Praise be to Allah.
If the manager of the agency has the authority – as granted to him by the administration – to dispose of these travel allowances in whatever manner he thinks is most appropriate, such as giving them as rewards and incentives to those who deserve that, so as to create an atmosphere of competition at work and raise performance levels in order to increase productivity, there is nothing wrong with that, and there is also nothing wrong with the employee who deserves that taking the money and benefiting from it, because the manager is in charge of running the agency’s work and taking care of the workers’ affairs.
But if the manager is going against the rules and regulations of the agency, especially if it is a public agency or a government department, and he does not have the right or authority to dispose of travel allowances in this manner, then it is not permissible for him to do that; rather any conduct that is not in accordance with the rules and regulations is a transgression against public wealth and the sin of doing that is greater than the sin of doing that with private money, because it affects the welfare of society and undermines people’s rights, which are undoubtedly greater than individual rights, although each has its own sanctity. This requires the employees to be honest and to refer the matter to their manager’s superiors, if necessary.
It was narrated that Khawlah al-Ansaariyyah (may Allah be pleased with her) said: I heard the Prophet (blessings and peace of Allah be upon him) say: “There are some men who dispose of the wealth of Allah unlawfully; theirs will be the Fire on the Day of Resurrection.”
Narrated by al-Bukhaari (3118)
Al-Haafiz Ibn Hajar (may Allah have mercy on him) said:
That is: disposing of the wealth of the Muslims in an inappropriate manner is more general than merely being unfair when dividing wealth and the like. This is a deterrent to people in authority against taking anything from the wealth in an unlawful manner or withholding it from those who are entitled to it.
End quote from Fath al-Baari (6/219).
al-Qastallaani (may Allah have mercy on him) said:
“the wealth of Allah” is that which He has allocated to serve the public interests of the Muslims. Disposing of it unlawfully means not giving it to those who deserve it; rather they give it to those who do not deserve it. “theirs will be the Fire on the Day of Resurrection” – this is a deterrent addressed to people in authority against disposing of the public funds of the Muslims in any unlawful manner.
End quote from Irshaad as-Saari (5/205)
Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said:
The point is that anyone who disposes of wealth in a manner that is contrary to Islamic teachings on wealth – whether it is his own wealth or that of another – the Fire – Allah forbid – will be his on the Day of Resurrection, unless he repents and restores misappropriated property to its rightful owners, and repents from what he spent his wealth on of haraam things such as smoking, alcohol and the like. Then he will be one of those whose repentance is acceptable to Allah, because Allah, may He be exalted, says (interpretation of the meaning):
“Say: O ‘Ibaadi (My slaves) who have transgressed against themselves (by committing evil deeds and sins)! Despair not of the Mercy of Allah, verily, Allah forgives all sins. Truly, He is Oft‑Forgiving, Most Merciful.
‘And turn in repentance and in obedience with true Faith (Islamic Monotheism) to your Lord and submit to Him, (in Islam), before the torment comes upon you, then you will not be helped.
‘And follow the best of that which is sent down to you from your Lord (i.e. this Quran, do what it orders you to do and keep away from what it forbids), before the torment comes on you suddenly while you perceive not!’
Lest a person should say: ‘Alas, my grief that I was undutiful to Allah (i.e. I have not done what Allah has ordered me to do), and I was indeed among those who mocked (at the truth! i.e. La ilaha ill-Allah (none has the right to be worshipped but Allah), the Quran, and Muhammad (blessings and peace of Allah be upon him) and at the faithful believers, etc.)’
Or (lest) he should say: ‘If only Allah had guided me, I should indeed have been among the Muttaqoon (pious and righteous persons).’
Or (lest) he should say when he sees the torment: ‘If only I had another chance (to return to the world) then I should indeed be among the Muhsinoon (good-doers).’
Yes! Verily, there came to you My Ayat (proofs, evidences, verses, lessons, signs, revelations, etc.) and you denied them, and were proud and were among the disbelievers.”
In this hadith there is a warning against spending money on that in which there is no benefit, and squandering it in this manner, because Allah has made wealth a means of sustenance for people that they need in order to maintain their religious and worldly well-being. So if a person spends it in a way that serves no interest, he will be regarded as being one of those who squander the wealth of Allah unlawfully.
End quote from Sharh Riyadh as-Saaliheen (2/538)
And Allah knows best.