Recent court cases and the resulting media splurges have emphasised the need to properly manage the use of corporate credit cards.
In March, former Labor MP Craig Thomson was sentenced to nine months jail, suspended for two years (to be appealed in November) after being found guilty of using Health Services Union credit cards for personal use, including escorts.
More recently, former Sydney Ferries chief executive, Geoff Smith, received an 18-month non-parole sentence after using his company credit card to pay for more than $200,000 in personal items including cars, overseas holidays, a pool and home landscaping.
Corporate credit card fraud can tarnish an organisation’s reputation and blow out business costs as well as have a negative effect on other staff.
The Independent Commission Against Corruption (ICAC) in NSW recommends three basic risk management strategies to help keep track of corporate cards. These include developing protocols for the secure storage of credit cards in the workplace; ensuring that policies for credit card use are consistent with other organisational policies; and regularly reviewing the need for cards.
ICAC has put together a comprehensive series of FAQs for card use in public sector organisations, as well as some strategies for managing corruption.
Who should be allocated a credit card?
This will depend on the nature of the organisation’s operations, including whether employees frequently work in the field. Organisations may decide to provide credit cards only for a specific purpose – for example, overseas travel to a conference. Even then, it is recommended that limits of expenditure and the types of expenditure be imposed. For example, the credit card can be used only for accommodation and meals.
Is it better to avoid the corruption risks by not providing credit cards at all?
Credit cards do pose a corruption risk, but they also provide accountability for expenditure by automatically generating an auditable record of payments made through their use. Provided security is adequate, controls are in place and records are regularly checked and reconciled, credit cards can improve the accountability of some types of public expenditure.
Should my organisation allow employees to use agency credit cards for personal use?
Most agencies have a policy of allowing employees ‘reasonable use’ of its resources such as telephones and computers. Credit cards are aresource that should probably not be included in such a policy because the risk of misuse, even inadvertently, is so high.
It is important for employees to know that credit cards are issued to the position, not the person. They are not a personal benefit that comes with the job, but a resource.
A risk assessment of credit cards in a public sector organisation may identify some or all of these corruption risks:
- An employee charging personal expenses to the agency credit card.
- An employee and a client colluding to misuse an agency credit card.
- An employee using the card’s personal identification number to withdraw cash for their own or another’s benefit.
- An employee falsifying, destroying or damaging receipts and other records.
- One or more employees of an agency colluding for improper benefit. For example, the person allocated the credit card colluding with a financial officer whose role is to check expenditure.
To manage corruption risks
- Introduce policy and procedures for the management of credit cards.
- Train all relevant employees in the policy and procedures.
- In the policy, include sanctions for any breach of the policy and procedures.
- Review the policy every two years.
- Include credit cards in the organisation’s internal audit process and corruption risk management processes.
- Allocate credit cards only to support operational functions and efficient public expenditure (not, for example, to all managers regardless of need).
- Establish lines of accountability for the approval of credit card usage and expenditure.
- Conduct regular reconciliations of expenditure records.
Keep a record of
- Conditions for the use of the credit card, including maintaining receipts of expenditure.
- Limitations of expenditure for each card and/or position.
- Limitations on items that can be purchased by the credit card.
- Who has been allocated a credit card, with a cross-reference to individual personnel records to ensure the card is returned as part of the exit process when an employee leaves the agency.
- The purposes for which the card has been allocated and the limits of expenditure.
- The records the cardholder is required to keep regarding usage, to whom these records have to be provided and the timeframes for this provision.
- Who has been allocated a credit card, for what purchases and the limits of approved expenditure.