Glossary
Expenses & Payables

Expense Policy

By: Alec Hollingsworth
Updated:  
June 16, 2025

DEFINITION:

An expense policy is a set of rules governing how a nonprofit manages, approves, and reimburses expenses.
An expense policy is a formal set of guidelines established by a nonprofit organization to govern how expenses are incurred, approved, reimbursed, and documented. This policy outlines the procedures for staff, volunteers, and board members to follow when spending organizational funds, ensuring that all expenditures align with the nonprofit's mission and legal requirements. A strong expense policy details allowable and unallowable expenses, required documentation such as receipts, approval hierarchies, reporting timeframes, and consequences for non-compliance. It helps maintain transparency, controls costs, and prevents misuse of funds, supporting the organization's accountability to donors, grantors, and regulatory agencies.

Key Takeaways

  • Defines allowable and unallowable expenses
  • Ensures consistent and transparent spending
  • Reduces risk of fund misuse
  • Supports audit preparation

Why It Matters

Expense policies ensure consistent, transparent, and compliant spending of nonprofit funds.

Real World Example

A small animal rescue nonprofit implemented an expense policy requiring all staff and volunteers to submit receipts and complete an expense report within 30 days of purchase. The policy defined which items could be reimbursed—such as animal food and medical supplies—and outlined the approval process through the organization's treasurer. When a new volunteer purchased supplies outside of the guidelines, the treasurer referred to the expense policy to determine that the expense could not be reimbursed. This clear process helped the organization manage its limited resources, maintain donor trust, and prepare for its annual audit with well-documented expenses.

How Aplos Helps

Aplos allows nonprofits to set up custom expense categories and approval workflows that align with their internal expense policies. By integrating these policies into Aplos, organizations can automate approvals, flag policy violations, and ensure all expenses are properly documented for audits and reporting.
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Frequently Asked Questions

What should be included in a nonprofit expense policy?

A comprehensive expense policy should cover allowable expenses, documentation requirements, approval processes, reimbursement timelines, and consequences for violations.

How does Aplos help enforce expense policies?

Aplos enables organizations to create custom approval workflows, categorize expenses, and automatically flag transactions that don’t align with policy standards.

Why are expense policies important for small nonprofits?

Expense policies help small nonprofits control costs, prevent misuse of funds, and demonstrate accountability to donors and auditors.

Can volunteers be reimbursed under an expense policy?

Yes, as long as the expenses are pre-approved and documented according to the organization’s policy, volunteers can be reimbursed.