Good morning, this is the third Government-wide Travel Advisory Committee (GTAC) meeting.

The first thing of order that we discussed on the last administrative call is that we would review and submit the recommendations from the first two meetings we've had thus far; on per diem and conference definition - internal controls. I summarized and shared a two-page PowerPoint, basically, straightforward and asked for feedback and I didn’t get any. I'm wondering if we should review that one more time and see if there’s anything that needs to be updated or changed before we provide this to GSA. I guess I'm asking my fellow committee members a ‘yes’ or ‘no’ on that.

I think we need to review it quickly. But that would be my suggestion.

To review it again?

Yes.

Okay.

Has everyone had a chance to review these recommendations?

This is Marcerto. The draft comments are due to GSA by the end of this month. We sent the draft notes and the information out before Christmas. That was a sufficient amount of time to do this. Can I ask everyone to please review the notes by the end of this week?

Yes, reviewing the notes that Marcerto Barr said. And the summary that I sent to everybody and a two page PowerPoint. The notes are very long. You will have to read through those. But the summary is what I put in the two pages of slides. To Marcerto’s point, we will not go over the notes on the phone. If anyone does not have the PowerPoint slides I sent, just shoot me an e-mail and ask me to send the PowerPoint again and I will be happy to. We need to confirm back to Marcerto by the end of the month, correct?

Yes.

All right. Good. So let’s just begin the agenda since we have some present with us.

We are talking about meals and incidentals, so let’s get straight to the presentation. Jill Denning, the per diem program manager will cover and review how meals and incidentals are established, which will include the methodology and how this coincides with the policies addressed in the Federal Travel Regulation (FTR). This will be followed by a presentation from Greg Bateman, Director of Acquisition Policy for Microsoft. Should we get started with Jill?

Jill Denning: I'm actually very glad this meeting happened today. It was supposed to happen back in December, so I’ve been ready to talk about meals for a long time. I’m looking forward to your comments. Paul, you actually laid out the presentation really well. In a lot of ways, it will be like the lodging one was, in July. Basically, I will start out by going over the methodology, how we set the meals rate and then go over the parts of the FTR that relates to the meals and incidentals policy. With that, I will go ahead and get started.

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The first couple of slides are the same as what we talked about in the lodging. Once again, a lot of times I find that when people refer to the term per diem, they think they are talking about meals and not lodging. I found that interesting when I first started doing this. Actually, when we talk about per diem, we are talking about three different things, lodging, meals, and incidentals.

We talked about lodging back in July. Today, we are talking about meals and incidental expenses. Once again, I will talk about the methodology and how we set the rate for breakfast, lunch, and dinner. I had the question about eating more than three meals a day, which we do not regulate. In general, we are talking about breakfast, lunch, and dinner. If you eat more than three meals a day, the daily allowance may or may not cover it. As far as incidental expenses are concerned, people always have lots of questions about what that means as well.

Incidental expenses are fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Just as lodging rates are set by locality, so are meals and incidental expenses (M&IE). Once again, meal expenses are for breakfast, lunch, and dinner, which include gratuities and taxes. Specifically excluded are alcoholic beverages and entertainment expenses. I know that is common in the private sector, but we do not reimburse for those in the Federal sector. The meals per diem rate is just for one person, one day, per trip. Although you can certainly volunteer to pay for everyone’s meal during a particular gathering, you will still only receive one M&IE allowance.

Jill, this is Brian Scott. If we have questions about your presentation would you like us to wait until the end or is it okay to ask you why you want?

If it's just a clarifying question, then feel free to ask any time. If it is something in more depth that will be discussed, it may be better to wait for the group --

I was wondering what the definition of entertainment expenses may be -- might be.

In regards to meals, what are entertainment expenses for meals?

Well, I think that it comes from the IRS.

There aren't any (allowed) and that is the point.

Right. Taking clients out to a movie or a baseball game is typically what people do in the business world to entertain their clients, which is not allowed in the Federal sector.

Okay.

Okay. If you read IRS publication 463 for the business deductions, I think it may explain a little better.

A little history. I don't have as much history for meals as I did for lodging. Kathy you may remember you talked about this back in your previous federal advisory committee. At that time, I don't think it was talked about a whole lot, but in the summary, the previous committee

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recommended that meals should probably be reviewed every five years, which is more or less what we do today.

Every three to five years is what we do, basically. Our last survey was conducted in fiscal year 2009. It has been five years at this point. We are scheduled to conduct another study this spring/summer. Back then, the rates were effective for fiscal year 2010. Actually, most of the rates that we set for fiscal year 2010 are still in effect today almost 5 years later. There are a few locations, or new locations that came up since then, of course. And we have a very small number of special review areas. Let's say like 95% of the M&IE rates are five years old at this point. And we get very few complaints; maybe one or two per year.

Back then, in 2009, we actually surveyed 9300 restaurants for 502 locations, which was very thorough. At the time, we had 402 nonstandard areas. Now we are down to 365. We also did a separate M&IE rate for all standard continental United States (CONUS) locations, which was convenient because this standard CONUS rate was the same as the lowest rate for our nonstandard areas. I'm not sure the data will show that the next time we do it, but it was very convenient. Once we did the study, it was recommended and accepted to have six different tiers for the continental United States with the lowest one being $46, which is also the standard CONUS rate. Places like New York, DC, are in the $71 tier.

Within the six tiers, the incidental rate is bundled into that. The incidental rate is currently five dollars per day. In other words, in the $46 tier, $41 is the meals rate and $5 is the incidental expense (IE) rate.

Now I will talk specifically about the methodology and how we actually get to those six tiers. The philosophy is similar to the lodging. We look at mid-tier establishments. Taking out the lower end fast food places and higher, fancy, fine-dining places, we get the average rates for three different meals, once again if you eat more than three, we only average three. Within those meals, we get two different types of samples of meals. For breakfast it could be pancakes, for one meal and then eggs for another meal, so to speak. For lunch it could be Caesar salad and a hamburger. We take local taxes into account, which are usually single percentage digits or low double digits. And we do add a gratuity of 15%. Once we get those three items added up, then we will add the five dollars for incidental expenses.

What happens then is, where do we place it? Once we add in all of those four items, if it is less than $51, we round down to the next lowest tier. It is a way to save money. The cost saving is intentional that way. For example, if the average comes to $50, we will round it down to the $46 tier. If it hits $51, on the mark, then it will be $51. If it hits $55, once again, we will round down to $51. If it is greater than $71, then it will be $71.

The types of restaurants we use, this goes back to, you may remember I talked about the Memorandum of Understanding created back in 1982, where we divided the responsibility for who sets the rates. There's a little bit about the meals in that Memorandum of Understanding. This is where a lot of the methodology still comes from.

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The primary restaurants we look for are two and three-star or diamond full-service type restaurants that are rated by either AAA or the Forbes travel guides. When we did it last in 2009, it was still owned by Mobil and they sold to Forbes.

Secondary, we look for chain type restaurants, Applebee's, Cracker Barrel, places like that. And the third type of restaurant we look for are the family dining type places. The word café pops up a lot. When you break it down, we find a lot more examples in the secondary and third level. When we did the survey back in 2009, about 70% of our sample was based on the second and third type restaurants. Only about 30% was in the two and three diamond full-service type restaurant. That's something to keep in mind. It is much more weighted toward chains and local family than two and three star.

I will describe what two and three star means according to the AAA. Two diamond establishments are called relaxed family fare. Enhanced food presentation, common garnishes, more home style type food. You have to look up by cities to see what earns diamond rankings. They won't do a chain, for example, like one-size-fits-all. You have to look up by city what they mean by two and three diamond. Here in Washington, DC I picked out three that I thought you may recognize. Hard Rock Café would be two diamond. I think the other place that everyone seems to go to in DC is the Old Ebbitt Grill. Not too far from where we are in the room today.

So a three diamond is skillfully prepared food. Not that I assume a two diamond is unskilled, but three diamond says skillfully prepared. Reflecting current trends, and also adult oriented, not I assume where school groups go. Here in Washington DC, that would be places like Gordon Biersch which I believe is a chain that originated from California. McCormick and Schmicks is a seafood place. Maggiano’s Italian Grill is an Italian place. That would be the cost level type of restaurant that would be included. The two and three diamonds only made up about 30% of the sample.

I wanted to show you an example of a real live, behind-the-scenes view from one of our locations. I picked this one because it is pretty short. I could fit it onto one screen. This is Big Spring, Texas, which was one of our new nonstandard locations starting in October, fiscal year 2014. You will see on the left the different types of restaurants that met one of the primary, secondary, or tertiary types. There's only one two diamond at the bottom, KC’s steak and seafood house. And there was only one chain, Denny's. I don't think that's 30%, but it roughly shows you that this is an example where local restaurants make up more of the majority of what we use in our sample. Back in 2009, they did the survey by telephone. Now they can look at a lot of places online so they don't have to necessarily call. What we did was take the average cost of three meals. Obviously, not all of the places will serve all three meals. For example, Denny's would. This location has a 8.25% tax. And when we added the 15% gratuity, the average came out to be $42.47. Then we add the five dollars for incidentals. So it turns out $47.42. Then we rounded down to the next lowest tier. It turned out to be a rate of $46 for Big Spring.

That is basically how GSA sets the meal rates. I will go through an example of what they do in the private sector. You may be familiar with Business Travel News. I think they update this every year. If you want to look at it online, there's the link to look at the top 100 cities that they

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did the survey for. If I were to summarize it, I would say pretty much everywhere has rates higher than what we have. You can see the US average for all meals, it was $85. The highest tier we have $71. Only five locations in their top 100 were less than our top-tier of $71. The next two slides, I will show you what the differences were in the methodology. You will get an idea as to why the prices are a little bit higher for what they did for the private sector. Just two examples of the cities, New York, our rate is $71. The BTN average found $115 for New York. Quite a difference. And Orlando, our rate is $56 and theirs is $71. A lot of them did have differences that were pretty wide, I'd say.

Jill, this is Brian Scott again. I just want to make sure I understand you correctly. This Business Travel News (BTN) that you are using as a comparison, you said, this is what private industry does. Is the BTN methodology just a sample of prices or is it a sample of commercial companies and what their best practices are?

Jill: It's my understanding that this is a sample of prices.

Okay, so it's not a sample of what private industry is doing. It's just a sample of what prices are around the country.

This is Pat Moscaritolo. I believe it is the study. And I believe GBTA may also participate in this.

That is their magazine, right?

In a lot of ways, the BTN survey is similar to ours. I think they have a contractor that goes out and does it for them. They do list most of their methodology. If you compare a little bit, they list the different types of food choices that they use. Frankly, lunch and breakfast are similar to what we would have our folks go out and try and find. With the difference being with lunch, we don't include dessert so a slice of pie would be out. The big difference would be dinner, we would not have our folks get prices on the most expensive meals on the menu, like filet steaks. We don't include alcohol. We would include soft drinks or tea or something like that. We don't include dessert. What we would include for dinner is, soup or salad, vegetables, bread, and once again, back to the memorandum of understanding in 1982, either beef, chicken, or fish type entrées. It depends on what the restaurant offers. I don't think dinner choices explains all of the price differentials we found. BTN does not include tax, and we do. So you would think the results may be a little closer because of that. But that is not the case. They do not include incidental expenses. So again you would think that ours would come up a little bit closer, but that is still quite a gap. They do include 15% gratuity, like we do. The only thing they do not talk about when they explain their methodology was the restaurant type sample. I have a feeling that is the majority of the difference. I have a feeling there were a lot more three diamond restaurants surveyed. I'm hypothesizing at this point when I say that. I have a feeling mom-and-pop cafés are not as heavily weighted in their survey as what it is for us.

With that, are any clarifying questions needed? The second half of the presentation will be about the Federal Travel Regulation (FTR) rules.

Are you going to go over how incidentals are computed?

