Expenditure Policy - 1. Policy Rationale

1. Policy Rationale

As a non-profit organization defined under Section 501(c)(3) of the Internal Revenue Code, Messiah College is committed to using institutional funds in an appropriate manner. The College engages in activities that are funded by private gifts and grants, and reconciliation of how those funds are expended are required to be on file and available for examination by the donors and auditors. All business expenses must be reasonable and appropriate given the position of the employee and purpose for the expense.

Because Messiah College must follow IRS laws and regulations in connection with expense payment and reimbursements practices, its expenditure policy is designed to meet the requirements of an “accountable plan” for business expenses, reimbursements, and allowances (see IRS Publication 463).

Accountable Plan: An accountable plan is a reimbursement arrangement that meets three criteria:

  • Expenses to be paid or reimbursed must have a business purpose and must be incurred in connection with an employee’s position at the College.
  • Expenses to be paid or reimbursed must be adequately accounted to the employee’s supervisor within a reasonable period of time.
  • Any excess allowance or cash advance must be returned to the employee’s supervisor within a reasonable period of time.

Reasonable Period of Time: The definition of a reasonable period of time depends on the facts and circumstances of the situation. However, regardless of the circumstances, actions that take place within the following time-frames will be treated as occurring within a reasonable period of time:

  • An employee adequately accounts for their expenses within 30 days after the expenses were paid or incurred, or within 30 days of returning if expenses involve travel.
  • An employee returns any excess allowance or cash advance within 15 days after the expense was paid or incurred. An excess allowance or cash advance is any amount an employee is paid that is more than the business related expenses that were approved and adequately accounted for by the employee’s supervisor.

If the employee meets the criteria for an accountable plan as outlined above, the College is not required to include any advances or reimbursements in the employee’s taxable income.