Does your department simply reimburse or set a limit per day on food, transportation, etc?
I have worked for places which used an internal travel office to get the airline tickets, car and hotel reservations, and I have used the IRS guidelines for Per Diem for everything else.
The limit for the employer is that the expense must be ordinary and necessary for the conduct of the business. If the employee is reimbursed under an accountable plan, then the expense must be ordinary and necessary for the employee to perform the services required for the reimbursing employer's benefit. There is an additional limitation on the employer's end under an accountable plan for meals and entertainment - the employer is allowed an expense deduction of 50% of the cost to the employer (reimbursement to the employee) however, the excess reimbursement over the amount deductible by the employer is not additional income to the employee - that is, the employee receives as tax exempt reimbursement the full amount reimbursed while the employer's expense deduction for the payment is limited to 50% of the amount paid for the expense.
Per diem payments work the same way - the employee is paid the full per diem amount and the employer is allowed a deduction for the full amount paid minus 50% of the amount attributable to meals.
Under a non-accountable plan, the employer may pay whatever amount the employer wants, whatever is paid is included in the employee's wages. The employee may deduct qualifying expenses as an itemized deduction (subject to the 2% AGI limitation) on the employee's tax return, but the amount of deduction for meals and entertainment that the employee may take is limited to 50% of the actual amount or the per diem amount attributable to meals that the employer paid.
The employer may pay any per diem amount it wants to, but if that amount exceeds the federal rates, then any excess (paid under an accountable plan) is treated as wages and the employee may deduct actual expenses incurred in excess of the tax exempt reimbursement. Under a non-accountable plan, the employee may deduct actual expenses subject to the 50% limitation on meals and entertainment.
It sounds as if you are trying to set policy - one thing that should be determined is who decides what is a reasonable amount as opposed to what is extravagant. That could be general limits set in the policy, it could be at the discretion of the manager reviewing and approving the expense report, or it could be the person reviewing the report in payroll or accounts payable. Assignment of that responsibility should be included in the policy. There might also be a procedure for getting approval for unusual circumstances where expenses exceed the general policy.
we reimburse but don't really have anyone that I know of that exceeds any reasonable limit. I do know our accountant/controller looks very closely at expenses and will ask what's up? if it is higher than expected. I travel once a quarter with an airline ticket and rental car and have never gotten pushback but I try to keep it reasonable and they know that. I stay with friends and family in that area and very rarely charge my employer for my food unless it its a 100% a business-related meal...but we are a small set of companies so it is pretty easy to control....
(The only time I have been questioned is when I fully bought and paid for an iPhone and charged it to the company -- the CEO had authorized it so I did it and told the accounting dept to speak with the CEO when asked)
I went to work somewhere you have all heard off and had both AP and PR reporting to me. I reviewed all AP transactions (1000 week) after the fact and found all sorts of interesting things. My "favorite" was a department manager who paid his girl friend as a soft ware consultant ($1K/week for several years) and put it on his expense report. Fun times. I made a lot of enemies at that place.
Even if you do not pay Per Diem, IRS considers It acceptable and it makes a good basis for a ceiling on maximum reimbursement. Sort of a "no more then" rule.