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Stop employee credit card abuse before it starts

A nonprofit staffer charged legitimate travel-related expenses to her employer’s credit card. Although she intended to file an expense report, her employer never asked for it — nor did the employer question her when it received the card statement. The employee was recently divorced and under unusual financial pressure, so when she couldn’t pay for a personal purchase she reached for her work credit card. She kept reaching for it until she had racked up several thousand dollars — at which time the nonprofit finally noticed the illicit charges.

There’s no reason your organization should experience this kind of credit card misuse or fraud. In fact, protecting it is as easy as writing a credit card use policy and following it.

Choose cardholders carefully

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 other staffers, consider whether they really need it. Most can pay out of pocket and submit reimbursement requests. However, if employees travel or entertain donors regularly on your nonprofit’s behalf, it may make sense to give them cards.

Just ensure that cardholders understand the rules. Explicitly say (even if it seems obvious) that they can’t use the card for personal expenses, and list prohibited uses such as cash advances and electronic cash transfers, as well as 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.

Get managers involved

Manager involvement is essential to preventing credit card abuse. Require employees to seek preapproval prior to incurring credit card charges over a specified dollar amount. Stress that unauthorized purchases (and related late fees and interest) will become the employee’s responsibility. Employees should have 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. Your accounting department should reconcile monthly credit card statements, and the statements should be reviewed by an executive or board member.

Give it teeth

Finally, make sure your credit card policy has teeth. Explain that violations will result in disciplinary action, including the possibility of employment termination and criminal prosecution. And if an employee violates your policy, do exactly as you promised. To ensure that staffers understand your policy, require them to acknowledge that they’ve read and agree to follow it.

For more information, please contact MCM Assurance Principal Theresa Batliner, CPA via e-mail or phone (502.882.4457).

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Personnel Profiling joins MCM

Effective July 1, 2014, Personnel Profiling, Inc. has joined the team at Mountjoy Chilton Medley, Kentucky’s largest CPA & advisory firm. With MCM, we’ll continue to offer the same top notch HR assessments, services and tools, now coupled with a greater breadth of in-demand expertise and services. You can now find the PPI main office and staff at MCM’s downtown Louisville headquarters.

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