Nonprofit Employee Expense Reimbursement Plans Part 2
Part 2 of a 4 part Educational Series from Jitasa
Nonprofit Employee Expense Reimbursement Plans: Best Practices
Once your nonprofit has met the IRS requirements mentioned in Part I, attention can now be turned to creating a best practice employee expense reimbursement policy for your organization.Best Practice 1. Leadership Collaboration
This is where the Executive Director and Executive Team or Board will need to work closely with the CFO / Controller to create a policy that is consistent with the organization’s vision and culture, while also meeting legal requirements. While the Finance staff will likely play a key role in drafting the policy, I would like to encourage as much involvement by the Executive Director and Board as possible during this process. From past experience, the more your nonprofit’s visionary leader(s) are involved in the process, the more understanding and buy-in there is at the highest level. Having the full support from the top will really help when implementing and maintaining any policy.
Best Practice 2. Incorporate Your Organization’s Vision, Culture & Objectives into Your Policy
While many nonprofit’s accountable expense reimbursement plan will look similar, there will be differences. Every nonprofit is different and needs to consider its vision, policies, organizational culture, and auditor requirements.
The following are key questions to help guide your organization when drafting your expense Reimbursement Plan Policy:
1. Are there any limits to employee reimbursements, such as ceiling amounts for meals & travel?
2. Are there any types of expenses that will not be reimbursed?
Some organizations will view certain types of expenses as acceptable, while others will not reimburse because of corporate values. For example, not reimbursing employees for alcoholic drinks when traveling or for purchases from certain companies that are known to break child/women labor laws in their foreign factories
3. Organizational Credit Card vs. Personal Credit Card. Do you have an organizational credit card, and if so can personal credit cards be used?
4. Should cash advances ever be given out? And if so under what circumstances?
5. Expense Reports and Receipts. Use / require manual hard copies or electronic?
6. What are the approval requirements? A few best practices:
• Employee signature plus one manager signature
• Additional approval signature required for purchases over a certain threshold such as $500 or $1,000
• Non-employee board member approval for Executive Director/ CEO expense reports
7. Does your auditor have any requirements or preferences?
• hard copy vs. electronic receipts /expense forms
• number of approvers
• information listed on expense reimbursement forms
8. Do employees need to use certain vendors for purchases?
For example, your nonprofit may have a preferred relationship and negotiated fees with a specific travel agency and require that all travel plans should be made through that agency.
Please join us on Monday, May 13th for part 3 of our series where we will continue our discussion on best practices for your nonprofit’s Accountable Expense Reimbursement Policy.
James Strombeck, Director of Delivery Support Team, Jitasa