Q&A #79 – Can an expense reimbursement policy allow small purchases to be reimbursed without receipts?
Question: My nonprofit organization is currently re-evaluating our expense reimbursement policy. We have found that staff has difficulty obtaining receipts for some small purchases. We are thinking about making an exception where receipts will not be required under a certain dollar amount. Is it ok to have an exception like this?
Answer: It is possible to allow exceptions to the requirement to provide receipts for certain small purchases as part of a clear and detailed expense reimbursement policy for all employees (full and part-time staff and senior management) that is equally disseminated and enforced. However, there should be no blanket exceptions based on a specific dollar amount threshold. Rather, you could include an exception that will allow expense reimbursements to be processed in situations where receipts for small purchases are very difficult to obtain.
As a rule, receipts should be required for all work-related expenses incurred by an employee. A blanket policy exception that receipts are not required for all purchases under $15 could open a door to abuse and exploitation. However, it may be appropriate for your organization to include a processing exception in your expense reimbursement policy. The exception could state that purchases under $15 will be processed if, after reasonable efforts, receipts are not readily available.
Make it clear in the policy that receipts are required for all purchases, and that the exception is for special situations where it is especially difficult to obtain receipts. For example, this is often the case for subway transit, tips, and some parking. Let employees know that expense reimbursement requests will be monitored, and unusual or recurring transactions could be questioned at any time and are subject to supervisor and/or senior management approval.
In general, policies by themselves are not foolproof. They need appropriate consideration related to practicality, efficiency, cost, and compliance. A poorly constructed policy that appears strong on paper might be impossible to follow because of overly stringent compliance requirements. For example, requiring senior management pre-approval for all purchases, even small purchases, would be inefficient, cost prohibitive, and hard to apply consistently. However, requiring senior management to pre-approve all contracts over $25,000 makes a lot of sense.
Consequently, it may be appropriate for your organization to include a processing exception in your expense reimbursement policy for the sake of efficiency, so long as it is carefully drafted to avoid the potential for abuse.
Planning Tip – Consider aligning your employee expense reimbursement policy with your Board and volunteer expense reimbursement policies. When possible, having the same language and requirements projects a sense of fairness and respect for mission. If there are differences, clearly explain the difference and why they are necessary. For example, employees might be required to submit expense reimbursements weekly while Board members only need to submit expense reimbursements quarterly to reduce workload on volunteer Board members.
Lastly, as with any policy, it is important to consider whether this exception would be culturally aligned to your mission, the needs of your organization’s constituents, and the perception of the general public. An efficiency-based exception that internally makes sense might not be perceived the same way by constituents or the general public. For this reason, many social service organizations strictly enforce expense approval and documentation requirements so there is no appearance of private inurement.
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