Nonprofit employee expense and reimbursement policy: a template

1. Purpose and scope

This policy covers how [Organization name] pays for and repays business expenses, including travel, and how each expense is coded to its program and funding source. It applies to [all employees] [employees and, for travel on the organization’s business, officers and directors (section 12)]. It is meant to be an accountable plan under IRS rules, so reimbursements under it are not wages unless it says so.

[Volunteers aren’t covered by this policy: [they follow the Volunteer Expense Policy] [the organization doesn’t repay volunteers’ expenses].]

Note: Volunteers’ rules differ from employees’. A volunteer can deduct unreimbursed driving at the charitable rate, 14 cents a mile, fixed by law, and the IRS has said that repaying a volunteer more than their actual costs, or at the business rate, makes the excess their income. Write a separate volunteer policy with a tax adviser.

2. Ask before you spend

2.1 Ask [your supervisor] [your program director] before you buy anything this policy doesn’t approve automatically, before any trip, and before any recurring charge. An approval covers only the amount, supplier and purpose approved.

2.2 Before you spend grant money, check with [the grants manager] [finance] that the grant’s budget covers it.

Note: In Illinois an employer generally owes only expenses it authorized or required, unless it failed to follow its own written expense policy.

3. The program and funding source on every expense

3.1 Every expense carries its program or activity, or [Management and general] [Fundraising], and its funding source: [unrestricted funds], [the grant’s name and number] or [the federal award’s name and number].

3.2 The program and funding source are chosen by [you, when you submit] [your program director], and confirmed by [finance] [the grants manager] before anything is charged to a grant.

3.3 An expense that serves more than one program or funding source is split by [the hours spent on each] [miles] [another documented basis], and [finance] records the split.

Note: Form 990, Part IX reports expenses as program services, management and general, and fundraising, and the IRS asks you to document how you allocate. On a federal award, a shared cost is split by proportional benefit where that can be measured without undue effort, and records must identify the amount, source and use of federal funds.

4. Unrestricted funds, private grants and federal awards

4.1 Unrestricted funds pay for approved expenses under this policy.

4.2 An expense charged to a private grant must also meet that grant’s agreement; [the grants manager] shares each agreement’s terms before staff spend under it. What a grant won’t pay [is paid from unrestricted funds if this policy allows it] [isn’t repaid].

4.3 An expense charged to a federal award, or to a subaward of one, must also be necessary and reasonable for the award, allocable to it, documented, and allowable under 2 CFR 200 and the award’s terms. Never charged to a federal award: alcohol, promotional items, fundraising [unless the agency approved it in writing], and entertainment [unless it has a programmatic purpose and is included in the award].

4.4 This policy applies the same way to federally funded and other work.

Note: The federal cost rules (2 CFR 200) apply to federal awards and flow down to subawards; a private grant follows its own agreement unless it passes federal money to you. Costs on a federal award must be consistent with policies that apply uniformly to federally financed and other activities, and you need written procedures for deciding what’s allowable. An award made before October 1, 2024 may follow the earlier text of 2 CFR 200.

5. Program supplies and purchases

5.1 Buy through [the organization’s accounts] [a purchase order] when you can. On your own card, buy only what this policy or an approval allows, up to $[X] a purchase without approval.

5.2 For a purchase charged to a federal award above $[micro-purchase threshold], get price or rate quotes from [two] [three] qualified sources first, following [the procurement procedures].

5.3 [IT] [Finance] tags and lists any item costing $[capitalization level] or more.

Note: On a federal award, the micro-purchase threshold is generally the FAR’s, $15,000, unless you document a lower one or self-certify one up to $50,000, and formal bids or proposals are needed above the simplified acquisition threshold. Equipment, lasting over a year and costing at least the lesser of your capitalization level or $10,000 a unit, needs property records and an inventory at least every two years.

6. Meals with donors and fundraising

6.1 Meals and events with donors, prospective donors and funders you’re asking for money are fundraising: code them to [Fundraising], pay for them from [unrestricted funds], and never charge them to a program grant or federal award.

6.2 List every attendee and the purpose. Meals are repaid up to $[X] a person with tax and tip[; alcohol [only with [title]’s approval] [isn’t repaid]].

6.3 A meal with a partner organization to plan program work is coded to that program[, up to $[X] a person].

6.4 Gifts to donors: [not allowed] [up to $[X] a person, approved by [title]]. Never give anything to a public official without [title]’s approval.

Note: The direct costs of a fundraising event with ticket sales, such as the food, are reported on Form 990, Part VIII, line 8b. Fundraising, alcohol and entertainment without a programmatic purpose are unallowable on federal awards; a private grant pays for them only if its agreement allows. Form 990 reports travel or entertainment for a public official once spending on that official passes $1,000 for the year.

7. Staff mileage

7.1 Business driving in your own car is repaid at [the IRS business standard mileage rate in effect on the date of the drive] [[X] cents a mile], plus business parking and tolls. Driving between home and your regular workplace is commuting and isn’t repaid.

