Properly managing expense reimbursements is crucial for nonprofits to maintain compliance, transparency, and financial integrity. This guide will outline what nonprofit staff, volunteers, and board members need to know about reimbursable expenses, the process for reimbursement, and the board's responsibilities in this area.
What Are Reimbursable Expenses?
Reimbursable expenses are costs incurred by employees, volunteers, or board members while conducting official nonprofit business. Examples include:
Travel expenses (e.g., airfare, mileage, lodging, meals)
Office supplies purchased for nonprofit use
Event-related costs (e.g., venue rental, catering)
Training or certification fees relevant to nonprofit operations
Nonprofits should define eligible expenses clearly in their financial policies.
The Expense Reimbursement Process
To streamline the reimbursement process and ensure compliance, follow these steps:
1. Submit an Expense Reimbursement Request
Use the nonprofit’s official Expense Reimbursement Form (a downloadable template will be provided below).
Include all required information:
Date of the expense
Description and purpose of the expense
Total amount
Copies of receipts or proof of payment
2. Approval Process
Submit the completed form to the appropriate approver. This is typically a supervisor, manager, or treasurer.
Ensure the request is reviewed promptly and checked for policy compliance.
3. Processing and Payment
Once approved, the reimbursement request is processed by the nonprofit’s finance department.
Payments can be issued via check, direct deposit, or another approved method.
Board Responsibilities
The board of directors plays a key role in overseeing expense reimbursement policies. Their responsibilities include:
Establishing Clear Policies: Ensure the nonprofit has a written expense reimbursement policy that outlines:
What constitutes reimbursable expenses
Documentation requirements
Approval procedures
Reviewing High-Value Expenses: For large or unusual expenses, the board (or a designated committee) should review and approve the reimbursement.
Auditing and Monitoring: Regularly review expense reports to detect potential misuse or fraud and ensure compliance with IRS regulations.
IRS Guidelines and Best Practices
The IRS requires nonprofits to have an accountable plan for expense reimbursements. Key elements include:
Connection to Nonprofit Work: All expenses must directly relate to the organization’s mission and operations.
Substantiation: Expenses must be substantiated with receipts or similar documentation.
Timely Submission: Requests should be submitted within a reasonable period, typically within 60 days of incurring the expense.
Failing to adhere to these guidelines could result in reimbursed expenses being classified as taxable income to the recipient.
Download the Expense Reimbursement Form
To simplify the process, use our Expense Reimbursement Form, which includes fields for all necessary details and can be submitted electronically or in print.
Conclusion
By implementing a clear and consistent expense reimbursement process, nonprofits can safeguard their financial integrity while supporting their team’s work. If you have questions about specific expenses or need further guidance, contact your finance team or board treasurer.