Imagine one of your nonprofit’s employees misuse their work issued credit card to make substantial personal purchases. You might assume the solution is simple: terminate the employee, report the issue to law enforcement, and recover the funds. 
However, securing a criminal conviction isn’t always easy. Additionally, you may wish to avoid bad publicity. Credit card issuers are unlikely to reimburse you for unauthorized charges unless the card was actually stolen, and insurance may or may not cover the loss. The most effective way to prevent this situation is by establishing and enforcing a clear credit card policy.
Who should receive a credit card?
Begin your policy by specifying who has authorization to hold or use a credit card. It’s common for nonprofits to issue cards to executive directors, program directors, and office managers. Before providing a card to an employee — or lending it to other staff members temporarily — carefully consider whether they genuinely need it.
Many employees can cover expenses out of pocket and request reimbursement later. However, if employees frequently travel or entertain donors for your nonprofit, it may be more practical to issue them a card.
Guidelines for usage
It’s crucial to clearly outline the guidelines for using work-issued credit cards. Specify in writing that personal expenses are strictly prohibited, and list other restricted uses, such as cash advances, electronic transfers, or transactions exceeding a specific limit.
Make it clear that refunds for returned items must be credited directly to the card, and employees should never accept cash or direct refunds.
Roles of supervisors and staff
Managers play a key role in preventing credit card misuse. Require employees to get prior approval for any charges made to the card, and ensure they provide proper documentation, such as itemized receipts, to their supervisors for review. Any unauthorized charges (along with related late fees and interest) should be the employee’s responsibility.
Supervisors should approve charges by signing and dating receipts or filling out a standard expense form. Additionally, your accounting department should reconcile monthly credit card statements, and an executive or board member should review these statements.
Organizations often terminate employees who misuse credit cards and, in some cases, seek criminal prosecution. Be sure to well communicate your policies, and that employees understand the consequences. Encourage employees to reach out if they face financial difficulties.
Think before you act
If an employee makes unauthorized charges on the organization’s credit card, your first reaction might be to deduct the amount from their paycheck. But be cautious: federal and state labor laws typically prevent such deductions. Instead, request that the employee repay the amount, and, if needed, offer a repayment plan. Consult legal and financial advisors before taking further action.
