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How to Protect your Nonprofit's Credit Cards from Misuse

How to Protect your Nonprofit's Credit Cards from Misuse
A hypothetical not-for-profit staffer named Britney had maxed out her personal credit cards. So when her car needed repairs, she reached for her employer’s card. She reasoned that she would come up with the money to pay the bill before her boss ever saw a statement. Britney did not come up with the money. But lucky for her, her boss did not review the card statement that month. When Britney needed to buy holiday gifts, she reached for her work card again — and again. By the time her boss finally noticed the illicit charges, Britney had spent more than $5,000.

This kind of credit card misuse or fraud is more common in nonprofits than you may think. But if you write and enforce a strong card use policy at your organization, you can help prevent such mistakes.

Who needs one?

The policy should start with who has the right to a card. Nonprofits commonly issue cards to their executive directors, program directors and office managers (or other employees responsible for buying supplies). Before issuing a card to staff, consider whether it is necessary. It may be reasonable to request employees to pay out of pocket and submit reimbursement requests. However, if employees travel or entertain donors regularly on the nonprofit’s behalf, it may make sense to provide cards.

Ensure that cardholders understand the rules. Explicitly say (though it may seems obvious) that they cannot use the card for personal expenses, and identify prohibited uses, including 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.

What’s management’s role?

Manager involvement is essential to helping prevent credit card abuse. Require employees to seek preapproval prior to incurring any credit card charge. Stress that unauthorized purchases (and related late fees and interest) will become the employee’s responsibility. Employees should be required to provide documentation (such as itemized receipts) to their authorizing supervisor for review.

Supervisors need to indicate their approval of the charges by a signature and date on the receipts or on a standardized expense form. The accounting department should reconcile monthly credit card statements, and the statements should be reviewed by an executive or board member.

How do you enforce it?

Make sure employees understand the possible consequences of violating the credit card policy, including employment termination and criminal prosecution. To ensure there is no misunderstanding, require employees to acknowledge that they have read the policy and agree to follow it in writing before receiving a card.

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