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I'm sorry. Yes, incidental expenses are computed by taking the consumer price index and multiplying it from whenever the last time was set. I think the last time prior to 2010 was 2004. The incidentals rate was $3 in 2004. So they took consumer price index percentage per year each year and multiplied it from the base of $3. I think the final amount was rounded up to $5.

Before you go, I want to clarify one thing; on the per day range from $46-$71. If I were a government employee and I were to go to a conference where they serve breakfast and they served lunch at the conference, would I be free to spend up to $71 at dinner if I were to go out to a restaurant?

No, and that is in the second half of the presentation. It is one of the rules of FTR. But, no.

Okay.

Great question.

Yes, it’s a great question because if you are attending a conference, where is that listed in terms of what is provided in the conference and how do you, what do you use as far as your M&IE if meals are provided as part of the conference. It would probably be defined later on in the presentation. But from a private perspective, from one company's perspective, we have limits that are close to that per diem. We are at $60 per day. It is broken down to a maximum of $15 for breakfast, $15 for lunch, $30 for dinner. No alcohol. And those totals are inclusive of tax and a tip of up to 20%.

Okay. That is $60 per day.

Yes, broken up. But I personally cannot spend more than $15 on breakfast. And I cannot spend more than $15 on lunch. And I cannot spend more than $30 on dinner. And that is true for the entire company.

That is just one company. For comparison purposes, I know that later on we are going to get Greg's private sector update. I just thought it would be valuable to look at that comparison as we go through this.

All right. Let me know.

Jill: I think some of it will become clear in some of these rules. I'll remember to point that out. I think there are roughly six or seven different sections that relate to M&IE. And I have put them in order. The first one is, do travelers have to reduce per diem if they receive a complimentary meal provided by an airline or hotel/motel. Right now, our travelers do not have to do deduct from their M&IE expenses. These days you don't get too many meals on airlines. I know hotels, in particular the midscale type establishments, offer complimentary free breakfast. Some like Residence Inn have a nice hors d’oeurves at night which can be dinner. Right now, the policy says you do not have to deduct if you get food like this. This is not at a conference. It would be a hotel or airline. I'm sure that will have lots of discussion once we go through them all.

This next one is long, there are three different parts. This is your question, Paul. What rate will I receive if the meal is furnished by the government or included in the registration fee. There are

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three different sections. I didn't have room to put them on one slide. The first section, section A, you can read it word for word later. Basically, what this says is you do have to deduct the appropriate amount from the chart. The chart is found on the website www.gsa.gov/mie. It has $46 through $71 tiers in five dollar increments. It has corresponding numbers like what you are talking about for each meal, Brian. For example, if you go to a conference and the breakfast or continental breakfast is provided, you may have to deduct seven dollars, depending on what the tier amount for the particular location where you are going. Since there are just six different meal rates, this master chart doesn't list every city. Find out where you are going first, say Washington DC, then you correspond to the appropriate column ($71) and you deduct from that $71 column. There is also a chart for outside of the continental US. That is contained within the FTR Appendix B. It is not used as much, but every now and then, somebody needs to use it. For some reason, we maintain this chart instead of State Department or DoD. We have their input, but it has not been updated in a while.

We also explain what happens on the first or last day of official travel when meals are provided, which confuses a lot of people.

On the first and last day of travel, they only get 75% of the rate. For the $71 tier, you would only get $53.25. So what happens if you were at a conference where a meal, say breakfast is provided on the first or last day?

You would actually start with the 75% amount and then you deduct the full amount located on the chart (www.gsa.gov/mie). The ending balance would never be a negative number because at a minimum, you would always receives the daily $5 daily IE allowance. The electronic travel systems will calculate this automatically.

Your agency can allow you to claim the full M&IE and not deduct for a few reasons, such as if you are unable to consume the meals because medical or religious beliefs. That happens a fair amount. If you are at a conference and you cannot eat the provided meal for those reasons, then the agency can reimburse you for what you can eat outside of the conference. You do have to let your supervisor know beforehand, not after the fact.

You should make a reasonable request to the hotel for alternative meal choices because of medical reasons. Finally, if your agency agrees, there are times when you may not be able to attend the meal because you are doing other business at the conference. If you cannot eat the meal because of the business, then you can get reimbursed anyway.

Right now, you do not have to provide receipts for each and every meal. Travelers will only be reimbursed up to what their maximum daily M&IE allowance is. A potential way to save money is to treat the per diem the same way we do for lodging reimbursement. This would mean the traveler will be reimbursed the actual cost of each meal not to exceed to daily allowable amount.

The last couple of slides explains what allowance you will be paid for M&IE. We talked about this a little bit. If it is, once again, the first and last calendar day of travel, that is paid at 75%. So if you are staying over two calendar days, say if you come on Monday and leave on Tuesday, you get 75% for each of those days. However, if it is 24 hours or more, then you stay for a

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week, Monday, you get 75%. Tuesday, Wednesday, Thursday, you receive 100% of the rate, and on Friday when you go home, it would be 75%. My colleagues filled me in on how we come up with the 75% number. You may remember prior to this, we were reimbursed based on quarters of the days.

So if I left at 5:59 a.m., and I was gone all day, I would get 100% for that day. I think that was determined a long time ago to be very inefficient. And people gamed the system by saying they left at 5:59 (1st quarter) instead of 6 a.m. (2nd quarter) and things like that. So that's when we moved to the calendar day approach where we do not make people write down the exact time. And it will all even out over the long run. So it was assumed that at least one quarter or one meal per day on your travel day, you are probably going to eat at home. On the day you leave, you probably eat breakfast at home. When you come back, you probably eat dinner at home. That's where the three quarters or 75% -- that's how this is determined, and it is still in place today.

This is Dane. And what we found was when we were submitting the manual vouchers, you literally had to list every single meal. And it depended on when you ate it, whether you've got a late breakfast or early lunch or whatever it is, what your reimbursement amount was. Start looking at prices to do the amended voucher. And it got to be so complex and literally -- when I used to travel, I used to keep a three by five card to write this all down so that when I got back you could remember what you did. When we started transitioning to the automated system, that's when we worked with GSA to come up with 75%, which is typically more than fair.

Jill: There are some people who complain about getting 75% if they are traveling -- leaving the airport at 6:00 a.m. and working all day. I believe at that the time the study was done, most people are leaving and coming home within their duty or regular working hours.

Yeah. This is Dane again. To go with this plan, you have to have an accountable plan. You know what I mean? So this kind of fits the criteria for accountability.

The answer to the question “What M&IE rate do I choose?” is not always straightforward.

If you require lodging, it's the rate that's applicable to your temporary duty (TDY) location or stop over point. For the most part if you're going from Houston to Denver and Denver is your TDY location, you get the Denver rate. You don't get your home location rate so to speak. And if it does not require lodging, the travel is more than 12 hours, but less than 24, it's the rate that's applicable to either your temporary duty site, or the highest rate applicable when multiple locations are involved. So if you're traveling to different locations and the total is less than 24 hours, you can choose the highest one. If the travel is more than 24 hours and you're traveling to a new spot at midnight, that's the one you will use. Once again for example say you spent all day in Houston and then at night you go to Denver. You would still use the Denver rate. And then once again on the way back, if you're returning back to your official location, once again you don't use your official location. You use the location for the previous day of travel.

You actually can reduce the per diem rate for a particular location, which is the ultimate money-saving practice.

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If the agency is going to reduce per diem, they have to determine in advance that the lodging or meals will actually be lower than the per diem rate. And they have to let the traveler know on the authorization what the rate will be before they go on travel. A lot of agencies do have more specific agency policy and it can vary I think 55% to I think I heard 65, 75% usually for extended stays.

This is Pat. How often does that occur? Does somebody track this data?

Jill: How often -- I don't know off the top of my head. I think it is fairly common that it happens. Certainly on extended stays, I think it's almost automatic.

Is it DoD where it happens the most?

This is Dane. Yeah. We do reduce per diem frequently for a lot of different reasons. If you're inside 30 days, the most frequent one would be either government quarters are provided or contracted, especially for training. A lot of these people come in and there's not capacity on the installation. In other words you have a spike in the training days. And there is commercial lodging almost always, literally for about half the price. I mean I've looked at some of this. You get over 30 days, it depends on the situation and circumstances, and we have the flexibility to reduce it. The general rule is we can be more restrictive than the FTR but not more liberal.

But we actually have been running the math. And what people are actually spending once they get over 30 days to about 180 days in there, is about 73% of per diem so we are actually working with the services to set that as the standard, looking at 75% of per diem.

And does that apply to the DoD civilian employees? Does it apply to the contractors as well?

No. Not contractors. Although -- I have to qualify -- there are some contracts out there that say some things that you will more or less use the rates -- that's a contract issue. It's not a requirement for a contract to say that. But I would say most large defense contractors stay close to per diem. Some of them are even traveling with DoD and that sort of thing.

Dane, correct me if I'm wrong, but I don't know if there's a real figure on the spend of stays over 30 days for the government agencies or the DoD. I think you've done some studies, but I think there's not an actual number to say how much of that spend or that travel lodging spend is 30 days or more. I think that's correct, right? We don't have that figure?

I have some 2012 numbers. I didn't bring all of it with me. I apologize. But if we want to be at 75% per diem at 30 days to 180 days, in fiscal year 2012, we would have saved $18.7 million.

Got it. Right. But as a whole, the government hasn't probably tracked that spend? I believe. I mean, what of that annual spend is of 30 days or more, do we have a figure for that? Obviously not for the government.

And I have some qualifiers before using that figure. For example, that's all vouchers processed through the Defense travel system for which we have good data. Some are processed out. For example, we have family members that travel -- they will file a manual voucher for a thousand dollars or something, which is not even all of our spend.

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That's impressive savings. Would you say it was?

$18.7M?

Yeah.

Doesn't hurt.

Yeah.

This is Craig Flynn. Some agencies, as you just heard, DoD, looked at that a lot closer and those reductions -- it varies agency to agency.

Right.

Based on their mission, their location, based on capacity. It's not analyzed, it's not collected, government-wide. It literally depends on the agency's internal travel management as to how much they utilize that particular rule and how much they have actually analyzed those numbers. So it varies greatly.

Right. Okay. Good. Yeah. Thank you for answering that.

I just want to reconfirm one thing. Somebody attends a conference and there's a meal provided, I know there's a deduction. Then we don't follow the same rule like for example the hotel provides breakfast -- we don't get into that.

If the hotel provides breakfast as a part of the room rate, you do not currently have to deduct this meal.

If I can go back to my earlier question -- I think I missed it -- but again, what is the regulation for vetting someone -- preventing someone from spending the entire per diem on one meal?

There is not. You can spend your own money too. You can spend more than the daily M&IE allowance but will only be reimbursed the allowable amount.

But the $71 figure, just hear me out on this, someone sits at a conference, they eat breakfast, they get lunch provided at the conference, and then they are permitted if I'm hearing you right, they're permitted to go out and spend $71 on dinner?

No. If they have a meal provided at a conference, they'll have to look at that chart on our website and deduct the appropriate amount. And whatever the balance is, they can spend on whatever they like.

I think that was Rick's question. He was differentiating from somebody traveling to attend a meeting and a conference as opposed to somebody having to travel from DC to Boston, to do an audit or something like that.

The way that they deduct it is by the 75% or is it 33% for breakfast, 33% for lunch, what is the calculation to deduct what's left of their per diem if two meals are provided?

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He's referring to the conference once again, right?

Yeah. For that example --

Basically -- how we determined the numbers in the chart was from the data. It is based on what was found, so it's not necessarily a round number or percentage like you mention. I think a lot of people think it is 10, 20 percent, but it's not. It's based on actual data.

So the agency is the only one that actually tracks this. Did I miss something?

