Per NationBuilder, the PayPal Express payment processor should not permit control panel refunds. You must go into PayPal to process the refund (http://nationbuilder.com/refund_donation). However, we are seeing cases where the refund option is available. This is not expected.
Update - we no longer see this issue - if you see it your nation please let us know so we can troubleshoot.
Thanks Abe! We will look at this and let you know if there are changes (either to the issue or the documentation)