Policy 516: Meals and Entertainment
Section: Operating Policies
Policy Number: 516
Subject: Meals and Entertainment
Effective Date: January 27, 2006
Revision Date(s): April 10, 2013; April 22, 2015; August 9, 2017
Effective Date: August 9, 2017
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516.1 MEALS AND ENTERTAINMENT
There are occasions when extending hospitality through meals and entertainment is in the best interest of the University. The University will pay for these meals (either on- or off-campus) and entertainment expenses when they are essential to University business or are considered to be de minimis fringe benefits under Internal Revenue Service (IRS) guidelines.
The University only pays for expenses that are related to the conduct of the University's business. We rely upon our employees to exercise restraint and good judgment in committing University funds.
1.1 Allowable Meal and Entertainment Expenses
Expenses for entertainment and meals as entertainment must be ordinary and necessary and meet one of the following two tests or qualify as de minimis benefits.
(1) Directly-related Test
To meet the directly-related test for meals and entertainment expenses, you must show that:
- The main purpose of the combined business and entertainment was the active conduct of business,
- You did engage in business with the person during the entertainment period, and
- You have more than a general expectation of obtaining some benefit to the University.
Entertainment expenses generally are not considered directly related if you are not present or in situations where there are substantial distractions that generally prevent you from actively conducting business.
(2) Associated Test
To meet the associated test for meals and entertainment expenses, you must show that the entertainment is:
- Associated with the active conduct of University business, and
- Directly before or after a substantial business discussion.
A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other transaction to obtain some benefit to the University.
(3) Tax Considerations
Under IRS regulations (Publication 463), meal and entertainment expenses will be considered taxable income to you if you do not meet one of the tests noted above or if the expense is not substantiated with supporting documentation (see Documentation requirements 1.3). Expenditures for spouses and guests are not taxable when they qualify as de minimis fringe benefits under IRS regulations (Publication 15-b).
1.2 Information on Specific Areas
2.1 De Minimis Benefits
(1) Beverages/Food Items
Supplies of coffee, water, soda, juice and similar items may be purchased and provided to University guests.
(2) Appreciation Events
Units may hold events during the year to show appreciation for employee efforts. The cost of the event should be reasonable and may include guests or family members at the department head’s discretion. Approval of these events must be by the department head.
(3) Retirement/Separation Functions
Departments may hold a reception for employees retiring or separating from the University (one per employee). Reasonable expenditures are permitted. Approval of these events must be by the department head.
(4) Holiday Functions
Holiday functions are permitted and may include guests or family members at the department head’s discretion. The cost of such functions must be reasonable and may not be charged against any contract or grant fund or reimbursed overhead (F&A).
(5) Retreats and Workshops
Beverages/refreshments (coffee, juice, soda, donuts, rolls, etc.) for retreats and workshops are permissible. Meals and entertainment may be provided to employees, guests and family members when appropriate for the time and duration of the event and approved by the department head.
The purchase of alcohol is allowed upon approval of the Dean or Vice President. Charges for alcohol may not be paid from state appropriated funds or federal funds.
(2) Allowable Costs
- The cost of meals, where only USU employees are present, are generally not permitted. In situations where employees from multiple departments or areas can only meet during a meal period it is permissible to charge the cost of the meal to University funds. Good judgment should be used when expending University funds in this manner.
- The cost of individual meals to be reimbursed on a Travel Authorization does not apply here. The costs of those meals are reimbursable. However, group travel meals do fall under this policy and must have the Meals and Entertainment form completed.
- Reimbursement will not be allowed when:
- Two or more employees choose to go to lunch together to continue their business as an incidental part of the meal.
- The meeting could have been scheduled during the normal course of business.
- Business meals with faculty, staff, or other colleagues are frequent (occurring on a regular or routine basis) and reciprocal.
Such expenses are not allowable under this policy. Charges for these types of expenses on the University purchasing card must be reimbursed to the University. If not properly reimbursed, these will be considered taxable income.
(3) Spouse Expenditures
In addition to the events described above, in other situations the entertainment expenses of the spouse of a guest, employee or the official host may be reimbursed as an exceptional expense provided such meals and entertainment serves a bona fide University business purpose. Participation in official functions that require the attendance of a spouse may be considered a bona fide business purpose. Fundraising events, alumni gatherings, community and recruiting events are examples of activities that may require the attendance of a spouse. Expenditures for spouse travel (meals, airfare, etc.) are generally not permitted.
Business meals and entertainment expenses must be documented (substantiated) to meet requirements of the Internal Revenue Services regulations and prudent business practices. Documentation required by these activities is as follows: Business reason for the activity; the individuals involved in the activity, including their title and affiliation; and the dates of the activity. All costs should be supported by the itemized actual receipts (not just a credit card receipt) and listed by the provider, location, date, and amount of the expense. Additional information may be provided as it is deemed necessary.
(1) This documentation is required if the employee is requesting reimbursement or if the expense is charged to the University by a credit card or other method.
(2) If the expense cannot be properly documented, the employee must bear the cost of the business meal and/or entertainment.
A Meals and Entertainment form is not required for food that is purchased as research supplies, cleaning supplies, for culinary instruction, or as normal operating supplies (e.g. Edith Bowen lunch supplies, preschool snacks, or Dining Services food for resale). However, these types of purchases still require that the business purpose is documented and charged to the appropriate account code (i.e. Supplies, Cost of Goods, etc.).
1.4 Activity Certification
The employee and one supervisory level above the employee will certify with their signatures that the expenses were correct for the business reason indicated for the activity. If this activity is an exception to this policy, then the Dean or Vice President must certify with their signatures giving their approval of the exception.
If requesting reimbursement, use the Post-Meals Form in USU EZ-Buy. The employee needs to sign the receipts to acknowledge his/her certification.
(2) Purchasing Card Transaction
Any purchasing card transaction that includes items covered by this policy must have the Meals and Entertainment form attached to it and kept on file in the department.
If a requisition includes items that are covered by this policy, then the Pre-Meals Form must be completed in USU EZ-Buy.
There are occasions when it is in the University’s best interest to make an exception to the above policy. In those cases, the Meals and Entertainment Expense form must be signed by the Dean or Vice President.
1.7 University Providers
Units are encouraged to consider University providers of meals and entertainment products and services.