No. That's not what I said. Management of the reduction, which is allowable under the rules varies by agency. Some do it a lot in certain instances, while some don't do it at all. And some do it across the board with a very static number. So it just depends. That's the first thing. Management of that rule. The second thing is the analysis of that data and the decisions around those reductions. Some agencies don't do any analysis about that at all. And some do quite a bit. I do not collect that information from a government-wide perspective. So I can't tell you other than some anecdotal -- which agencies do it a lot or some or none.

Some of the issues about the FTR is that it's flexible and it allows agencies to manage based on their mission. For example, you have FBI traveling today to do an investigation and you have Education going to some meetings in Chicago and -- in two months, it varies by mission. But the answer to that is yes. We could be very prescriptive and regulatory with lots of exceptions. But that gets really cumbersome.

Yeah. people don't like how long the FTR is now.

This is very helpful. If I look at this, the very first column on the M&IE chart, $46.00, the maximum that's reimbursable for continental breakfast is $7, correct?

That's the deduction you take if you are at a conference and the meal is provided. Not how much to spend on each meal. If you're just on regular business travel and you get $46, you're not limited to what you can spend for any one meal, in this case breakfast. You can spend whatever you want. You could spend that 46 on one meal or not at all.

Right. Once again, this chart only comes into play if you have to do a deduction because the meal is provided at a conference, so you are not double dipping. Usually the government is paying a registration fee that includes the meals. So there's no reason for somebody to voucher a meal that was already paid for once. If you're in a location, and you get a continental breakfast or full breakfast, and there is a reason for that distinction -- continental breakfast can be pretty expensive as well. So even if you are only getting danishes or something, you still have to deduct that at a conference. So yeah, in your voucher you only deduct $7. But that does not transfer over into how much you can spend per meal on a regular trip.

And to the comments -- I don't know who just said it but somebody could spend $46 on breakfast if it wasn't a conference, correct?

That is correct.

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Is it me or does that seem wasteful?

The Government gives you the per diem and then you have to manage your money because they don't want to manage all the receipts. What its come down to is would oversight come into play? Now that you have to receipt, someone has to review it. The Government prefers to give me lump sum that they believe is fair but not excessive and let you manage your own money once you have it.

We've had some people that have actually skipped breakfast and lunch so they can enjoy dinner at a really nice restaurant, which is their personal choice. And they're still not exceeding the daily M&IE allowance.

I just know that that would not fly -- that type of behavior would not fly on the non-government side of the business. And I don't know if the other people from private or non-government companies want to speak to that.

Mark?

I don't consider us Government even though we are a government contractor. But we have stakeholders and shareholders, we operate under free-market principles. So I consider us a commercial company.

Paul: I don't have a problem. I think the crux of this is -- I don't know if Jill has finished her presentation to let her do that -- but it's really identifying again back to the mission, what are the cost savings opportunities and what are the efficiencies that we can make if any? Right? So we would probably want to look at, once this is finished, the methodology. Is it sound and efficient? Is there room for tweaking it? We should probably wait to hear the presentation from Greg to then further come up with our own views and analysis. I'm coming up with some ideas myself but I don't want to share them just yet until we hear everything. Would everyone agree to let Jill finish up?

Jill: I’m actually finished with my presentation so that's all I have to share at the moment.

Jill, you did a terrific job by the way. Very clear to me anyway.

Jill: Thank you.

This is Cindy. I have a question. With regard to all the M&IE expense, do you partner with any kind of programs? I'm thinking of Dinova as a corporate program that we partner with for restaurants and receive rebates throughout our corporate program. Have you investigated anything along those lines?

Jill: I am familiar with what you're talking about but no, we don't have any kind of agreements with restaurant companies or anything like that. We just set the rate.

Okay. So that could be, as we said earlier, maybe an opportunity to look in as far as it's not engaging restaurants on an individual basis. The company itself is a third-party that has the

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engagement and in essence you just get these rebates based on the productivity and cost that's filtered through the corporate card, through your credit card system.

Jill: Yeah. Certainly something to maybe put in your recommendations as well.

Okay.

This is Brian Nichols. Just to add to that, at Deloitte, we've looked at Dinova as well. One word of warning, there's a challenge for us anyway. I don't know if it's it translated to the federal government or not but because a high proportion of our meal expenses are part of the travel and expenses that we are billing back to clients, any form of a rebate becomes problematic for us because it's difficult to allocate the portion of the rebate back to the client that it was originally billed to. So it's a great program, but just look at that dimension of it and make sure it doesn't present challenges for you.

Lockheed utilizes Dinova too. I think we were one of the first ones to sign up for it. I think it's a great business model. There's still some challenges there, but we've we crossed that hurdle as far as -- early on as far as getting our government finance group involved. There's some other aspects of it too, but I think it's definitely something to look into because even if you don't, the methodology or the theory behind it is that Dinova can go to these restaurants and say, we have corporations or customers that are signed up, they're going to direct their travelers to meet at restaurants in the network. It's totally transparent to the traveler. All done based on their travel card. And based on the usage of restaurants the network, then Dinova gets X% -- maybe negotiated a 10% discount. They keep 5%, 5% back to the company as a rebate. The problem is incentivizing the travelers. You don't want to be too heavy-handed with telling them to go to certain restaurants. When we first signed up, we just looked at it and said even if we do nothing, we are already eating at a lot of these restaurants. We don't have to do much effort internally. We're to the point we want to increase the rebate so the challenge is trying to incentivize people to eat within restaurants that are in the network. And that's the rub too. So it's definitely something worthy to look into for sure.

It’s easy money, really and it is a program you can, if you are publishing specific restaurants already based on your markets, might be an easy way to again reduce your costs and bring value back to the program.

It's a great point. And I liked Mark’s point about not pushing specific change but participating in the network.

This is Mark. A lot of the restaurants are heavily weighted towards the small businesses, locally owned and operated mom and pop type restaurants, which is great. And the government wants to support those.

We have put some local restaurants in the network as well. One thing we found is that we've seen usage at a restaurant that we know has a lot of spend there. We've asked them to try to add them to the network. The thing is this: if there's too many companies signing up and saying it's free money, we don't have to market anything internally. The restaurants are going to catch on to that and say we're getting this company’s meal spend regardless of whether we're in the

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Dinova network or not. Some restaurants have dropped out because of that. We think Dinova has no influence over where we eat kind of thing. So it's an interesting model, but there's some challenges that are going to unfold over time. But yes, it's definitely something to consider.

One of the potential challenges would be also the tracking. And that would maybe play into if a model were to be adopted where receipts are required and there is a cap. There is this potential that it could be a little bit more manageable too because you have some backend tracking of where that expense is actually going. Where now, people don't report back where they eat or how they spend their money or if that money goes back in their pocket.

One area that we've actually found that has increased our rebate with Dinova is part of my organization is also the Event Management side. We've got some of the larger event planners within Lockheed that use catering services from some of the restaurants in the Dinova network. And that has definitely increased our rebate amount. And it's pretty seamless, the way they have it set up as well.

Are we ready for Greg?

My name is Greg Bateman. I'm joined by Gary Bramhall. We are both based in DC. My responsibility here in town is to work with government agencies on issues of mutual interest and the policy area. I want to thank you for the opportunity to brief the group.

Okay. I've just got a few slides to talk a little bit about. Microsoft's experience with our travel program. I am not a travel manager at Microsoft. I have a team here. I've been with the company for 16 years. I've been a traveler. I approve travel expenses. I have done some homework on what our corporate philosophy is and I have some facts and data points that might be useful for the group here. An overview of our travel footprint. We are a large global organization. Not as big as the US government, but we do have numerous types of travelers, as well as a lot of regulatory regimes around the world that we must work under in all the countries in which we do business.

On any given day, you'll see 5000 people from Microsoft in the air or on a train or what have you. We do have a consulting organization that does a lot of work on-site with customers and that of course the people that are working directly with customers on problems along with internal travel. As a company and as a technology provider, the intersection of travel expenditures and how that can be made more economical through technology is something that we spend a lot of time thinking about as well. And so we have done things to both make the booking of travel easier from an electronic perspective, -- little-known fact if you go back to the mid-90s, everyone here has probably dealt with Expedia. Right? It was actually a Microsoft company when it first started. We spun off Expedia in the late '90s, but we had some good experience with that. And so whether it's booking travel or using technology to avoid or enhance travel, like we are doing today with web conference and what have you, those are all things that we think about.

Let's get into some of our philosophies of travel. Clearly, as a company and as we have grown pretty quickly, I've been at Microsoft since the mid-90s where it was a high-growth mentality and

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perhaps not as much oversight on spend as you might expect. It was sort of get the job done and not really loosey-goosey but less concern about spend. Certainly 16 years later, there's more rigor, more oversight, and more looking at the spend, but we do try to balance the oversight with the administrative complexity associated with that oversight. So you could look at our philosophy as a trust but verify philosophy. We were kind of unique back in the mid-'90s. I recall briefing some government folks about how we did expense management through a browser and how you would submit your expenses electronically. Not a lot of people were doing that. And how we effectively could pay those expense reports, upon submission and sometimes after-the-fact to lower the administrative burden and that effectively is what happens today.

At Microsoft, we do audit and there are increasing numbers of audits in terms of business expenditures. And sometimes we find people not doing the right thing. But it's actually a very small percentage. I don't have an exact figure, but it's probably less than 1% of the expenditures we have are problematic and looks like somebody is gaming the system. Certainly just from my anecdotal experience, having people working for me, most people do the right thing. But we recognize that the government has a different set of oversight responsibilities and a different responsibility to the public and taxpayer which is a little bit different than the responsibility of shareholders. But perhaps our experience would be useful. Our policies key up an awful lot of -- like much of the private sector does, what tax policy and tax regulation and what is proper there. Reasonable and necessary is the guideline that our business expenses are approved under. We don't really have strict per diems. A couple of years ago when we first started being a little bit more deliberate in our oversight, we did publish and circulate guidelines for not exceeding rates for hotel stays in various cities in the country.

We did have a document there, but it was more of a target to shoot at, not a regulatory regime where you couldn't do that. If there was a business reason to exceed it, it was okay to do that. And that is also true for per diems, right? Now, for administrative ease, I think this actually keys off an IRS regulation in that we don't require receipts for expenditures under $75 a day unless it's a receipt for a hotel bill.

Various other things that we expense, cell phone bills and things like that, Microsoft the company doesn't pay the cell phone bill in total like the government does. It's an individually liable bill that we can submit our expenses against. We clearly try to stay timely on those expenses. I don't know whether the government has the same issue that some of the private sector does in terms of getting to people to submit expenses on time but that is a constant battle that we as managers have to deal with. And everyone has been through the pain of sitting down and doing your expenses. So I think that will always be an issue that's out there. But if there's a fair amount of discretion amongst the supervisors -- there's a fair amount of trust by the company in the supervisors to say, look, run your business in an efficient way. Be responsible to the shareholders. As pretty much all Microsoft employees are shareholders, because of the way -- you heard about the stock options -- most everybody has an equity exposure to the company.

In my experience, there's been relatively adequate and appropriate oversight and a lack of extravagant spending. Some people might be more extravagant -- but that doesn't happen too much. As we think about travel, though, we continually do try to actually understand what can we do to make our spend is better. And as a technology company, one of the neat things that

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we get to do is try to figure out, how do you apply technology to business domain problems and travel expenditures are one of those? So we look at data analytics and predictive modeling as very important keys to a successful travel program. And this is just to talk a little bit about some of the things that we're doing that are neat and make actually my life a little bit easier as a traveler.

