Key Takeaways:
- To prevent employee misuse of company-issued credit cards, nonprofits should implement a clear credit card policy, outlining who is authorized to use the card and the rules for usage, including prohibiting personal expenses.
- Managers must be actively involved in the process, requiring preapproval for charges, reviewing receipts, and ensuring monthly reconciliation of credit card statements to detect and prevent abuse.
- If misuse occurs, legal counsel should guide the response; immediate deductions from the employee’s paycheck are typically not allowed, but repayment arrangements can be made.
Imagine one of your non-profit’s staff members uses a company-issued credit card for substantial personal purchases. At first glance, the solution may seem simple: fire the employee, pursue legal action, and recover the lost funds. However, securing a criminal conviction could prove difficult, and you may wish to avoid negative publicity. Moreover, unless the credit card was stolen, your card issuer is unlikely to reverse the unauthorized charges, and your insurance may or may not cover the loss. The most effective way to prevent this scenario is by creating and strictly enforcing a clear credit card policy.
Who Should Have a Card?
Begin by outlining who is authorized to possess or use a card. Non-profits typically provide cards to executive directors, program managers, and office administrators. Before granting an employee a card, or temporarily giving one to another staff member, carefully consider if it’s necessary.
Many employees can pay out of pocket and seek reimbursement. However, staff members who frequently travel or entertain donors on behalf of the organization may need the convenience of a company credit card.
Usage Guidelines
It’s crucial to explicitly state the guidelines for card usage. Document clearly that personal expenses are prohibited, and specify other restrictions, such as bans on cash advances, electronic transfers, or charges exceeding a certain limit.
Also, indicate that any refunds for goods or services must be credited directly back to the card, and employees should never accept cash or refunds personally.
Supervisor and Employee Responsibilities
Manager oversight is key to preventing credit card misuse. Require employees to seek preapproval for credit card charges and provide itemized receipts for supervisor review. Make it clear that any unauthorized purchases, along with associated late fees and interest, are the employee’s responsibility.
Supervisors should confirm their approval by signing and dating receipts or an expense form. Your accounting department should reconcile monthly statements, which an executive or board member should review.
When misuse occurs, employers often terminate the staff member and sometimes pursue criminal charges. Ensure your policies are clear, and employees fully understand the consequences. At the same time, encourage staff to communicate with management if they face financial difficulties.
Think Before Acting
If an employee makes an unauthorized charge, your instinct may be to deduct the amount from their paycheck. However, both federal and state wage laws typically prohibit such deductions. Instead, request the employee repay the amount, offering a repayment plan if necessary. Always consult legal and financial advisors when determining how to proceed.
