What constitutes reasonable "proof of payment" for reimbursement from a 501c3?
January 12, 2011 8:11 PM   Subscribe

What exactly constitutes "proof of payment" for the purposes of 501c3 accounting standards? Are my accounting demons tormenting me for their own sick pleasure, or because they actually have to?

I've been banging my head against the brick wall of a university student group accounting service. They are registered as a 501c3 charitable organization and as such have to conform to certain accounting standards.

Last year things went swimmingly: our student group would invite a speaker, the speaker would give us their ticket, we'd file that for reimbursement, and a check would get sent to the speaker.

This year, they started demanding credit card statements (with nonessential info blacked out, if desired) to prove that the flight was actually taken. Is this standard procedure, or unnecessary CYA on their part?

Moreover, in the case that's bothering me now, they won't settle for just a credit card statement showing the transaction and that Speaker X was on the ticket. The document my speaker sent me doesn't show that it's X's credit card (ie their name is in the transaction description, but not elsewhere on the credit card statement), so the request has been rejected again. They now want to see a scan of the X's credit card (with all but the last four digits blanked out) so they can match name to card transaction to flight.

This seems unreasonable to me. I provided "proof of payment"--proof that a flight had been taken and paid for--so why should they care whose card it is? Their fiduciary duty (to the university's students) has been discharged no matter who they're reimbursing, right? I mean, fraud is bad and all, but this strikes me as going beyond the call of duty on their part, given that it would be an unknown and hypothetical third party that they would be protecting.

I wouldn't argue with them, but asking for this kind of documentation is intrusive, makes me as a host feel inhospitable, and will, I suspect, make it more difficult for us to bring in invited speakers and guests. ("Visit our lovely campus! Share your personal financial information!")

I've corresponded with our accounting people and one of the student employees has told me that they're doing what they have to do, but given that their procedure was different last year I remain unconvinced that someone hasn't just decided on a very strict standard unnecessarily. (I'll confess that the fact that undergrads are handling this--with oversight, of course--makes me skeptical, too.)

Are they following proper procedure? Are they being overzealous?

If the former, I will drop the matter.

If it's the latter and I'm right, I'll take this up with higher-ups in the organization. In that case, I'd be grateful to any pointers to credible documents on accounting standards to that I could use to make my case.
posted by col_pogo to Work & Money (8 answers total) 1 user marked this as a favorite
My experience with accountants has been that they are not too interested at explaining why a certain procedure has to be adhered, only that it must be adhered to.

We can't really answer the question why. For all we know the university instituted some policy that requires these people to get the information that they are requesting. Or perhaps they are overzealous.

But what you should do is ask them to give you a rationale. If they can't give you a rationale, or the one that they give you is not satisfactory, then, sure, go over their heads.
posted by dfriedman at 8:15 PM on January 12, 2011

they are being "overzealous". I suspect that someone has abused the system, or there is someone on a bit of a power-trip.
posted by HuronBob at 8:28 PM on January 12, 2011

Best answer: The IRS is not only asking for credit card receipts but in an audit they may ask to see copies of the plane ticket to verify flights. They want both. But they definitely want to see credit card receipts. So the accountants are right IMO. This call for extra documentation is new and it sounds like your accountants are on top of things. Source: I live with a tax accountant.
posted by cda at 9:09 PM on January 12, 2011

Best answer: Accounting demons (any demons fulfilling their professional and ethical duty) are better appeased. Don't get into a battle about who is right when it comes to accounting. Your expertise as a speaker coordinator is something they can't dispute. Foreground your "it turns off speakers" concern and look for a solution that works for you both. In the event of an audit, it's their butt not yours, so find decisions they're comfortable with. But your issues are valid. I mean, if there was no reason not to collect every shred of documentation on earth about these flights, then I'm sure that'd be even safer in the event of an audit. You know these particular reasons not to, they don't.

I'm speaking from my 501c3 staff experience here. Despite many years of staff experience, I don't claim to know the answer. I do know that battles with accounting are an enormous time suck in which they'll likely be proven right. They get paid to figure out what works for the organization and the IRS, so I just provided the "what works for us" viewpoint and let them do their job.
posted by salvia at 9:54 PM on January 12, 2011

I can't say this is why, but in the past, perhaps some speakers were given expensive refundable tickets with the understanding that they could cash them, buy cheaper non-refundable tickets, and pocket the difference tax free.
posted by zippy at 10:04 PM on January 12, 2011

Response by poster: Thanks for all the helpful responses here, especially salvia on how to frame this for them and for me.

(Part of me still wants to take my ironclad reasoning and my righteous indignation as far I need to to avoid having to request all this documentation. Through all the accountants in the university! To the IRS! To the White House!

I'm starting to realize that maybe I should keep that part of me in check.)
posted by col_pogo at 11:19 PM on January 12, 2011

With the advent of computers and the internet, fraud regarding travel reimbursements has been on the increase. The change in procedures in the last year means the accountants are catching up to the technology. Do you have new accounting staff processing the reimbursements?

Having worked for a law enforcement agency, I can tell you that

- tickets can be faked
- credit card receipts can be faked
- credit cards can be faked
- speaking events can be faked

Requiring copies of several different types of supporting documentation reduces the likelihood of fraud. You can talk to the accounting folks about ways to meet their requirements without the effort being too onerous but working yourself into a lather is not going to get you anywhere.
posted by eleslie at 8:01 AM on January 13, 2011

I'm starting to realize that maybe I should keep that part of me in check.

Or you could capitalize on it by becoming an attorney. Or an accountant. Or a tax attorney! In all seriousness, the world needs people whose first instinct in a conflict is to consult the regulations.
posted by salvia at 11:56 PM on January 13, 2011

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