We've set up an environment now instead of just calling the travel agency, and having to explain who you are, and give them your travel record, et cetera, we've integrated that stuff. So when you click the button down here to talk to MS travel, it automatically -- you get -- the agent automatically knows who you are, what is this unit you are in, what your cost center is, what travel restrictions your unit might have, and preferred carriers and that sort of stuff. The travel agency is not an in-house -- I think we use American Express travel agency. I'm not exactly sure. That changes time to time. But we pass that data over to the travel agency. It makes it that much easier when you're saying, I need to travel to this place. A lot of the booking is actually online. Should you need to talk to somebody, we've made that easy and we've made the agent have the same kind of data that the system would have if you are booking online. So that kind of just lowers friction, makes the travel experience a little bit quicker. That's been a really neat thing. We also have worked to tried to analyze the travel spend, try to figure out who's spending too much on business class travel, all of those usual things. And we continually try to be efficient in our spend. Our shareholders have asked that of us, and so we have some tools to be able to do that.

Let's see -- there was a discussion of the analysis that we do to try to inform our travel policies a little bit. Don't want to belabor -- obviously the technology part of that, but lots of people do this, lots of people have different ways of doing this. We do try to make data on fact-based decisions. We analyze the data. And that's a key point on this. None of this I think is necessarily news to this audience. That if you can make it easier to actually book the travel, that's more cost effective and it will go to the bottom line, obviously making people more productive as they are traveling. That also goes to the bottom line. Those are all things that we try to do as a company. And we look forward -- we're always looking for, how do we make that easier?

This is not really a sales pitch of any kind, but we are trying to figure out, how do you make these travel things more automatic, such as somebody asks you to go to a place and you get a meeting request. In the future, it would be neat if you could recognize somebody saying I want you to meet in New York. And would recognize that you're going to be in a particular place in New York. Here's the hotels that are close to that place. A little more seamless. In general, we share this data. Happy to open the floor here to questions about our policies. The difference here is that our travel policies -- perhaps are a little bit less prescriptive than the Government's. But happy to shed insight into what we do and why.

Greg, this is Paul. I have a question. Earlier you mentioned that no receipts are required for expenses, meals and incidental under 75. What is your cap? If somebody spends $80 a day on meals, do they have to submit receipts? What is the cap? Is there a maximum?

There really isn't a cap on meals spend. You could have three meals of $74 apiece. And you don't need a receipt. Now, if I as a manager saw that on a consistent basis, and I saw my

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people were spending $75 for breakfast, I'd start asking some questions. And frankly, what I have always done personally is no matter what -- I submit my receipts no matter what. So if there's a cab trip that I take in DC, I'll keep that receipt in my wallet and I'll put it in just because I like to be able to backup anything if they come around and audit, which happens sometimes. They will randomly audit you just like IRS does. Some of these receipts, even if they are not necessary, I'd like to have them. I've got every receipt I've ever submitted to Microsoft back to 1997. But we try to balance against the administrative burden of checking everything with the trust of the people that work for us.

So you submit it in your expense report?

We do. We do submit those electronically. We do send the receipts that are required, which are located in a central place. It happens to be Fargo, North Dakota where they are processed. I don't understand why Fargo, but it is. And I think that is keying off IRS regulations as well.

This is Rick. Knowing you don't have a cap for your meals and expenses, do you have the statistics? Are you going to show the statistics of what your average spend is?

We do have some data on that.

Based on the situation.

We encourage the senior managers, if there's five or six or 10 of us, the senior manager would pick up the tab and expense it and you'd have to list the names and Microsoft employee or partner, you have somebody from Dell or HP, you have to list their name and company name as well.

I can show some of the stats now. Of course they are on this machine connected to my corporate network, so I can go in there and actively interact and do some analysis. The people on the phone won't be able to see it unfortunately, but I can look things up here real quick.

And it also depends on what part of the country you're traveling in. If you make regular trips to New York, typically your expenses are going to be a little bit higher. If you travel to the central part of the US, that's going to be much less than you would be in the Northeast.

Which is the same thing CRDM essentially is looking at?

Right. The analysis takes that into account. The cost of expenditures and so on, what part of the country or the world in our case that you're in.

It really comes back to whether you are going to look at actual expenses or a per diem and decide the cost to manage those.

Yes. That's the thing. Microsoft has said we want to manage it but we're not going to manage it on a micro level. That is a question that I wonder, whether in the future we would move toward a hard per diem. I would be curious to know whether the other private sector entities of this group do.

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I have had, through this opportunity to engage with you folks, I've made some contacts in our travel office and talked about their experiences. It was large corporations -- Price Waterhouse and Lockheed et cetera, whether they have a similar approach to it -- you could certainly see from an accounting perspective that it could be even -- we could see more savings to the company if we went to a hard-core per diem.

Make no mistake, I intend to squeeze every dollar out of travel that we can. Year after year, there's information associated with that. Be sure you're booking your travel plans two weeks in advance, so on and so on. Take that hotel instead of that hotel. Things of that nature.

But at the same time, we don't want to be checking out $15 receipts times a thousand employees.

Right.

That's what we try to balance. And we don't want to have a lot of people there shuffling paper around.

It's not cumbersome either. It's all electronic. Again, we make use of the data that's collected as well.

The reason I'm bringing it up is this one. I would imagine on this committee we really have opposing views on how -- I would be curious to see what everybody thinks and once we hear everything.

I think the general thrust is that annual labor around tracking will lessen over time and technology will do more of the tracking.

If the company -- if the technology enables managing the per diem on a hard and fast basis as the government does and have that be not onerous to the traveler, then you would do that. Maybe you would do that. I would be surprised since there's cost efficiencies, tight focus for everybody and for us as well.

Are there any other questions that I could answer? I'm not in the travel office, but we have made contacts with those folks. For the general group, we could certainly give you more data points.

We frequently hear that government has one set of policies for everybody. There's one guideline and everybody has to follow it. Doesn't matter if you are the mail guy going for a training or an elevator service technician and specific technical information or you're a senior manager that is going to talk about the strategic plan for the next five years. Everybody gets the same allowances. Is that consistent in your corporation or do you have different levels of tolerance, if you will, because you say it's not hard and fast but the different levels of tolerance based on level in the organization?

I think it's more of the latter. I think there's more levels of tolerance. Of course it's open to abuse, but while there is a single policy that applies to everybody in the company, there's a degree of management discretion for the spend. So for instance, if you are a senior executive and you're traveling someplace and you have a reason to stay right next to the office of the

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customer that you're visiting, that's going to be a $350 a night stay, it will generally get approved. Even though it might be higher than the guidelines for staying in that particular city, there's a business reason to do it because the customer wants you at a meeting at 7:00 a.m. and to stay at a hotel that fits that per diem would be onerous. It would be across town and you might not make the meeting.

And there is a drop-down list that gives you a way to list that exception.

And you can make exceptions and that's true for travel as well. The system -- our business rules do have preference for certain carriers. Preference for lowest-cost flights. That's always up front but you can say, “I'm not going to take the lowest-cost flights I'm going to take this other one for a time reason or traveling with somebody else that's going on this and I must pick that one.” We do track those reasons, though. We do track those if we see a lot of people using that same excuse over and over again, I have personally had to talk to one of my people about this practice being a problem.

To follow that up, just a little bit and I'll be quiet and let the committee ask some of the questions they have. Do you manage on a per piece of the trip or do you manage on the big picture of the total cost per trip? The example you mentioned, lowest-cost flights, do you look at all the pieces at one time?

Right. It's really an individual expenditure. It's not really a trip. So we'll just look at the airfare period and if you buy the cheapest airfare, we're not going to necessarily tie that into cheapest airfare and cheapest hotel or the totality of that. That's something that I suppose we could do and technology would enable if you could in general -- people go up and buy something, buy airfare and the next action they take is buy hotel. One could infer that that is all within a trip. But I imagine our analysis could make those inferences. And then we could analyze further.

In your analysis, do you look at travel as purely as expense or do you look at it and weigh it against the investment?

Well, the manager discretion does that. Right?

The company I think from a pure accounting perspective looks at it from an expense perspective but somebody tells me I've got to go to Europe to go meet with this guy, to talk about something -- I've had some of my people say that to me -- my next question is why? What are you going to get out of that? There is manager discretion for that. That's not something the company enforces.

I'm trying to gather your culture.

The culture is actually relatively tolerant to the people at the lower levels of the organization. And that's probably not very different from a lot of private sector companies especially technology companies and to some extent, that's different than how the government looks at the world and government contractors look at the world. But to be fair, or to be clear really, there is goodness in moving more toward the other way of doing things. And I've seen Microsoft do that.

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When I first joined the company, there were a lot of people that would travel at the drop of a hat, would take their entire teams for off-site at someplace, which was not really necessary.

Yeah. I enjoyed the presentation and the philosophy sounds almost word for word like the government -- just a couple quick questions. On the back end, do you have any auditor compliance tools or is that just done by your accounting?

We do have internal tools that we built. I don't think we bought anybody else's stuff, but we do analysis on that and the guys that come around and do the audits of our expenditures are from a finance organization.

Very user-friendly. They're not complicated. So simple end-users could slice and dice at a local level.

It's basically -- the group is called ProHealth, the guys who work our expense management. And they will send to our local finance people a report with anomalies on travel expenses. That's how the audit starts. And then we'll interface directly with the manager and the person who incurred the expense.

Do you use a travel management company, TMC? Or do you do that all internally? All the reservations and everything?

For all the reservations, Concur Technologies is our portal vendor. And that's changed. That used to be Travelport. So I guess about a year and half ago, we moved over. And I gathered that that was predicated on some more granularity of business rules and things that Concur was able to do.

Do you require Microsoft to use Concur?

Generally yes, but I think if somebody can say like, well I saw it so much cheaper on Southwest and I could -- and have 10 minutes to get on the plane -- you can make that trip so complicated.

Right. But yes, that's the default. When we go to the internal MS travel site, it really just redirects us over to Concur technologies and that's where we do the booking and all that and we'll send you when you try to book a flight, they will say, hey, this flight -- there's cheaper options. And you have to say no. I'm not taking that cheaper option.

Do you have a travel card?

We have American Express corporate card that all the team has to be on.

If you don't use it, you don't get reimbursed?

The policy violation would reimbursed -- if you happen to put the wrong card down, put it on your Visa or something like that and it was a small amount, and you had a receipt for it and it was very clearly a business expense, I think the company would reimburse you for it, but the policy is that AMEX is the card. Thou shall use it for everything and no personal expenses. With the exception of hotel incidentals. For instance if you were staying at a hotel and you rented the

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movie and it happened to show up on your bill, nobody really does that, but you could have minor incidental hotel related things that show up on a hotel bill.

Just curious on the top of your head how many pages is your travel policy.

It's on a website. So it's probably small print.

50 pages?

They wouldn't even be 50 pages. It's not that -- it's basically you can just probably scroll down on a screen about four times, scroll all the way down and that's the travel policy.

That was a great presentation. Thank you very much. There was a question that was asked a few minutes ago that I wanted to address quickly before we move too far past it. It was about the travel policies consistent for the level of employee. Greg, you answered that. I wanted to give another perspective. From our company, I think again for comparison purposes, we have this same policy no matter the level of employee from top to bottom with exceptions to lodging. And our lodging accommodations are kind of -- I don't know if they are unique or not, I just want to get some feedback. If you are an officer or above, within our company, you're allowed to have a single room. At a conference or where there's multiple employees traveling on a trip, you are expected to have double occupancy. To where you would share a room with somebody you don't know, but you are all with the same company and we are required to book double rooms. So that's the only exception within our 14 pages of travel policy between levels of employee. So I thought I'd share that with you for comparison purposes. I think every company is going to be a little bit different but that's something that was unique that I wanted to share with you.

We do have a little bit of that at Microsoft where we do various big internal meetings several times a year. And one of those is called the Microsoft global exchange. Most of the salespeople get together and you are supposed -- if you are under a certain level, you're supposed to bunk up, which when I first joined the company, I didn’t like that very much. Once you get to a certain level, you're not required -- you can choose to if you want but you're not required to bunk with anybody else. So we do that for efficiency.