7.2 Log each drive at or near the time: date, start and end, purpose, miles, program and funding source.

7.3 On a federal award, mileage is repaid at this policy’s rate, the same as on other work.

Note: The 2026 IRS rate is 72.5 cents a mile through June 30 and 76 cents from July 1; anything above it is taxable wages. For non-exempt staff, unrepaid costs the job requires can’t cut into the minimum wage or overtime.

8. Travel and conferences

8.1 [Title] approves each trip, its budget, program and funding source before you book. Conference registration is approved with the trip.

8.2 Fly economy at the lowest available fare that fits the schedule. Business or first class needs [title]’s written approval and, on a federal award, a documented reason the federal rules accept.

8.3 Lodging is repaid up to [the federal lodging rate for the city and month] [$[X] a night], before taxes[, or the conference hotel’s rate with approval]. Submit the itemized hotel bill.

8.4 Meals while traveling overnight are repaid: [choose one]

• [Option A: at actual cost, against receipts, up to [the federal meals and incidentals rate for the city] [$[X]] a day.]
• [Option B: as a per diem at the federal meals and incidentals rate for the city, 75% on the days you leave and return.]

8.5 Apply the same method to every day of a trip. Alcohol is [never repaid] [never charged to a grant]. Travel for a family member or companion isn’t repaid.

8.6 Flights paid with federal funds use a U.S. flag airline unless [finance] confirms an exception applies.

Note: On a federal award, travel follows your written policy; without one, federal rates apply: from October 1, 2026, $113 a night and $68 a day for meals and incidentals in most of the continental US. Airfare above the least expensive unrestricted class is allowable only for a documented reason the rule lists, such as a medical need. GSA’s lodging rates exclude taxes. Dependents’ travel is unallowable on a federal award, except for travel of six months or more with the agency’s prior approval.

9. Receipts

Submit an itemized receipt or clear photo for every night of lodging and every expense of $[75] or more[, and for every expense charged to a grant], with the business purpose, program and funding source, and for meals, the attendees. For a missing receipt, submit a signed statement of the amount, date, place and purpose[, approved by [title]].

Note: The IRS requires a receipt for lodging and for any other travel expense of $75 or more; Illinois requires a signed statement for a missing receipt. Costs on a federal award must be adequately documented.

10. Deadlines

Submit expenses within [30] days[, and those charged to a grant before its budget period ends]. Claims more than 60 days old [are paid through payroll as taxable wages] [need approval from [title]]. Return any advance or overpayment within [120] days of the expense.

Note: IRS rules treat 60 days to account and 120 days to return any excess as reasonable; Illinois allows 30 days to submit unless the policy allows more. On a federal award, costs must be incurred during the approved budget period.

11. Approvals

Expenses within this policy are approved [automatically] [by your supervisor]; anything outside it needs approval from [title] first. [The grants manager] confirms every expense charged to a grant. No one approves their own expenses. The executive director’s expenses are approved by [the board chair] [the treasurer], and that person’s by [another officer].

12. Officers’ and directors’ travel

12.1 Officers and directors travel and are repaid under this policy, against receipts, like staff.

12.2 First-class or charter travel is [not paid] [paid only with the board’s advance approval, recorded in its minutes].

12.3 Travel for a guest or family member is not paid[, except for someone traveling primarily for the organization’s business, approved by [title]].

Note: Organizations that file Schedule J with Form 990 report whether they paid first-class or charter travel or companions’ travel for officers, directors and key employees, whether a written policy covered it, and whether they required substantiation before repaying it. Business class isn’t first class there, and a family member’s travel counts as companion travel even on business. Payments without adequate accounting are compensation.

13. When reimbursement is paid

Approved claims are paid [by direct deposit] within [X] days of approval, and never later than 30 days after you submit them, whether or not a grant has paid the organization yet.

Note: New Hampshire sets a 30-day limit for expenses an employer asked for.

14. What isn’t reimbursed

Commuting, personal travel and detours, upgrades for comfort, traffic and parking tickets and other fines, travel for family or friends, [alcohol outside sections 6.2 and 8.5], gifts outside section 6.4 and [other items].

15. Records

[Finance] keeps receipts, logs, approvals and the basis for every split for [X] years, and records for a federal award for at least three years after its final financial report[, or longer where a grant agreement requires]. Employees who hand theirs in and are repaid generally don’t need to keep copies.

Note: The IRS generally asks for three years from filing the return, and at least four for employment tax records. Federal award records are kept longer if an audit, claim or litigation starts within the three years.

16. State and local law

Where a state or local law gives employees more, such as reimbursement of all necessary expenses or a shorter payment deadline, that law applies. [List your states and cities.]

Note: California, Montana and South Dakota require employers to repay necessary work expenses, and in California an agreement to waive that is void. Illinois requires it within its own rules: claims within 30 days unless a written policy allows longer, and a policy’s limits can’t amount to no or de minimis reimbursement.