Preventing Staff Abuse of Work-Issued Credit Cards in Nonprofits

Imagine one of your nonprofit’s staff members makes personal purchases using a credit card provided for work expenses. You might think the solution is simple: terminate the employee, refer the matter to law enforcement, and recover the funds. However, the reality is often more complex. Criminal prosecution may not be guaranteed, and pursuing legal action may lead to unwanted public scrutiny. Moreover, your credit card issuer likely won’t reimburse you for unauthorized charges unless the card was stolen, and insurance may not provide recoupment of your losses. The best strategy is to implement and enforce a well-defined credit card policy.

Determining Who Needs a Card

Your nonprofit’s credit card policy should start by identifying which staff members truly need a card. While executive directors, program directors, and office managers often require access, not every employee does. Before issuing a card to an employee or allowing temporary use, carefully assess whether the individual’s role necessitates it. Many staff members can make purchases out of pocket and submit reimbursement requests. However, for those who travel or entertain donors on behalf of your organization, a work-issued card may be a practical necessity.

Clear Rules for Usage

To minimize misuse, it’s essential to communicate clear rules for credit card usage. Explicitly state the card must not be used for personal expenses and outline other prohibited uses, such as cash advances or transactions exceeding a specified limit. Also, clarify any refunds for returned items must be credited directly to the organization’s account, not provided to the employee in cash or direct refund.

Responsibilities of Supervisors and Staff

Managerial oversight plays a critical role to prevent credit card abuse. Require pre-approval for all charges and instruct staff to submit detailed receipts or documentation for supervisor review. Clearly state that unauthorized charges, along with any related fees or interest, will be the employee's responsibility. Supervisors should approve expenses by signing and dating receipts or using a standardized expense report. Monthly credit card statements should be reconciled by your accounting team, with oversight from an executive or board member to ensure transparency.

Although misuse of nonprofit funds is a serious matter, termination and criminal prosecution should be approached with caution. Ensure employees understand your credit card policies and the consequences of abuse, but also offer a pathway for staff to communicate any financial difficulties before issues arise.

Avoiding Knee-Jerk Reactions

If you discover an unauthorized charge on your nonprofit’s credit card, your immediate reaction might be to deduct the amount from the staff member’s paycheck. However, labor laws typically prohibit such deductions. Instead, request repayment from the employee, and if necessary, arrange a repayment plan. Be sure to consult legal and financial advisors before taking action to ensure compliance with applicable laws and regulations.