This is Paul. I'd like to see if we can get back on track since the topic is meals and incidentals methodology and we are going all across the board here, getting sidetracked. But it's good conversation, I'm just saying from a time perspective and to stay on track, if there are any questions, I think Greg, is your presentation over?

It's all over. I just put out there that if we can help in any particular data point, feel free to ask us and I'll see if our travel people can give us average meal spend or -- I don't believe they've ever -- I'm not privy to a survey that we have done on a per diem type stuff, but I will also ask that question to see if there is one.

You may not be able to answer it because it's proprietary. Your typical spend is in this range -- ?

Yeah. We have the data. We should be able to give you at least some actual data rather than what we may have found through surveys. You know?

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Great. So if there are no other questions, then we will move on to our state government presentation on meals and incidentals, expense methodology. I think Erin is going to report out, correct?

Erin: Okay. I think that everybody received the e-mail that had the spreadsheet attached as well as the other slides for the other presentations. So let me just start by telling you what I did, which is summarized in this Excel spreadsheet. Basically I spent some time with the Internet browser and looked at every state that I could find, trying to find anything published about how they determined their meals or reimbursement. I was getting a kick out of the conversation about the length of the travel policies. When you're talking about state governments, some have very concrete travel policies which were easy enough to find. Others you have to do more digging. They can be found in statutes, regulations, and directives. At least one agency and one state, the only information was actually on the reimbursement form itself. So after looking in all of those places, searching under various things like meal reimbursement, travel policy, and the like, I tried to consolidate all of that information into this chart indicating whether there was an in-state rate or out-of-state rate and how they looked at international rates, which had actually very little information on that particular category. I also looked to see from the policies indicated whether the employees had to provide proof of actual expenses. And then to the extent there was some interesting extra information, I put that into the notes as well.

Just to summarize, of the 47 states that had information on their official state website, 20 of them referred to the GSA rate, either explicitly or if you look at the rates they provided, they referred back to the GSA rate. Of the approximately remaining half that did not explicitly refer to the GSA rate, all but a handful actually had a smaller reimbursement rate in the $20 to $37 range. There were a handful that had higher than the GSA minimum. Alaska, which I think makes sense -- actually Connecticut has a range from $19 a day up to $52 a day. Connecticut has the rates established by collective bargaining. We have about 18 different unions in the state and each union bargains for its own rates for its own members. The nature of collective bargaining means it is really just a question of what other issues were more important to the people at the table. I'm not exactly sure why our corrections officers only get $19 a day, whereas some of the others get more, but I listed them on the chart. The managers get an equivalent to $52 a day which is the same as the highest bargaining unit rate.

Other than that, Louisiana and Missouri also had high end rates. They had different tiers for how they set it, and so in those situations, their low-end was pretty much was on target with everyone else’s low-end rate, but their high-end was higher than the GSA minimum but still less than the GSA maximum. I did try to spend a little bit of time reaching out to some of the states just to see if I could get any information on methodology. Unfortunately, those phone calls were not particularly successful. I only was able to talk to one person who verified that they do just -- they do look at GSA rates as a maximum, but they essentially do their own survey of their own town's meal rates. She said that they have rates that they would actually like to increase, but it's not politically feasible to have the rates as high as the GSA rates. Given budget cuts and other considerations, there's just no real appetite to raising the rates for reimbursement for the relatively small number of state employees who travel when they are cutting costs and services elsewhere. Michigan, actually confirmed from the experience we have in Connecticut, which is

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that travel is highly visible and very emotional for people. It's an easy target for the newspapers. And so we just are very careful and cautious about not looking like we're being extravagant, which I think is probably the reason why the majority of states either refer to GSA so we can just say that we're doing what the Feds do, or have rates that are lower.

Very good.

Are there any questions?

Thank you very much. I think it goes along lodging per diem too, right? The state looks at the GSA per diem very often.

I think most states do refer back to the GSA rates for lodging, although I think a number of them will also set something a little bit lower. The experience we've had is that hotels tend to set their lowest rates around whatever the government is going to be willing to pay. So if you start raising those rates, even though they are supposed to be a ceiling, they end up being the floor in terms of what's available to you.

Terrific. Erin, thank you very much. Are there any questions for Erin on the methodology of the states on M&IE?

Erin: I should just add one caveat. With the couple of states like Connecticut, California and Minnesota, that explicitly stated their rates were set by collective bargaining, I imagined that most of the other states also do have collective bargaining since it’s fairly common. Typically you could expect that if a collective bargaining agreement set a different rate, that would trump over the standard policy. But except for the few states identified, I did not have any information. There may be some anomalies not referenced in this chart for that reason.

Great. Any questions for Erin?

We could carry on and maybe summarize a little bit of what we've heard, the perspectives from the GSA, from Jill, from Greg, from the commercial sector, Microsoft's philosophy, and Erin, and maybe come up with some of our takeaways before we adjourn for lunch. Is everyone comfortable with that?

I think it makes sense to plow forward.

Okay.

I agree.

Paul: Okay. Well, again, I'll just speak from what I've heard and then we can maybe go around the horn. Everyone can share their thoughts because again it's now up to us to deliberate and have our perspectives on the way GSA sets per diem.

I personally think the methodology is sound. I don't know the implications of the survey that's done every five years. It seems a long time. For establishing the standard CONUS lodging rate, we talked about having it done every year or -- as opposed to every two or three, because

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inflation is every year, not every five years. And so we get a more accurate understanding of what the true costs are of these two and three diamond restaurants.

The methodology is sound in my opinion. I think -- I do believe that we should apply like in the commercial sector, a trust factor. I don't subscribe to the Feds taking the M&IE per diem as a lump sum. I think there's an opportunity for savings. I think if we applied the same methodology as we do the lodging per diem and look at some of the rebates savings through applying the Dinova network that Cindy and Mark referenced, that's a great idea. And then also looking at maybe through the trust factor not needing receipts up to what the daily allowance is. If you do need receipts, we take it from what the grade is. What is the allowable per meal breakfast, lunch, and dinner? I know that's a lot of administrative work, but we're all doing it in the commercial sector and a lot of this technology takes care of it anyway. I'm sure that Concur and the expense reporting tool, the government is already folio enabled. If you are having a meal at a hotel, the folio that comes into your expense report pre-populates. So you don't need to go in and put in the meal expense, etc. It's the smaller mom-and-pop restaurants and then you have to decide whether or not a receipt needs to be submitted at all, as long as you are within the daily allowance. Not providing the individual with the money so they can keep it in their pocket, just seems more ethically correct and a way of saving in the long run, the taxpayer dollars.

This is Brian.

I had one other point. Sorry. I think also with that it encourages people to use their meals and incidentals in a way that will stimulate the economy. Let's think about it. Tax revenue to restaurants and hotels, it's a good thing for the state. So there is also that positive spin that I think will have some political appeal if people use their meals and incidentals rather than pocket that as, “Okay, I get some money that I can save because I'm staying at a Residence Inn and getting my breakfast and my meal or Embassy Suites,” which they could still do and it would not deter them from getting free meals at a hotel, it just means that maybe they won't spend as much. That's where the cost savings will come into effect.

I think the real thing is you have to have a process to review the receipts to really know if they are any savings.

This is Brian speaking. With regard to the methodology and to say that it's sound, I respectfully disagree. I don't think that we've got enough of a comparison. I don't think it would be fair to take an opinion on it without knowing how it compares to what is happening outside of government. We've heard from Microsoft, but I just don't know if it's fair to take a position and say yes, the methodology is sound without any comparison.

Well, let's look at the GBTA per diem meals and incidentals average. How did they get the conclusions and what did they use to get that? We haven't seen that. I'm not going to say a methodology is sound based on a report that we don’t know what methodology they used was to get the data.

I'd like to hear from other companies too, like Lockheed.

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If I heard correctly, again, I hate to keep going back to this and I'll stop after this, but a system that allows someone to skip meals and then use their entire per diem on one meal -- I don't support that.

I'm not seeing the difference. If somebody eats a $20 breakfast, lunch, and dinner, they are expensing 60 bucks. If they personally choose to eat a $60 dinner, what's the difference?

I don't think you can tell people how to eat their meals.

That's what I'm saying. I'm like you know --

I think that you could eat a $30 dinner, as opposed to a $60 dinner and it's the Government's money, that there's a fiduciary responsibility to meet the $30 dinner threshold or limit.

But if you look at the per diem offered, they are not exorbitant. The per diems are pretty low.

They are very low.

So you are not talking about people getting wealthy off of keeping the per diem. That's the first thing. The per diems are pretty modest. Most of the corporate world would spend more money if we were in any one of these cities.

This is Cindy. We do have a per diem within our organization. And we don't dissect it by meal. We allow for the full amount. Regardless if they want to spend it all on breakfast, lunch and dinner. From our perspective, we agree with that kind of methodology.

At Lockheed, we get paid actuals, but we are held to anything that goes over the per diem amount is unallowable. So whatever it may be, your full day food per diem is 60 bucks. That's also how you divvy it up. You still have to expense for actual because you don't get paid a lump sum. You don't get paid that whole per diem amount. If you have a $15 lunch and don't eat dinner, that's all you are going to expense. If you have a $60 dinner and no breakfast or lunch, then you are within the per diem and it's allowable. But you only charge actuals. You don't just get paid a lump sum, here's your per diem, go eat your food or pocket it or whatever you're going to do. We don't do it that way.

Yeah. This is Dane. Any system you have needs to have some sort of mission flexibility. In other words, if you are someplace to do something, you may not be able to eat breakfast at breakfast time or dinner or whatever and sometimes you are working until late into the night and also factor in availability because of certain restaurants in the survey for that location, they may not be available or you need to rent a car to get there and get in the costs and so I think whatever system you have has to have a maximum flexibility. The current system actually has a lot of flexibility built in for the traveler to manage the mission while they are en route and at the location.

I think some of the accountability is also addressed by requiring the receipts and only paying the actual expenses. I think that to me is a greater concern than just allowing it to be used -- just divvied up -- $30 dinner versus $60 dinner as long as they get the actual receipt so that I can tell how many people -- how many meals were purchased that day, whether or not there was any

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alcohol, what they factored into it. That would make the process more transparent. I wouldn't worry as much about, did they spend $7 on breakfast or $12?

This is Emily --

I was just going to say, I think that was Erin that was speaking earlier. Not worrying so much about $7 breakfast or the breakdown. My concern on the requiring receipts side is just the resources that it takes. I know the time spent to look at any one of these documents properly is pretty intense already. And so to go in and have to require all of these receipts and spend the resources on that and I think might warrant more analysis.

I agree with you. The way we get around that is we require the use of their corporate card so that it is fed into the system. If it is a corporate card and it's under 75, we don't require receipts. So it motivates them to use their card more. And then obviously if they don't use the card, then you might want the receipts just to see what's going on but even then, we say if you don't use your card and it's under 25, they don't need a receipt.

We are like Cindy. We want them to just --

This is Mark -- we charge actuals but we don't ask for receipts unless over $75. But the employees do know that we require the use of the corporate card. That is auditable, to go look at actual expenses. Depending on what the expense reporting system you have, our expenses put on the card are automatically pulled over into the reports anyway. So we think that does away with a lot of the risk of an employee charging $40 for dinner when in fact he went to McDonald's and paid $6. As long as he put it on the card, it is auditable if we want it to be.

You're saying just because the costs are visible, that that stops people -- or the transparency?

Exactly.

I totally subscribe to that.

This is Erin again. In Connecticut, we have a purchasing card that has the same thing plus the added benefit of you can put controls on the card so that it can't be used for alcohol, it can't be used in certain locations. So it adds to that. And then you audit when necessary. And everyone knows that it could be audited. Even though we don't audit everything, everyone knows it could be audited. So I think it was the Microsoft person who said he keeps his receipts for that purpose. As long as everyone knows they might be the one audited, they should keep their documents.

