Spending Approval Process for Small Nonprofits and NGOs

Quick answer: A small nonprofit should agree its budget before anyone spends, split it by project or department, and then decide who may approve spending against each budget and up to what amount. Set checkpoints, for example at 75% and 90% of a budget, so the treasurer and trustees hear about a budget running out before it does. Keep the request, the approval and the supporting documents for every payment together, because donors and auditors will ask for them.

The problem: spending decided in a corridor

In many small NGOs, churches and foundations, spending is decided informally: the programme officer asks the director on WhatsApp, the director says "go ahead", and the treasurer finds out when the receipt arrives.

The cost shows up later. A donor-funded project runs out of money two months early, a committee chair spends the year's allocation in the first quarter, and nobody can tell the auditor who approved a ₦600,000 payment. Committees often ask a sharper question: "Can each chair spend up to their budgeted amount, or does every payment still go to the board?"

Start by separating two ideas. A budget says how much a project or department may spend in a period. An approval limit says how much one person may commit in a single decision. You need both, and the budget comes first.

Why this matters more for a nonprofit

A nonprofit that overspends, or spends on the wrong thing, can lose the trust of the people who fund it.

Donor money often comes with conditions. The Charity Commission for England and Wales describes restricted funds as money given for a purpose narrower than the charity's general purposes, and expects each restricted fund to be spent, managed and accounted for according to its rules. If a grant agreement ties money to a project, treat it the same way: money for a borehole project is not money for office rent.

Registered associations have record-keeping duties. NGOs, churches, mosques and foundations in Nigeria that are registered with the Corporate Affairs Commission (CAC) as incorporated trustees come under Part F of the Companies and Allied Matters Act 2020 (CAMA). As enacted in 2020, it says:

• the association's income and property must be applied solely towards the objects in its constitution (section 838);
• where an association collects subscriptions or contributions, its constitution must set out the procedure for disbursing its funds, keeping accounts and auditing them (section 827);
• the trustees must keep accounting records that show and explain its transactions, including day-to-day entries of money received and spent and what it was for (section 846);
• those records must be kept for six years (section 847), and the annual return to the CAC must be accompanied by audited accounts (section 848).

This is general information, not legal advice; check the current Act and the CAC's regulations, or ask a lawyer, for what applies to you. The practical point: your constitution is the first place to look for who may authorise spending, and every approval should leave a record that explains it.

The process: budget first, then who approves what

1. Agree the budget before the year starts

The board, trustees or council approves the budget before the financial year begins, as the Charity Commission recommends. Split it into the pieces people spend from: one budget per donor-funded project and one per department or committee, each with a named budget holder.

2. Decide who may approve spending against each budget

Give each budget holder an approval limit per request and say who approves anything above it. The Charity Commission's guidance asks for clear, written authority limits for placing orders and approving payments. Our article Who Can Approve What? shows how to set the tiers and backups on one page, so we will not repeat that matrix here.

To answer the committee question: yes, a chair can approve spending from their own committee's budget, but only up to a per-request limit the board sets. A budget of ₦3,000,000 for the youth committee does not mean the chair can sign a single ₦3,000,000 contract alone.

3. Keep two people on every transaction

The Charity Commission expects more than one person to be involved in every financial transaction: the person who authorises it should not be the person who made it. In a small organisation, the programme officer requests, the director approves and the treasurer pays. Where there are too few people to split duties fully, it suggests that all trustees review transaction reports instead.

4. Check the budget before approving, not after paying

Before saying yes, every approver asks: is there enough left in this budget after everything already approved? The Charity Commission says orders should be within an agreed budget, and spending outside agreed budgets should be authorised. Write down who may authorise it in your organisation, for example the treasurer and one trustee.

5. Act at budget checkpoints

Do not wait for a budget to hit zero. Agree in advance what happens as each budget fills up, and who is told (see the table below).

