Thanks to Steve Briggs of First Baptist Church of Hendersonville, North Carolina for sharing this policy from their church.
Employee Accountable Expense Reimbursement Policy and Procedures of First Baptist of Hendersonville
The following terms and conditions shall be followed by all First Baptist Church (FBC) employees:
- Each year as part of annual Budget preparation Ministers will submit a line item request for Reimbursable Expenses detailing planned usage of the funds, ie. specific conferences, conventions, mileage estimates, etc. (see 1B below). The amount approved in the budget may not be exceeded without authorization from the Finance Committee.
- Employees of FBC shall be reimbursed for any ordinary and necessary ministry and professional expenses incurred on behalf of the church, if the following conditions are satisfied:
- The expenses are reasonable in amount.
- The employee documents the time, place, ministry purpose, ministry relationship, and amount of each such expense with the same kinds of documentary evidence as would be required to support a deduction of the expense on the employee’s federal income tax return.
- The employee documents such expenses by providing the Finance Office with an accounting of such expenses, no less frequently than monthly.
- Ordinary and necessary ministry and professional expenses for ministers shall include the ministers’ use of their personal automobile, conference/training costs, dues of ministry organizations, periodicals/books/reference materials, ministry contacts/hospitality expenses, and any other ministry and professional expenses considered ordinary and necessary for them to carry out their ministerial duties. Dollar limits for these expenses shall be determined by the adopted general operating budget of the church.
- Employees of FBC shall not be reimbursed from church funds for the following, but not limited to, items:
- Flowers or other gifts purchased for staff members or their families
- Meals (i.e. lunches) with staff members. Under special circumstances, group staff meals (i.e. retirement lunch) might be appropriate. The Senior Pastor or Administrator must approve these special occasions in advance.
- Golf, tennis, health club or other recreational activities.
- Parking or traffic tickets.
- Expenses related to an activity where an honorarium is personally received.
- Air travel insurance.
- House sitting or pet boarding.
- Movies and entertainment.
- Sight‑seeing or souvenirs.
- Personal needs (laundry, toiletries, clothing, newspapers, over‑the‑counter medications, snacks, etc.).
- Expenses that shall be considered appropriate for reimbursement include, but are not limited to, the following:
- Conference/registration fees as approved by the Employee’s Department Head or the Senior Pastor.
- Coach rate airfare.
- Taxi fare, tolls and parking fees.
- A mid‑size or economy rental car up to $50 per day (refer to Rental Vehicle Insurance policy for insurance limits).
- Mileage for the use of a personal vehicle at the standard mileage rate allowed by the IRS.
- Hotel room charge up to $120 plus tax per night.
- Meals not to exceed $75 per day.
- The substantiation of travel expenses must include sufficient documentary evidence. “Estimates” shall not be allowed under FBC’s reimbursement plan.
Application for Reimbursement
- Each employee incurring expenses on behalf of the church shall prepare and submit an expense report as soon as possible, following the end of a calendar month but no later than the 15th day of the following month. For example, March’s expense report must be completed and submitted to the Finance Office no later than April 15th. Only in extreme cases shall expenses be reimbursed later than the 15th day requirement. To assure that the church maintains the IRS requirements for our “accountable” expense reimbursement plan, under no circumstances shall an expense be reimbursed if substantiated more than 60 days after the expense is paid or incurred by an employee.
- Substantiation Requirements: The date, place, ministry purpose, ministry relationship (if entertainment related), amount and budget account to be charged shall be shown for each expenditure. If the expense is entertainment or meals, there must be a disclosure of the ministry relationship (i.e. name of individual(s) entertained). The church will not reimburse an employee for ministry or professional expenses incurred without proper substantiation according to this policy. This policy relates to all ministry or professional expenses reimbursed to an employee out of their own personal funds or from purchases made by an employee by the use of a church credit card. These requirements are necessary to prevent the church’s reimbursement plan from being classified as a “non-accountable” plan. Under this plan type, employee expense reimbursements would be taxable to the employee.
- Each expenditure must be supported by a receipt. If a receipt is not practical to obtain (i.e. cash tip to baggage man at airport), substantiation of the expense must be thoroughly documented on the expense report. Expenses reimbursed where no receipt is available must be minimal in amount and infrequent in occurrence. A receipt shall always be required where an employee reimbursement is for $75 or more. If no receipt can be reproduced for this amount of a reimbursement, then the reimbursement shall not be made. If leadership elects to pay, it shall be treated as a taxable reimbursement to that employee. It is FBC’s practice of stewardship and operational integrity that all employees are expected to submit receipts with their expense report no matter what the dollar amount is for the expenditure. The church shall retain all receipts and other documentary evidence used by the employee to substantiate the ministry nature and amount of their expenses.
- The church shall not include in an employee’s W-2 form the amount of any ministry or professional expense properly substantiated and reimbursed according to the preceding paragraphs, and the employee should not report the amount of any such reimbursement as income on his/her or her Form 1040.
- If, at any time, a church expense reimbursement exceeds the amount of ministry or professional expenses properly accounted for by an employee pursuant to this reimbursement policy, the excess must be returned to the church within 120 days after the associated expenses are paid or incurred.
- If, for any reason, the church’s reimbursements are less than the amount of ministry or professional expenses properly substantiated by an employee, the church shall report no part of the reimbursements on the employee’s W‑2, and the employee may deduct, on their personal tax return, the unreimbursed expenses as allowed by law.