This is Brian. If a traveler buys their coffee from a vending machine or soda or other snack food, are they going to have to start keeping receipts for that too?

To me, those are not meals. A person who chooses to have a Snickers for dinner instead of a meal? -- unless they are putting that into their incidentals.

Put it in your expense report but you don't have to submit the receipt. Whether you keep it or not, that's really entirely up to you.

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You could see it in the airport, they have vending machines that serve all kinds of breakfast. I don't know.

In DoD, we want to go with the travel card and electronic receipts. And we've even gone to the Treasury to ask permission to do that. Now the accountable plan -- the issue comes that the criteria for a receipt -- and the travel card depends on the vendor. The provider, when they give you level three data or not, they give you the details and requirements of a receipt. So we would like to get there and I think eventually all the merchants in the country will get there and I think that's where we need to go. I think that's a good recommendation. The other thing you've got to factor in is if you have a receipt, you've got to keep it -- don't quote me on this -- seven years --

Six years.

You've got to factor in costs for electronic storage and retrieval and auditability. All those sorts of things.

What if we we’re seeing some receipts of -- under certain amount not required?

You just submit your expense to your Concur or CWT tool. It's not like you have to send in the receipt after you close out your expenditures.

How is that different than what we do now?

Seems to me the difference is you don't get a lump sum payment.

How is that amount determined?

The same way it is today. The GSA has determined what the daily per diem is. What I'm understanding is saying more like the cap, like lodging there's a maximum --

Right. You can only expense up to that amount. Again, if you don't expense that amount, the government saves money. Everyone is not going to automatically spend $71 in the high rent district of New York. They may have a day where they only had $25 worth of meals for whatever reason. That's it. So then, how are you going to be able to verify that?

Because they expense it.

What's stopping them from expensing the entire amount?

That's where were getting ahead of ourselves. Not all of the systems have that capability yet.

You mean not every agency has expense reporting?

Not where it's automatically uploaded.

It doesn't have to be.

If you didn't use your smart pay charge card, it would have to be uploaded.

Even if you use your smart pay charge card, it’s not uploaded automatically right now.

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If it's not, you still have to enter it, then.

That's why it's just a lump sum. From the administrative resource side, the determination and breakdown of average cost of meals was determined. If you are eating at these average locations, that is likely to be the amount that you spend. If you choose to just eat off the dollar menu, that's your choice.

If you put in your expense report that the onus is on the individual traveler, not on other people are doing administrative work, the traveler comes back to the desk and inputs what their expenses were. If they are more than the daily allowance, it will say, “Stop, do not proceed.” The tool will tell you if it's fine.

I guess I just don't know where the accountability is for an approving official to verify what they spent.

Lockheed Martin does it. We do it. Every company does it that way.

You should check with Concur and CWT in the room because they are delivering the ETS 2 solutions and I'm sure they have to have this capability.

Not currently existing. So I think that's why I'm just saying we might be getting ahead of ourselves. These are all good points. Travelers and approving officials need to be held accountable.

What are you doing right now?

What are we doing now? I mean, that's the lump sum. If you go on a trip, you put in the days, 75% for the first and last day and than 100% for the full days.

If you had the employee enter actuals not to exceed that amount -- I mean, you are saving money.

I agree. I just don't know how you would --

What's the difference? We don't exceed the maximum. You're asking about auditability --

That's what you're doing right now. I mean, so what difference does it make? So if you ask somebody to put actuals in, if they are honest people, and they ate at McDonald's three times that day, and it is half of what the lump sum would have been and that's what the expense -- you are saving money. Right?

I completely agree with that. Yes.

I mean, you know, we trust the employees to enter what they actually spent for meals. We say not to exceed per diem. The system is set up that anything that is expensed over that is not allowable. As far as the mechanism is concerned, if you need to have it, which is noted, we want them to spend everything on their corporate card and then we can go back and compare actuals versus what they expensed. Even if you just require them to use the card, nine times out of 10, they're going to expense less than the per diem lump sum.

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That's the point here. So maybe we get to that technicality later and maybe we focus on the methodology back to Scott's concerns about not being a sound one and we need more references from GBTA on how did they come up with what their average meal costs. We also need to look at the difference between Microsoft that will allow $75 per meal and maybe Enterprise who allows $60 per day.

I still think GSA is a very fair, low per diem amount, but let's take this next step between the two and get GBTA to provide us data to support their methodology. GSA methodology is very sound.

We have to come to a conclusion to move forward. Otherwise -- first point was the methodology. Like we did with lodging, we have to agree, do we think it's sound? If we don't, we have to get data to back it up. Right? Is that what everyone wants?

I think that my personal opinion is you have two choices. Either you go to per diem and you only reimbursed up to exact receipt or leave it as is because I think we all agree it's not highly compensated and the average federal traveler is not a highly compensated employee.

Wait a minute, we're looking at trying to find efficiencies looking at the tools that are available. Government has the great technology with ETS 2. There are ways to do things more efficiently. If they use the card and promote the card, you get the tax rebate or the rebates through Dinova. And then we don't have anything to support where the money is going --

You have to look and see what the government contracted with Concur and CWT if that module is included in the price.

There's a lot of research we have to do yet before you can really make an intelligent decision.

I agree.

It is part of ETS 2 by the way. That was something that was part of the proposal or the requirements that went out in the government.

Right. And I don't think it becomes per diem excessive. But I do believe we still need data on that. I like that idea to just verify the methodology is solid. I think becomes obsessive perhaps if it is two, three, four, five, six weeks stay, then suddenly that's a lot of money. That's 70 a day for 30 days would be $2100, which is a lot money. Probably no one spends that in groceries I would imagine.

I would be supportive of initiatives to push for a government-wide long-term reduced per diem because right now it's handled differently between different agencies. And I think that's something we might be able to work on.

Right. Yeah. Something to think about but I definitely think we need more data. I agree.

I think the assumption you're making on long-term stays is that they are staying in corporate housing and so therefore they are cooking their own meals possibly and their expenses go down because they are eating in more. Is that correct?

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Right. Or even a suite hotel with a burner type of thing, I think that there's opportunity for some savings in that area. But getting back to the methodology, personally I think it's pretty solid but I do believe to Brian's point, we've got to make sure we look at where that data came from.

Can Jill give us more insight? Every five years, they are about to do the survey again.

Right.

Do we need to benchmark it? Is it benchmarking against what GBTA does to get their average meals? Across the country? I don't know -- They don't have it by NSAs.

I'm not aware of a whole lot of places that set per diem rates, period. The example I gave of BTN was the one example I found of people who actually set or formulate rates. Other than that, what I usually hear from corporate sector is more like Microsoft, they don't really have the per diem per se, so the methodology of how we come up with per diem -- I think it might be a little different than what you guys are talking about. What you guys seem to be talking about are more the rules and not necessarily how it's set. A lot of people don't set anything. Even when we're looking at the states, even a lot of them don't set per diem rate, about half of them seem to follow what we do. So the actual formulation of the rate -- maybe somebody does have that out there in the private sector, but it seems like this is more is about the policy and not the creation of the rate itself. Does that make sense?

I think you're right, Jill about the distinction between the policy and the creation of the rates. And you're also correct that I think everyone just looks to you -- at least explicitly and the others use you as a benchmark -- which to me means that it would be helpful to verify that your methodology is at least consistent. So I think the suggestion of getting a little bit more information about whatever the acronym is is helpful. I think it's also -- if it would be possible it would be nice to know if there's a way to get it more than every five years. That, to me would be a huge undertaking. I understand if it wouldn't be possible to do more than every five years. But I think that might be another way of making it more accurate.

Which will increase the expenses, which I don't disagree with, but essentially if you are going to start looking at the rates obviously through the cost-of-living increases and whatever, those rates are going to increase, not decrease.

If the methodology stays the same, I fully expect it will increase next year.

Brian, when did yours last change? Yours is $60? And you are a private entity and it's a flat fee across the country, which by the way a couple of our M&IE tiers are less than that. But when was yours changed the last time?

I'm looking at the document. And it was last revised on July of 2013. But I can't confirm nor deny that the per diems hadn't gone up or down. Based on my travel, they've remained unchanged for the last three years.

Do you know how they actually come up with numbers to set that 15-15-30 or whatever it is?

I don't but I could get that information for a follow-up if you'd like.

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Okay.

It's not the numbers themselves. It's how they get to those numbers.

Right.

Is it just random? I don't know.

Should we vote on the need to get a better understanding of where the GBTA comes up with its average meal averages? Because if we do, that has to be documented. So let's go around the room.

Rick, do you agree what want to get data from GBTA?

Yes.

Patrick?

Yes, I do.

Brian?

Yes.

Kathy?

Yes.

Mark?

Yes. Absolutely.

Cindy?

Yes.

Erin?

Yes.

Emily?

Yes.

Dane?

Yes.

Paul? Yes. So is that something then, Jill, would you be able to undertake that?

I'm not sure.

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Not sure? Okay.

Certainly, I have access to the GBTA and stuff, but I'm not sure if there's someone we can talk to about it.

Is there anybody from one of the private companies that are actively involved with GBTA?

It's Cindy.

I've used Runzheimer and American Express for benchmarking. I don't know what their capabilities are on this.

I think we should at least go to them and ask -- let's see what kind of information and feedback they give us.

Runzheimer seems to be the one that we've used most consistently from the private sector’s standpoint.

Cindy, are you able -- Would you mind doing that?

Certainly. I can check with them.

That would be fantastic. And from GBTA, maybe Jill can see what they have? So we'll talk if you need more information.

Maybe a letter with our specific questions of what we're asking from the committee would be a little bit more effective and gain more attention from them, since we have a vested interest in it.

I think again, a letter from the committee asking them specifically what we're looking for and why we're asking it would be more powerful.

Right.

Who would send that out?

The chair --

We need to have somebody on the committee to do that but probably start with a phone call to GBTA.

I think it comes from the chair.

Yeah. I'm not disagreeing with you but it can't come from GSA. It has to come from the committee.

Okay.

I'm a member of GBTA so I know I can go to them.

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This is Marcerto. I think they should come not just from the chair but also from the vice chair as well. The chair is David Flynn (Federal) and the vice chair is corporate. At least we will have a balance there.

From the committee chairs.

Okay. Mark, David and I will work on that letter. Should we do that for both GBTA and Runzheimer?

Cindy, maybe you can provide us the contact for Runzheimer? So good -- so that will give us some benchmarking and greater insight as to the GSA's methodology and whether we think it needs further review or tweaking or is on solid footing.

The five-year review -- what do you say that, Jill? Has that been in place for many years? Is that how long it’s been for every study or survey?

I don't know prior to the last federal advisory committee. I know that we have done it a little bit more than every five years at different times, but a couple years ago, we actually had it scheduled at the three-year mark and it was removed from the budget. So this is now the first year it's been back in the budget at the five-year mark.

Okay.

Yeah. That's as much as I really know.

How much manpower goes into the survey? A lot of locations? You mentioned like 5000 restaurants.

Yeah. I think there were about 9300 restaurants surveyed last time. It probably won't be that much this time because I think the sampling is going to be a little bit different. I don't think we frankly need 9000 restaurants to get accurate numbers.

That's a great point. Now we know that Smith Travel is doing this and they have subcontracted it out because it's probably not their expertise. And maybe we could identify the subcontractor of Smith Travel which has potential customers that want similar analysis done in the corporate world.

I'm not aware of what else they have done.

Maybe we can ask because if we're benchmarking, we are looking at the GBTA, Runzheimer, maybe the subcontractor has something to say about it too.

I mean, they apply our methodology that we give to them. So they are not coming up with their own methodology. They just put it operationally into place for us but I'm not sure what else they need.

