SECTION 5. APPLICATION

.01 In general An employee of a federal government agency may make an adequate accounting to the employer to substantiate the employee’s expenses (under §§ 1.274–5T(f)(2) and (4)(ii)) without submitting documentary evidence, provided the employer makes the reimbursement pursuant to a written policy that includes all the procedures set forth in section 5.02 of this revenue procedure. An adequate accounting made pursuant to these procedures satisfies the substantiation requirements applicable to accountable plans under § 1.62–2(c)(2). However, an employer must comply with the other requirements of § 1.62–2 in order to treat reimbursements as paid under an accountable plan.

1997–41 I.R.B. 11 October 14, 1997

.02 Required procedures (1) The types and amounts of expenses paid or incurred by the employee, or to be paid or incurred by the employee, must be approved by an appropriate official of the employer (who is not the employee incurring the expenses), either in advance of, or after, the employee pays or incurs the expenses.

(2) Within a reasonable time after paying or incurring the expenses, the employee must submit to the employer an expense voucher sufficient to establish the elements of amount, time, place, and business purpose (and, for gifts and entertainment, business relationship of the recipient or persons entertained) for each expenditure or use.

(3) Except as provided in Rev. Proc. 96–63, 1996–2 C.B. 420, or Rev. Proc. 96–64, 1996–2 C.B. 427, or any successors, the employee must obtain and retain for a period of four years after submitting

the expense voucher, documentary evidence for (a) expenditures of $75 or more, and (b) all expenditures for lodging, and produce the documentary evidence when requested by the employer or the Service. The employer must timely inform an employee receiving reimbursements of these requirements.

(4) The employer must conduct periodic audits of a representative sample of the expense vouchers submitted (including related documentary evidence), selected on a statistically sound basis. Compliance with the applicable requirements of the General Accounting Office is sufficient.

(5) The employer must either (a) collect from an employee any amount discovered on audit or otherwise to have been reimbursed in excess of the amount supported by the documentary evidence required under section 5.02(3) of this revenue procedure, or (b) treat such excess as

paid under a nonaccountable plan.

(6) The employer’s policy and procedures (including audit procedures) for reimbursing employees for expenses must be subject to review by an independent government authority (such as its Inspector General or the General A c c o u n t i n g Office).