to no or de minimis reimbursement (820 ILCS 115/9.5). A cost that is unallowable on a contract can still be one these laws make you repay.