What time is it? Do we need to talk about having information from a technical standpoint or do we wait? Do we need to engage Concur? CWT? ETS tool, experts? -- Mark said it was a

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requirement, but do we need confirmation -- of course? Better understanding of the capability? What does the committee feel about bringing them into the fold and having some confirmation?

Since there are trade-off costs against what the potential recommendations will be, it would be good to know just what they are doing now and in three years they'll be able to do XYZ.

This is not to say that one way or the other is better, but as we move into different topics, we can invite the experts of those particular topics. And so the next follow-up meeting or a portion of the next meeting, we can invite them based on the topics that I'm hearing. We can invite Concur, we can invite folks who wrote and delivered the stack for that system and it's not just Concur. We have to make sure that there are two different systems that are delivering solutions for ETS 2. So we would invite both of those as experts and we can work on what exactly we're looking at because we're not really looking at a demo of the system. We are looking at what they do and how can it help in this area and maybe that's the right expert. I don't know the answer to that. Since I haven't specifically personally worked on the efforts and I haven't interacted with those particular vendors, I'm not an expert on the operational side. I do know there's some people from GSA that are listening right now and they can't speak because of the way we've got this set up currently, and because of the weather in the area, but we can certainly revisit this and we can utilize experts from GSA and from the particular vendors and maybe others that have knowledge of this type of benchmark or this type of activity. So we can work with that and figure out what's the right solution for this, when we have the right information in front of us.

Okay. Another good idea that surfaced from Cindy was Dinova, using their network of restaurants for the rebates. So do we need to think about having a subject matter expert report out on that so if we make a recommendation to GSA, they can understand how they can leverage these potential savings.

That's basically like managed lodging type of agreement. Would you agree with that Cindy or Paul?

Mark and Cindy were the subject matter experts. I don't know anything about it.

Third-party agreement -- with restaurants.

With restaurants, not lodging.

Okay. I don't know anything about that, but we certainly can see if we can figure that out.

You don't want a sales pitch.

We have to be careful -- perhaps somebody that has all the information of how that works and whether or not it could work in a lot of ways. This team doesn't have to have all the answers. But they need to drive the direction and be able to have a good idea of the possible pitfalls or some of the great advantages of certain things.

The big discussion about receipts or a flexible plan and people just put in whatever they actually spend and be able to depend on getting audited. We can make recommendations without

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having all of the information, but you should be able to have some discussion in your recommendation paper so that it's convincing that it would be worthwhile to do further research and/or apply things in a certain direction or in a certain way. So I don't want to stop you from finding out more about these things, but at the same time, you could really research some of these things forever and really not know the real answer ever.

Right now, how many agencies across the government actually reduce their meals and lodging? Is it cost effective to do that? I don't know the answer to that but we have a rule that says you can do it. And some don't do it, while some do it. See what I mean? So that's why we want to look at the private sector and some instances of some of the things they have done. What are some things that nobody does and why don't they do that? That's the kind of direction we should be going to.

I think it just has to be almost if we are in the mode of casting votes in a sense of saying, “Do we agree that there is room to look at a trusted traveler based where you have a cap per diem and you don't need to submit necessarily your expenses? Many of them, SmartPay charge card are used, going to be captured and the others are entered into the expense reporting tool. If that's a manageable process, which it is in the commercial sector, that should potentially incur savings to the Government, and provide, as I said, through increased utilization of the SmartPay charge card. If GSA chooses to look at the Dinova network, some rebates and then some extra tax dollars to the states, because more network hotels or restaurants will be utilized.

I know it's a limited per diem, but it is what it is, and we're trying to see if there's a way to find efficiency and utilizing all the best practices. The commercial sector looks at actual and does not provide lump sum to travelers to my knowledge. That just doesn't exist.

So I think we just need to maybe go around the room and agree. Do we want to move in that direction? In which case we are pulling these different resources and experts to the table to clearly define and make recommendations. It will be up to the GSA anyway and how they want to proceed. This is just bringing in ideas. That's what this is about.

Rick, why don't you start off? Do you think this is the way or do you feel that things shouldn't be changed?

I think you need to have more information first, but I'm not in favor of a change at this time.

Before you go around the room, can you expressly state what the question is?

The question was more if the committee would like to see that the meals and incidentals potentially looked upon as actual expenses with caps, with a maximum, which is currently given as a lump sum to the traveler? So they would submit their expenses and they have a daily allowance. Same FTR policy, same methodology, subject to review still, but that's what the per diem is.

Would receipts be required that are currently not required?

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Well, that's to be discussed. If the Government feels they need receipts at a certain amount, then you do. In the private sector, they don't up to $75. It really depends, because $75 is beyond what your daily meal allowance is in your key markets, so I don't know. How much administrative work you want to take on.

You don't need a receipt up to $75?

Exactly.

I abstain from giving an opinion because I don't know. I'm really at a loss here because I know I don't have the same opinion as others, I don't disagree with the receipts up to per diem. I want to know other than oversight the overhead costs related to that.

Overhead costs? Okay, but what's that?

This is Emily. I was saying I agree with that opinion. That's my opinion as well.

Okay. How about Patrick?

I totally agree. I think it sounds great, but we need to know more. So I agree with Emily and Rick.

And Brian?

Brian Scott agrees with the statements.

Okay. Kathy?

Yeah, I agree. We need to see more.

Mark?

I agree with the statement.

Cindy?

I agree.

Erin?

I feel we've got a game of telephone tag because I'm not sure but it seems to me that the first three speakers said slightly different things but everybody else is all agreeing. My personal view is that government employees should have documentation for their meal expenses, whether they submit them or retain them in case of audit, but that they should have documentation.

Dane?

I'm in the camp that says you need to determine total cost of ownership or cost-benefit analysis. Going to that, there are a lot of other factors you haven't really talked about. We have a lot of

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people that don’t have a government travel charge card. For example, trainees and family members traveling for medical care. This goes on and on and on. And so you have to consider all of that. A lot of the travel we have is not mission related. You're thinking a lot of this is business travel and all that travel we're doing doesn't fall under this category. There's also a lot of admin costs of collecting receipts and storing them so you need to factor that in and also the cost to process extra vouchers. I can give you figures on some of that. It's very expensive. So I think I'm in the camp that says we need to look at the cost benefit of the proposal. Framing the proposal and doing cost-benefit analysis.

Okay.

So what is required to do that cost-benefit analysis?

Right now, there's a rule that says that agencies must provide travelers an individual travel card if they travel a certain amount times a year. You can now control the use of the cards by turning them on an off electronically, which was the not case in the recent past. That doesn't mean that you can't get a receipt from wherever it is, McDonald's, with cash and keep that receipt and scan it into the system. Paying for that with your card doesn't exclude you from having a receipt. So that's one thing.

Another piece that I see is figuring out the definition of a meal. Basically, the government reimburses you to take care of your food and substances and lodging. The question becomes, “Would a candy bar, Coke, cup of coffee” require a receipt? If yes, how hard would it be to get a receipt? There are all kinds of details associated with that that can get messy. Are there expenditures with the receipts? I'm hearing that there are only actuals. Are the actuals less than what our current tiers are for per diem? Are we actually spending less money than what they do?

Same thing with Lockheed Martin. Is there a maximum cap? Is there a cap in the middle after or is it related to our tiers and then they have to show expenditures as well? I don't know. It sounds like you're saving, but where are you saving from? And if we go to a cap, do we need to have a single cap? Is it $60? $90? Is it $25? I don't know. So I think it this can explode real fast when you start working on your actual validation. Again, the cost of doing the vouchers is known, but the cost for people who are auditing and the amount of time an individual takes to maintain is not minor at all. We have 50,000 people on travel every single day. The average Government employee costs the government somewhere in the neighborhood of 75 to $100 an hour. So take each one of those 50,000 people, a day, extra 20 minutes, what's that cost? I don't know? But I can do some of that math.

This is Emily. That cost is one of my biggest concerns. And I think just the fact we're all operating under tighter budgets and a smaller amount of resources worries me. I don't know if it's possible to get that number but I'd be curious. What are we saving versus the extra resources would have to put into it?

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Per diems are so limited now and are not extravagant and very moderate. Somewhere in the middle. If per diems were higher, maybe that would make more sense, but meal per diems really haven't gone up in a long time.

I want to be clear. I'm not pushing the committee to not do this. I do agree with what Cindy and I really understand that concept. The accountability and transparency and lots of people from my organization and many others go to the Hill and say, what do you mean you gave this person X amount of money? What did they spend it on? Did they go to McDonald's or did they go skip breakfast and they got money for breakfast anyway? Certainly the media push on that sort of information. I'm not saying that that is a bad thing to have transparency and accountability of what people are spending money on. So don't mistake what I said a minute ago about knowing the numbers and what it's going to cost. It's just a matter of where do you line up some benefit of doing certain things and savings as opposed to costing in a different area that's not identified in the formula? We have to balance the whole big picture.

This is Mark. Lockheed's cap is based off of the GSA per diem for meals for the day. So the very first city, Orlando is 56 bucks for food. As an employee, you can bill actuals for $56. If you exceed it, it's unallowable for your meals for that day. No receipts are required. Unless you exceed a certain dollar threshold. I believe it's $75. And that's well over whatever the cap is. But the administrative cost for that is -- what are we comparing it to? What do you guys do right now? Pay out a lump sum? Is that what the government does?

Yeah.

Giving somebody $56 for the whole day, using the Orlando example, there are variables that go into it. For food, you're actually saying if the guy charges actuals of $35 for meals that day, and if administrative costs exceed that savings, you need receipts. Why? I mean, that's what I'm saying. I don't understand why that would be administratively prohibitive and costs involved with that. You don't ask for receipts right now when right now when you're just giving them a lump sum. Now when you want to start charging them actuals or making them expense actuals, now you need receipts? That doesn't make sense to me.

I agree.

That's the common sense, logical statement right there.

Can I attempt to answer that question, Mark? Because the next step behind that will be someone -- not sure what entity of government or which -- the first person that puts $35 on their voucher -- and then the person behind them that puts $15 on theirs -- and then somebody is going to say, I want to know how you did it for this amount of money as opposed to this person. And somebody's going to say, because this has already happened on lodging, put out a memo verifying that people are not claiming more than what their spending on meals. The next step is you would have to show your receipt in order to do that.

So rather than answering that question, let's say -- let's give them $56 so we don't get asked that question based on the methodology of the IRS rule, associated with the lodging --

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Now we're dealing with the irrationality of the Government that -- you can't just say it makes sense, because we're not giving them a lump sum at a high dollar value. Now you are wanting to cut it up and get this granular level of somebody can eat for $35 a day, I don't -- I want to make sure that nobody needs more than that. Compared to the present state of affairs where you are giving them a lump sum, I don't know -- it doesn't seem very common sense to me.

If somebody paid $35 but had a $50 max -- it's circumstantial. They may have been in a position where they didn't have other options. They missed breakfast because they had a doughnut at the customer site, whatever the situation, you cannot get granular like that. I don't see why anyone would. That’s where your administrative waste of time and effort is.

Absolutely. He could be eating by himself after a long day or eating with a customer.

If you want to make that granular, you can do a whole analysis and single them out and recognize that. Good job in saving. What you are doing. Share this as a best practice as a traveler. At least you know that certain people have certain habits. Again, somewhat of this is a trust factor.

This is a minor note. The reason why I asked about receipts. If you do charge actuals, the FTR does require receipts. So we would have to modify that somehow if we decide to use actuals for meals, but keeping the current meal tiers as a cap.

There is a provision to go actual expense allowance. You know that, right? And when travelers file that, it is usually higher than the per diem. If you say we're going to go actual expenses, you will start to see where it is actually higher.

The actuals with a cap. Not per diem.

Okay. You're still back to setting a rate.

There is a rate in place.

That's what it would be.

That's the per diem.

That's by the GSA.