6. Keep the evidence together

For each spend, keep the request, the approval, the quote or invoice and confirmation that the goods or services arrived. This is what a donor reviewing a grant, or an auditor, will ask to see. To stop one purchase being split into small requests to stay under a limit, see How to Stop Purchase Splitting.

7. Report to the board every meeting

The Charity Commission recommends making the financial position a standing agenda item at trustee meetings, sent to trustees beforehand. A one-page budget-versus-spending summary per project is usually enough.

A budget checkpoint table (illustrative)

The example below uses a donor-funded school-feeding project with an annual budget of ₦12,000,000, run by a fictional education NGO in Jos. The organisation, people and amounts are illustrative.

At 90%, ₦1,200,000 remains. If three months of meals are still to be bought, talk to the donor now, not after the money is gone.

A one-page spending approval policy outline

Fill this in with your board and keep it to one page.

1. Purpose and scope: which funds and which people the policy covers.
2. Budgets: approved by the board before the financial year; one budget per project and per department or committee; a named budget holder for each; restricted funds listed with the donor's conditions.
3. Approval authority: per-request limits for each role and who approves above them (attach your approval matrix).
4. Separation of duties: the requester, the approver and the person who pays are different people; nobody approves their own request or a payment to themselves or a relative.
5. Budget checks: approvers confirm the remaining budget before approving; spending outside the budget needs written authorisation from the treasurer and one trustee.
6. Checkpoints: what happens at 75%, 90% and 100% of each budget, and who is told (use the table above).
7. Records: request, approval, quote or invoice, proof of delivery and payment kept together, for at least as long as the law and your grant agreements require.
8. Reporting: budget-versus-spending for each project at every board meeting.
9. Review: the board reviews the policy once a year and when a new major grant starts.

How RequisitionPro helps

A spreadsheet and a signed policy work for a handful of requests a month. It gets harder when several projects spend at once and the treasurer finds out after the money is committed.

Difficulty: nobody knows how much is left. In RequisitionPro, a Company Admin sets up budgets on the Budget Management page. Each budget belongs to a department, or to the whole organisation, for a fiscal year, and shows how much is allocated, committed and still available. A requisition counts against its department's active budget for the current year once it is fully approved (or against the organisation-wide budget if the department has none), so keep one active budget per department each year. There is no separate project field, so a small NGO that budgets by project can set each major project up as its own department, which also gives the project its own approval route.

Difficulty: finding out too late. Every budget has a warning threshold (75% by default) and a critical threshold (90% by default), both configurable per budget. In the budget list, utilisation turns amber from 75% and red from 90%, as in the screenshot below, where one budget sits at 88% and another at 96%. When an approval takes a budget past a threshold, a budget alert appears at the top of the Budget Management page for a Company Admin to review and acknowledge. These alerts appear in the app rather than by email, and approvers do not see budget figures on the approval screen, so make checking the page part of the treasurer's weekly routine and pass the news to approvers.

Difficulty: approvals go to whoever is around. Approval workflows are set up per department, with each step assigned to specific people or a role such as the department head. RequisitionPro does not route requisitions by amount: every request follows its department's steps whatever its total, so the per-request limits in your policy are applied by your approvers, not by an app setting.

Difficulty: evidence scattered across phones and email. Each requisition carries its justification, its items and attachments such as quotes (up to 10 MB per file), and the approval trail on the requisition shows each approval step and how long it took. The Reports page, open to Company Admins, offers requisition and department reports that can be downloaded as Excel files or opened as a printable PDF view for a board pack. RequisitionPro does not produce donor reports or fund accounts; those still come from your accounting records.

Related questions

Should a church or mosque use the same process as an NGO? The principles are the same: an agreed budget, written limits, two people on every transaction and records kept. Start from what your constitution already says about disbursing funds, then fill the gaps with a one-page policy.

What if a donor's rules are stricter than our policy? Follow the stricter rule for that grant. Note the donor's conditions against the project's budget so approvers see them before they approve.

Next step

Watch the "Budget Management" video (2:11) on our tutorials page to see how budgets, thresholds and budget alerts are set up in RequisitionPro.