B-120344, OCT 14, 1971

B-120344, OCT 14, 1971

REIMBURSEMENT FOR USE OF PRIVATE VEHICLE TO PERFORM OFFICIAL DUTY DECISION THAT RATES OF 10 CENTS TO 12 CENTS PER MILE INDICATE THE RANGE CONSIDERED TO BE REASONABLE FOR USE OF PRIVATE CARS TO PERFORM OFFICIAL DUTIES UNDER FPR FOR USE IN COST-REIMBURSEMENT CONTRACTS, REGARDLESS OF FACT IRS ALLOWS 15 CENTS PER MILE DEDUCTION.

TO NATIONAL INSTITUTE FOR COMMUNITY DEVELOPMENT, INC.:

WE REFER TO YOUR LETTER OF JULY 13, 1971, IN WHICH YOU MADE THE FOLLOWING INQUIRY:

"IN THE LIGHT OF RECENT CHANGES IN THE INTERNAL REVENUE SERVICE ALLOWANCES FOR AUTO BUSINESS MILEAGE, HAS THE GAO REVISED ITS POLICIES AS TO WHAT RATE PER MILE FOR PRIVATE AUTO USE THE GOVERNMENT WILL ACCEPT ON COST REIMBURSABLE CONTRACTS? *** "

IN A SUBSEQUENT INFORMAL DISCUSSION, YOUR OFFICE EXPLAINED TO A REPRESENTATIVE OF OUR OFFICE THAT THE NATIONAL INSTITUTE FOR COMMUNITY DEVELOPMENT, INC. (NICD), PERFORMS COST-REIMBURSABLE CONTRACTS SUBJECT TO AUDIT BY OUR OFFICE. EMPLOYEES OF NICD ARE OCCASIONALLY REQUIRED TO USE THEIR OWN AUTOMOBILES WHILE PERFORMING UNDER SUCH CONTRACTS AND NICD HAS CUSTOMARILY REIMBURSED ITS EMPLOYEES 10 CENTS PER MILE FOR THE EXPENSE OF USING THEIR OWN AUTOMOBILE. THIS RATE WAS BASED ON THE BUSINESS EXPENSE DEDUCTION ALLOWED BY THE INTERNAL REVENUE SERVICE (IRS) FOR A TAXPAYER'S USE OF HIS PRIVATE AUTOMOBILE. IN REVENUE RULING 71-412, IRS RECENTLY INCREASED THE AMOUNT FOR THIS DEDUCTION TO 15 CENTS, AN INCREASE BASED IN PART ON "COST OF OPERATING AN AUTOMOBILE," A STUDY ISSUED IN FEBRUARY 1970 BY THE DEPARTMENT OF TRANSPORTATION, WHICH CONCLUDED THAT THE AVERAGE COST FOR THE USE OF A PRIVATE AUTOMOBILE IS APPROXIMATELY 15 CENTS PER MILE. NICD HAS REQUESTED OUR OPINION WHETHER WE WOULD NOW CONSIDER 15 CENTS PER MILE A REASONABLE REIMBURSEMENT TO EMPLOYEES OF NICD WHO OCCASIONALLY USE THEIR PRIVATE AUTOMOBILES WHILE PERFORMING UNDER COST-REIMBURSABLE GOVERNMENT CONTRACTS.

WE NOTE THAT THE DEPARTMENT OF TRANSPORTATION STUDY OF FEBRUARY 1970, INCLUDED THE FOLLOWING BRIEF DISCUSSION ON THE SUBJECT OF REIMBURSING EMPLOYEES FOR COSTS INCURRED BY THEM IN USING PRIVATELY-OWNED AUTOMOBILES WHILE PERFORMING THEIR WORK:

" *** IF THE EMPLOYEE USES HIS AUTOMOBILE ONLY OCCASIONALLY AND INCIDENTALLY AN AMOUNT SUCH AS SIX OR SEVEN CENTS A MILE SHOULD MORE THAN COVER HIS OUT-OF-POCKET COSTS, TIRE WEAR, AND GENERAL WEAR ON THE VEHICLE. BUT IF THE EXTENT OR TYPE OF USE AFFECTS HIS INSURANCE RATE, OR IF IT SUBJECTS THE AUTOMOBILE TO UNUSUAL LOADS OR OPERATING CONDITIONS, THE REIMBURSEMENT SHOULD BE ADJUSTED ACCORDINGLY. TOLLS AND PARKING OR STORAGE COSTS INCURRED IN THE COURSE OF SUCH USE SHOULD BE PAID SEPARATELY AND IN FULL, REGARDLESS OF PER-MILE REIMBURSEMENT. IF AN EMPLOYEE OWNS AND OPERATES A CAR IN THE REASONABLE EXPECTATION THAT HE WILL NEED TO USE IT IN HIS EMPLOYER'S BEHALF, REIMBURSEMENT ON THE BASIS OF THE EMPLOYEE'S OVERALL COSTS PER MILE SEEMS FAIR. HOWEVER, IF THE EMPLOYEE'S FREQUENCY OF CAR PURCHASES, THE TYPE OF AUTOMOBILE BOUGHT, OR OTHER FACTORS OF OWNERSHIP OR UPKEEP ARE SUBSTANTIALLY AFFECTED BY THE EMPLOYER'S REQUIREMENTS, THE REIMBURSEMENT SHOULD BE SUFFICIENT TO COVER ALL OUTLAYS THAT EXCEED WHAT THE EMPLOYEE WOULD NORMALLY SPEND FOR HIS OWN NON- BUSINESS AUTOMOBILE TRANSPORTATION."

THIS WOULD INDICATE THAT THE FIRST CATEGORY FOR OCCASIONAL AND INCIDENTAL USE MAY BE APPLICABLE TO PAYMENTS TO EMPLOYEES OF YOUR ORGANIZATION.

TRAVEL EXPENSES IN COST-REIMBURSABLE CONTRACTS ARE PAID UNDER PARAGRAPH 1 -15.205-46 OF THE FEDERAL PROCUREMENT REGULATIONS. THIS REGULATION REQUIRES THAT TRAVEL COSTS BE BASED UPON COSTS ACTUALLY INCURRED, OR ON A PER DIEM OR MILEAGE BASIS, OR ON A COMBINED BASIS OF THE TWO, PROVIDED THE METHOD DOES NOT RESULT IN AN UNREASONABLE CHARGE. THERE IS A COMPARABLE NORM IN BUREAU OF THE BUDGET CIRCULAR NO. A-7 FOR REIMBURSING TRAVEL COSTS INCURRED BY EMPLOYEES OF THE GOVERNMENT WHILE IN THE COURSE OF THEIR OFFICIAL DUTIES. IT ALLOWS A MILEAGE RATE OF 12 CENTS PER MILE FOR THE USE OF A PRIVATELY-OWNED AUTOMOBILE IN THE CONDUCT OF OFFICIAL BUSINESS. THE TOTAL AMOUNT REIMBURSED, INCLUDING SUBSISTENCE EXPENSES, MAY NOT EXCEED THE COST OF TRANSPORTATION AVAILABLE BY COMMON CARRIER TO THE SAME DESTINATION.

WE BELIEVE THAT THE RATES OF 10 CENTS TO 12 CENTS PER MILE INDICATE THE RANGE OF WHAT IS CONSIDERED TO BE A REASONABLE RATE UNDER THE FEDERAL PROCUREMENT REGULATIONS FOR USE IN COST-REIMBURSABLE CONTRACTS. THUS, AT THIS TIME, A RATE OF 15 CENTS PER MILE WOULD BE SUBJECT TO QUESTION IN AUDITS BY OUR OFFICE.