Regionalized it as not to exceed. We had a business area that was paying a lump sum. A few years ago, we finally went to actuals with the rest of the Corporation and they saved a substantial amount of money year-over-year compared to what they were doing previously. As long as you have a cap and say anything above that is not allowable. I'm not disagreeing with the methodology that calculates the per diem yield rate. I'm just saying there's a better way of doing it and paying a lump sum rate and charging actuals is not going to cost more than giving a lump sum for the whole amount if you use that same lump sum value as not to exceed.

You need a lot of data to support that.

Does Lockheed Martin have any? Sounds like Lockheed's program is a great fit.

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I can ask our finance group for some information on that. They would be the ones to have it. But I definitely can ask them for it.

That would be really revealing and very telling to say, “We have sampled 10 markets and we looked at what the average expenses were for meals and incidentals”. If they are less than the cap, there's a great case to present and say, guess what, “Here you are.” And then on top of that, the rebates that you are getting through the Dinova program should result in more savings to the taxpayer.

I'm not trying to push anyone in any direction, but it just seems that this is an option so it should be discussed and of course I think that data is good because not only does it mirror the discussion but it also mirrors the rate of the government.

Exactly.

That's pretty good. It's a sample of data for sure.

Lockheed is the biggest contractor so they have the most --

Do they travel and eat in the same places and the same general locations? I would say probably as much as any company. So I would be interested in seeing that.

Do Government employees have comparatively the same jobs in the same sectors. That would be my next question.

What does that got to do with it? I don't understand that. Seriously, what does that got to do with cost efficiencies?

I don't think there's any cost efficiencies. You are going to ask people to change the system all around, if you try to skim it back further than it does, I don't think it's realistic.

Where are you skimming back?

My thought would be to look at the per diem more frequently, whether it is every three years or whatever, and have exact receipts, but realistically, you are going to raise that number probably. And if you start asking people for exact receipts, they're going to spend the per diem, they're not going to let it go.

Right.

Right now, the rates are set by design to be on the low end. If you look at the restaurants, look at the factors that go into it, you're going to wind up with similar costs if not higher. That's where the data comes in. You have to prove that travelers are going to try to stay underneath that.

Essentially, they are incentivized to not spend all their money. Once they are accustomed to spending that $46 or $61, I believe they are going to spend the whole thing.

They don't spend the whole thing now to get the lump sum, right?

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Well yes. Except --

If somebody says the meal per diem in Orlando is $56 and they charge actuals of 55, it's $1 less than what they would have received were they given a lump sum. I mean, you're saying basically nobody is trustworthy that's going to actually submit actual expenses for meals. I couldn't spend $56 on meals in Orlando if I was by myself on travel -- seriously, who spends $56 a day on food? I know you can exceed it easily with going out with customers and such, but seriously, the premise that people are going to charge more than the per diem cap if you ask for actuals, I don't think is very sound.

Let's ask the question actually because -- let's go in the rearview mirror up and say, what happened before or when did the lump sum go into place and what was the situation before that?

I think I'd have to do just a little bit of research on that. I can do that research and I'll send it out in an e-mail. Congress initially set the rates. I think back in the '20s or something like that. Congress was setting the rates and somewhere around in the '80s, they handed it over in the authority to GSA. But I can let you know when it changed to lump sum. I can let you know what the rates were for modern history and things like that.

Because if it's been in place for 15 years or -- we need to know -- yes, we're going to upset the apple cart. There is a behavioral change potentially. We’re saying the travelers can’t spend their allowance, we’re saying they have to submit actual for each meal.

Frankly -- they don't go away with 10 or $15 in their pocket -- I know it's pocket change and not a lot of money, but it means a lot to them potentially so I do understand that. But if we're being honest here, otherwise we can go around the table and say leave things the way they are.

And I think we have a responsibility in this economy and this environment and with our debt that, I don't think it's too much to talk about actuals and having a cap on it. I'm not sure it should be pocketed money, especially when you are at a location for long period of time -- not in this economic environment that we're in. This debt that we are in. I mean, I think it's a great benefit in some respect for the federal traveler, but I'm not sure that this is the time. I think we have to shore some things up and this is our opportunity to do that.

I really agree with what you're saying. The rates should be evaluated more than once every three to five years. I have no problem with asking people for receipts. I have no problem with the gap because those are great guidelines but then I do think if you're going to do that, you need to expedite the evaluation period and then I don't think you're going to see a savings. That's the point I'm really trying to make.

I think you will ultimately see a savings, but I do agree, it should be reviewed more quickly. Everybody knows costs are going up. The cost of meals, the cost of everything is going up. So I think you will see a rising of that cap, absolutely when we review it.

I think those are two separate points. That was brought up earlier.

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This is a good one to reduce it from five to three or even two to be more in sync with reality. We did the same thing with lodging. We are just making common sense proposals here.

And I do agree with that. If you are going to evaluate lodging every year, you probably ought to evaluate food every year.

Right.

The expense is probably known. It's a subcontractor, Smith Travel, as Jill said she can scale it back from 9000 to five or four hundred thousand restaurants -- the cost to the government is X. Every three versus every five years. Not a huge amount I'm sure.

It's not.

I think it's time that everyone has a lunch break. I'm sorry. I got a little emotional there. I didn't mean to get stirred up, but I think seriously, you could tell I get passionate about these things but I believe that we're on the right direction if we challenge the system where it needs to be looked at and where common sense prevails, I see that everything Lockheed Martin is doing could be parlayed into the Federal government with meals and incidentals. And we can stab at it, we can look at all the data from GBTA and guess what, the contractors are paying the same. Why do we even have to do that? Lockheed's position, I'm sure Northrop Grumman and SAIC, they may have to abide by the Government’s per diem rates for reimbursement.

That's what it's about. If they pay more, out of their own pocket.

No. That's not what I meant. The company can reimburse their employees differently than that.

True.

But it's unallowable if you pay. I think for descriptive purposes, that's good but to be fair to Lockheed, we see the commercial practices, but we don't want Lockheed Martin to get the stigma that we are using their program in the event people don't accept it.

I appreciate that.

Very enterprising of you.

Just a housekeeping note: One comment and then a question. I think the fact that everyone refers back to the GSA rates means that we really need to shore up the methodology for the GSA rates. Because Lockheed or the commercials -- everyone looks at it as at least one factor.

Okay.

I agree with you that we should firm up methodology. Last time we went around, I got the consensus that we needed more data.

My point is that the commercial looks back at GSA.

That's right. Can we not agree that the methodology is sound?

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There's one other area that we haven't talked about that's just a little nibble on the side. Business tax deductions. You may utilize the GSA per diem rates, which includes the full set of per diem, all three pieces. As business tax deductions. So there's a lot of money that has absolutely nothing to do with government. Has nothing to do with individual companies so to speak. But if and when these rates change, it has huge influence on the economy. So we have to make sure that we know what all the factors are. Whether or not we know what the actual amount of change is.

Just to echo what Craig is saying here. If you take the $41 you get, you've got to back up about 15% tip, $6.15, 15% tax is not unrealistic since on a lot of things we're paying 20% tax. Okay. Crank in all the local taxes, and all these little surcharges, so you are really talking about $28.70 is what you are eating on. All I'm saying is you've got to work the math. And then back up the costs of going and received actuals and that becomes your total cost of policy. Okay?

But how does that differ? So I don't understand. Your actuals are going to be the same as your lump sum.

What you pay for tax on a meal, tips, everything is part of the not to exceed amount.

Yeah. It just is a reminder that people are not actually spending $41 to eat. You're really looking at $28 or $29 to eat.

Okay.

So you're talking about the actual amount that's allowed. So that goes back to -- let's review it every two or three years instead of every five.

Yeah, I'm there on that. I'm just saying when we start looking at the decision on how you want it to be done, you've got to include all the numbers.

You also backed out the $5 incidental already from that. So we've also got the incidentals bundled in there as well.

Yeah.

That's another question.

Incidental covers a whole other series of things, a bunch of tips.

Can I ask Mark one more question? Does Lockheed reimburse the same for non-CRC travel on per diem for meals or is it different? In other words, if you have a Lockheed employee that's traveling for business but it's not on the government reimbursable business, do you use the same per diem?

Yes, we do.

Okay. That's what I wanted to know. That makes a big difference.

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Is there anything else outstanding or otherwise that we can summarize during the administrative meeting or do we need to remain in the open public forum?

I think we covered everything.

I had a government travel manager that sent me an e-mail. And it's for a very, very large organization of greater than 600,000 travelers and one piece of the organization. They are very concerned. And their statement is “No, no, no, please no actuals. We will certainly save more money if all of per diem rates are just dropped by a dollar.” And there are also concerns of the way that they negotiate labor as well, that if you have to show receipts and you have to show actual, which opens another set of activities that would be required in their administrative costs. So just keep that in mind. We can certainly continue that conversation when we open this back up and we have lots of pieces that we'll put together in the big picture.

To be clear, I'm not advocating submitting receipts for actuals.

I understand.

This person didn't say receipts. They only said no actuals. That's my interpretation. So I will send this along, who seems to be voicing the same concerns that I was trying to voice as well. So at least from a government perspective, understanding the workload that goes into it, I think more information is needed.

Would like to know where that workload is.

Exactly. Can you share that or tell us about it?

Well, I can tell you I only have two people in my office to look at these. So the time spent checking for actuals.

I don't understand where the extra labor is for that.

I think Craig stated if a person spends $15 versus $20 for the same meals, it may open up a big can of worms.

Maybe you can enlighten us on some of the worms in that can so that we can be advised as to if this is the wrong or the right approach. Because unless there's other areas within the government that need some efficiency, we can weigh in on those as well.

I think if the technology existed, we'd be a lot better, but I don't think it's there yet. So I'd be happy to come up with ideas of the time spent and the administrative requirements, I can't do it off the top of my head right now, but I'd be happy to do that and share it with the group next time.

Just one point. The current system enables you to average costs over time. So some of these meals will cost you more and some will cost you less. If it cost you more and you're doing actual, and you exceed this threshold and then you are into what's called actual expense allowance. Right now, if you wind up exceeding the dinner rate for whatever reason, it’s kind of

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get averaged to the day, to the trip. Okay? So when you cost this whole thing out, you've got to figure what total cost of a trip would be. And whether for certain portions you'd end up paying significantly higher. You know? So I understand exactly what you're saying per meal, but when you've got to work the whole trip --

Well, the per diem is not per meal. It's the day. It's the daily allowance.

Great. But if you go to an actual, if I understand you correctly, you're having to itemize every single meal.

Sure. You itemize but then categorize it as a meal and it adds it all up, tallies up for that day and if it's below your per diem, you move on. If it's above, there's a problem -- it's unallowable.

No. Not necessarily. If the mission required you to make a trip and that's all that was available, you can always ask for actual expense allowance. And if you're on orders to go do something and that's the rate that it costs, it could cost you more.

I see.

So what I'm saying is we start running the numbers, you've got to consider the trip. You've got to look back to the total costs.

That could happen either way, right?

That could happen either way. Even if you had to receipt for actuals, it would still exceed it.

Basically we would have to rewrite the policy to have two different tiers of actual expenses. If the committee wants to do that, if it makes sense, we have no opposition to doing that.

I'm just saying if we're talking actuals, we'll have to talk in that language, two different types of actuals. – agree? Back to you, Paul.

So just -- before everyone leaves, my understanding is that there have been no final decisions about the meals and incidental rates. We all agreed or at least the consensus was that we needed more information both about other entities developing rates, more information about the administrative costs associated with actuals versus caps, and receipts or not. And those will all be for next meeting.

Pretty much.

Everybody is nodding their heads.

Sounds good.

All right.

Thank you, everyone, for participating today. This concludes the public part of the meeting. Please check the GTAC web site (www.gsa.gov/gtac) for the notes on today's meeting, as well as for previous meetings.

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Thank you.

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