Accounts Payable

Car Rental Policy Updated

Date: June 20, 2006

To: Agency Financial Managers

From: Jim Behrend, Audit Supervisor
State Controller's Office

Subject: Clarification of Car Rental Policies

A variety of questions have been raised regarding use of rental cars. This document is intended to clarify the existing policies on this issue. The primary issues are:

Instances when the state rental car contract cannot be used.
Instances when the state purchasing card cannot be used to pay for a rental car.
Allowable reimbursement if the contract vendor is not used for a rental car or if the employee combines personal time with a business trip.

The general policy is that when a rental car is the most cost efficient means of transportation [UTSA F-3.05(4)] employees traveling on state business are suppose to use the contract vendor. However, if an employee is traveling on business with a non-state employee (spouse, family, etc.) who is not traveling on state business then the state rental contract cannot be used. In these situations, if a rental car is needed for business purposes then the employee can rent from any vendor (including the contract vendor) but cannot rent under the state contract. When not using the state car rental contract, employees on business are required to purchase the collision damage waiver (CDW) and liability insurance (UTSA F-3.05(b)).

Employees cannot use the state purchasing card (P-Card) when renting a car in situations where non-state employees (spouse, family, etc.) are accompanying them on the business trip or if the employee expects to use the rental car for more than incidental personal use. Incidental personal use is not treated as personal use for determining reimbursement amounts. The State's travel card or the employee's personal credit card may be used in these situations.

Incidental personal use is defined in the state Fleet Driver and Management Policies and Procedures manual. For overnight trips incidental personal travel includes trips to a pharmacy, grocery, laundromat, fitness center, or other locations to purchase goods or conduct activities necessary for the employee's health and well being. Trips to these locations should be reasonable in distance.

If it is determined that rental of a vehicle is the most cost effective means of transportation or if the efficient conduct of the state business precludes the use of other means of transportation then the employee can be reimbursed for the business use of the rental under the following provisions:

Reimbursement for the business travel is limited to the lesser of the actual cost incurred or the cost that would have been incurred if the state rental contract had been used, if one was available at the location. If the contract vendor is not available then the employee would be reimbursed for the actual cost incurred, including the insurance coverage, with a non-contract rental.
If the rental includes both business and personal use (but the vehicle is not rented for more days than needed for business use) the reimbursement will be based on the costs that would have been incurred if there had been no personal use. For example, if the employee rents a vehicle that includes unlimited mileage in the daily rate and is rented for the business days only, but includes more than incidental personal use in the evening then the daily rate would not be prorated between the business and personal miles. The daily rental cost (and applicable taxes and insurance) would be reimbursable subject to item 1 above. However, the cost of gasoline would need to be prorated between the business and personal miles because this includes a cost that would not have been incurred if the vehicle had not been used for more than incidental personal use.
If the rental includes both business and personal use and is rented for more days than necessary for the business use then the rental cost should be prorated between the business and personal use (based on number of days). Prorating the cost is necessary because in some instances the longer rental will result in a reduction in the rental cost per day (weekly rate versus daily rate). This reduction in the rental rate per day should be allocated to both the business days and the personal days. Any other costs (taxes, insurance, gasoline, etc) of the rental should also be prorated between the business and personal use. These costs should be prorated based on reasonable methods for the type of cost (fuel based on mileage, insurance based on number of days, taxes based on costs, etc.) Any costs that are strictly personal would not be reimbursable.

The following chart provides a summary of the policies regarding rental cars.

Situation	Rental	Can State P-card be used?	Reimbursement
Employee travels with spouse or other non-state employee who is not involved in state business.	Cannot use the State rental contract. Must purchase CDW and liability insurance.	No - may use the state travel card or personal credit card.	Business use of the rental can be reimbursed but reimbursement is limited to the lesser of the actual rental cost (for the business days) or what it would have cost using the state rental contract. (Items 1 - 3 above)
Employee travels alone or with other state employee but plans on using the rental for more than incidental personal use.	Cannot use the State rental contract. Must purchase CDW and liability insurance.	No - may use the state travel card or personal credit card.	Business use of the rental can be reimbursed but reimbursement is limited to the lesser of the actual rental cost (for the business days) or what it would have cost using the state rental contract. (Items 1 - 3 above)
Employee travels alone or with other state employee and intends on using the rental for strictly business use with some incidental personal use.	Must use the state contract vendor, if available, or can use a non-contract vendor if the cost including CDW and liability is less than the contract vendor.	Yes - must use the State P-card or travel card.	Business use of the rental is reimbursable in accordance with UTSA F-3.05(4). (Item 1 above)