I respectfully disagree. Per Diems are generally a fixed amount paid in lieu of requiring an employee to itemize actual expenses. If the expenses were not reimbursed, the expenses would be tax deductible. Since they are merely to offset expenses, they shouldn't require being reported as income. I'm certain nobody else pays taxes on their per Diem's, they are trying to make a special case for her, which is unethical and illegal.
You are missing the point. If she was “on travel” then I agree with you.
She was home. Not on travel. Therefore - income.