Not-For-Profits and Credit Card Fraud

Not-for-profits and credit cards can be a bad combination when the right internal controls and oversight are not in place.  A Philadelphia non-for-profit learned this lesson the hard way when a federal grand jury indicted its former chief operating officer and former chief program officer on federal embezzlement charges.  The charges allege the two suspects were using mission-directed funds as well as the not-for-profit’s credit cards to pay for personal expenses, including overseas vacations, expensive meals, and even a personal trainer.  Authorities claim the two suspects charged a combined $350,000 in personal expenses on the not-for-profit’s credit cards during their employment.

If this not-for-profit had the right combination of internal controls and oversight this credit card fraud could have been deterred.  The not-for-profit could have simply adopted a formal credit policy which would have outlined the internal controls and oversight necessary to enforce proper usage of the credit cards.  A formal credit card policy, clearly written and easy-to-understand, should be implemented by the board and management, and communicated to all employees.  The policy should stipulate that supporting receipts be submitted for all charges with the purpose of the expense clearly documented, and the policy should limit the use of the credit card for certain specified transactions.  An independent board member or manager should carefully review all credit card activity on a monthly basis before payment is authorized.

Get more information on protecting your not-for-profit from credit card fraud.

Brian Collins is an Audit Manager with over 10 years of public accounting experience. He performs audit, review, compilation, and tax services for a wide range of clients in various industries, including not-for-profits and automotive dealerships.

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