Work-issued credit cards: How to prevent staffer abuse

Let’s say that one of your not-for-profit’s employees makes significant personal purchases on a credit card you’ve provided for work-related expenses. You may think the outcome is relatively straightforward: The individual is fired and referred to law enforcement for prosecution, and you recover the funds. Unfortunately, obtaining a criminal conviction may be difficult. Plus, you might not want the negative publicity. Your credit card issuer is unlikely to credit you for the unauthorized charges unless you can prove the card was actually stolen, and your insurance may or may not cover the loss. The best way to prevent this situation is to craft and enforce a clearly worded credit card policy.

Who needs a card?

Your policy should start with who is authorized to have or use a card. Nonprofits commonly issue cards to their executive directors, program directors and office managers. Before issuing one to an employee — or temporarily handing one to other staffers — consider whether that person really needs it. Most people can pay out of pocket and submit reimbursement requests. However, if employees travel or entertain donors regularly on your nonprofit’s behalf, giving them cards may make sense.

Rules for use

It’s also important to clearly communicate the rules for credit card use. Explicitly state in writing that cardholders can’t use the card for personal expenses, and list other prohibited uses such as cash advances, electronic cash transfers and charges over a specified amount. State that reimbursement for returns of goods or services must be credited directly to the card account. Employees should never accept cash or refunds directly.

Supervisor and staffer responsibilities

Manager involvement is essential to helping prevent credit card abuse. Require employees to seek preapproval for any credit card charge and provide documentation, such as itemized receipts, to their authorizing supervisor for review. State that unauthorized purchases (and any related late fees and interest) will become the employee’s responsibility. Supervisors need to indicate their approval of the charges by a signature and date on the receipts or a standardized expense form. Your accounting department should reconcile monthly credit card statements, and an executive or board member should review the statements. Employers often terminate and sometimes pursue criminal prosecution against staffers who misuse credit cards. Make sure your policies are clear and that every employee understands the potential repercussions. At the same time, let employees know they should talk to you if they’re in financial straits.

Resist your initial impulse

If a staffer makes an unauthorized charge to your organization’s credit card, your first impulse may be to deduct the amount from that person’s paycheck. But be careful: Federal and state labor and wage laws generally prohibit making such deductions. Instead, ask the employee to repay the amount, arranging for a repayment plan if necessary. Discuss such actions, and other potential responses, with legal counsel and financial advisors. © 2024