Charity Credit Cards and Expense Claims: A Workflow

Every charity expense needs three things attached to it: a code, a supporting document, and an approval. Corporate cards and staff expense claims are where those three come apart, usually because the transaction arrives weeks before the receipt does. This is the workflow that keeps them together. Whether a particular payment is taxable to the person receiving it is a separate question with its own rules, and we cover it separately.

What does the workflow need to produce?

A coded transaction, a supporting document, and evidence of approval, for every single expense. If any of the three is missing, the expense is not properly recorded no matter how neat the ledger looks.

The coding has to answer two questions, not one: which fund the cost belongs to, and which function. Business bookkeeping only asks the second.

These are two different kinds of evidence and it helps to keep them apart. The supporting document is a record-keeping obligation: your books must be supported by source documents that let CRA verify what happened, and CRA's own examples of a charity's books and records include invoices and receipts. Our guide to keeping proper books and records sets out the requirement.

Approval is internal-control evidence rather than a CRA source-document requirement. It matters because someone other than the spender should confirm the spending was authorized, and because a funder or auditor will look for it. Both are worth having; only one of them is a record-keeping rule.

How should a corporate card statement be handled?

Transaction by transaction, not statement by statement. Coding a $4,200 monthly card statement to a single "credit card expenses" account is the most common charity card failure, and it destroys every downstream report.

Import the card as its own account with a live feed so transactions arrive individually. Each one gets coded on its own merits, with its own receipt attached.

Reconcile the card monthly against the statement, exactly as you would a bank account. The card is a liability account, and the payment you make to the card company is a transfer, not an expense. Charities that record both the card transactions and the card payment as expenses double-count everything.

Set a receipt deadline and enforce it. A practical rule is that receipts are due within five business days of the transaction, because a cardholder can still remember a purchase after five days and cannot after thirty.

How do you code an expense to the right fund and the right function?

Ask two questions in order: whose money paid for this, and what was it for.

The first question is the restriction. If the cost was incurred under a grant, it codes to that fund, and it needs to be eligible under that agreement. If it was general operating money, it codes to unrestricted. Guessing here is what produces fund balances nobody can defend. Our guide to fund accounting for charities covers the structure.

The second question is the function. The main functional categories are charitable programs, management and administration, and fundraising, and the annual return also carries separate lines for other activities, for grants to non-qualified donees and for gifts to qualified donees. This split feeds your return, and doing it at the point of coding is far cheaper than reconstructing it in June.

Some costs genuinely span both. A staff member who spends 60 percent of their time on programs and 40 percent on administration produces expenses that should be allocated on a documented basis, not assigned wholesale to whichever is convenient. Write the allocation basis down once and apply it consistently.

What does an expense claim need to contain?

Six fields, and a claim missing any of them should go back.

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The business purpose field is what makes an expense defensible a year later. "Lunch, $84" tells a funder nothing. "Lunch, program partner meeting, four attendees, $84" tells them everything.

Set a policy on what happens with claims submitted late, and apply it. Claims that arrive after the period has closed create prior-period corrections, which are worse than a slightly annoyed staff member.

How do you handle petty cash?

Run it as an imprest float, which means a fixed amount that is topped back up to the same number every time.

Set the float at a specific amount and record it as an asset. When cash is spent, the receipt goes into the box. At any moment the cash plus the receipts should equal the float exactly.

To replenish, total the receipts, code each one properly, and write a cheque or transfer for that total. The float returns to its original balance. Posting the expenses at replenishment is the routine workflow under an imprest system. At a reporting period cutoff, unposted receipts sitting in the box still need to be recognized appropriately for that period under your accounting basis, so total and post them before you close rather than waiting for the next top-up.

Count and reconcile the float monthly, and have someone other than the custodian do the count. Keep the float small, because a small charity almost never needs more than a few hundred dollars in cash, and a large float is both a control risk and a sign the cash is being used for things that should go through a card.

Who approves, and who pays?

Your bookkeeper records. Someone at the charity authorizes and releases payment. These are different jobs, and combining them removes your main control.

A bookkeeping engagement records what was spent, codes it and reconciles it. It does not normally include bill payment, accounts payable management, or releasing funds. Our scope of service page sets out where that boundary sits.

That separation is not just a service definition. It is the control that means the person recording transactions is not also the person moving money, which is the basic protection every small charity should have. If your bookkeeper both records and pays, you have lost it.

If your card and claim process is producing uncoded transactions and missing receipts, our charity bookkeeping service page sets out how this runs inside a monthly cycle.

Frequently Asked Questions

Can we code a whole credit card statement to one account?

No. Each transaction needs its own code, receipt and approval. Coding at the statement level makes fund tracking, functional allocation and funder reporting impossible, and it removes the audit trail that supports your records.

What do we do about a missing receipt?

Have the cardholder complete a written statement describing the purchase, the amount, the date and the business purpose, and have it approved by someone else. Be clear about what that is: a fallback internal record explaining the transaction, not a substitute for the original source document. Record it, and track how often it happens. Occasional missing receipts are normal; a pattern is a policy problem.

Should a charity give staff corporate credit cards?

It depends on volume. Cards reduce reimbursement delays and give you a clean transaction feed, which is a real bookkeeping benefit. They also require a written policy, spending limits and enforced receipt deadlines. Without those, a card is worse than reimbursement.

How much petty cash should we keep?

As little as practical, commonly a few hundred dollars. Run it as a fixed imprest float, count it monthly, and have someone other than the custodian do the count. If the float keeps running out, the spending should be moving to a card instead.

Is a reimbursement to a volunteer taxable?

That depends on whether it is a reimbursement of actual expenses, an allowance, or an advance, and the rules differ. It is a separate question from how the transaction is captured and coded, which is what this article covers. Confirm the treatment before you pay rather than after.

This article provides general information about bookkeeping practice and Canadian charity compliance. It is not accounting, tax or legal advice. Speak with a qualified adviser about your organization's circumstances.

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