05.107 Business-Related Entertainment Expenditures

Vice Chancellor of Business Affairs

Updated, July 1, 2024; Updated December 9, 2013 - supersedes former Administration Policy No. ACG2.40, “Business Entertainment Expenditures”; Updated July 3, 2013; Updated July 1, 2006; Effective February 13, 2001

Internal Revenue Code; Office of State Budget & Management Budget Manual

• Internal Revenue Code
• 05.001 Discretionary Trust Funds Spending Policy
•  Entertainment Expense Pre-Approval Form

Policy Details:

1. Purpose

   To provide guidelines for business-related entertainment expenses for compliance with Internal Revenue Service regulations, university requirements, and the subsequent reimbursement of business-related entertainment expenses.

2. Scope

   This policy applies to all university departments and employees and defines the type of business-related entertainment expenditure, approval and documentation requirements, and the allowable funding sources for business-related entertainment expenditures.

3. Policy

   1. 1. Types of Business-Related Entertainment Expenditures Governed by This Policy

         Costs of a personal nature including food and/or beverages or any other personal costs related to a business activity taking place off-campus.  Business-related expenditures must be reasonable in nature and cost must have a documented business purpose.  The university cannot pay for activities that are not business-related (examples: tours, social activities, theme parks).

      2. Examples of Business-Related Entertainment Expenditures
         

         Business-related entertainment is not considered a normal operating expense; therefore, each expenditure requires additional scrutiny from university management. All entertainment costs reimbursed are subject to state audit review.

         Before engaging in any form of entertainment, determine if the type of entertainment expenditure is deemed "reasonable" and "justified” to meet the prudent person test.

         1. Prospective employees – In the case of highly recruited individuals, it would be reasonable to expect key personnel involved in the recruitment to be included in group activities, such as meals.

         2. Prospective students – Highly recruited students, such as students with special talents (athletes and graduate students).

         3. Official guests of the university – Examples would include visiting lecturers, visitors from foreign countries, representatives of research organizations, visitors from other universities, potential donors, guests assisting in the development of new programs, and business and community leaders.

         4. Social events such as holiday celebrations or retirement parties.

         5. Staff and/or faculty meetings, professional development, team building, or retreats (see university policy 05.192 Conferences, Training Sessions, Retreats, and Informal Guests of the Chancellor).

      3. Entertainment Associated with University Business

         Entertainment costs that are paid or reimbursed by the university must meet the following requirements:

         1. Expenses must be directly related to university business.

         2. Expenses which precede or follow a university-related discussion, must be associated with the conduct of university business (e.g. team building).

         3. Expenses which include a business meal require the university employee to serve as the official host. The host must be present when the food and/or beverages are provided and must submit the group’s receipt for reimbursement.

      4. Payment Request Approvals

         Requests for payment of business-related entertainment expenditures require approval from the appropriate Dean, Vice Chancellor, Chancellor, or Chancellor Designee in addition to the approval of the budget authority from whom the business-related entertainment expense is charged. These approvals are obtained as part of the payment workflow.

         Department or Division - Additional approval requirements of the Department or Division where they exist as determined by senior management (e.g. pre-approval for the expenditure). These additional approvals are usually in the form of an email attachment to the payment request.

         1. Purchase orders should be used in cases where a venue requires a contract for services.

         2. Departmental pcards can be used for these expenses with prior approval from the Director of Purchasing (See Related Link for Entertainment Expense Pre-Approval Form).

         3. Advancement may use departmental pcards for these expenses without prior approval.
            
            

      5. Required Documentation

         To avoid a taxable event, all business-related entertainment expenditures must meet IRS documentation requirements. All requests for business-related entertainment expenditures to be paid or reimbursed by the university must include a description of the business purpose and a list of internal and/or external attendees. See Business-Related Entertainment Guidelines on Travel website for more details.

      6. Required Receipts

         Original receipts and/or invoices displaying itemized charges to equal the total business-related entertainment expense (including gratuity) are required as supporting documentation for reimbursement. Tips must be reasonable and customary and must not exceed twenty percent of the total bill and/or invoice.

      7. Timely Submittal of Requests

         To avoid a taxable event, reimbursement requests for business-related entertainment expenses must be submitted within thirty days after the expense is incurred. Reimbursement requests received after sixty days, may be considered taxable income to the employee.

      8. Allowable Funding Sources for Business-Related Entertainment

         Business-related entertainment expenses may be paid from the following types of funds:

         1. Agency funds, such as custodial funds where the university acts as a custodian of the funds for another entity for purposes such as a conference.

         2. Unrestricted endowment income, such as donor-restricted gifts initially made to university endowment where earnings allow discretionary spending.

         3. Unrestricted trust funds consisting of unrestricted gifts made to the university or income available for general program enhancement.

         4. Grants or contracts that specifically provide for the payment of business-related entertainment expenses.

            (Prior approval from Sponsored Programs and Research Compliance is always required for funding from contract and grant funds, regardless of the recipient.)

         5. Auxiliary funds (such as Housing, Food Services, Parking) whose revenue is derived primarily from sources other than university departments.

      9. Non-Allowable Funding Sources for Business-Related Entertainment

         Business-related entertainment expenses are strictly prohibited from the following funding sources:

         1. General funds (state appropriations).

         2. Restricted gifts to the university designated for scholarships, endowments, or a specific purpose other than business-related entertainment. Federal indirect costs.

         3. Grants or contracts that do not specifically provide for the payment of business-related entertainment expenses.

         4. Auxiliary funds (such as Telecommunications) if the sales or service is directed primarily to university departments.