AAFCPAs Advises on Internal Controls When Giving Employees a Business Credit Card

Businesses may receive many benefits when issuing credit cards to employees, including convenience and efficiencies when making purchases, improved expense tracking, and incentive rewards. However, AAFCPAs urges clients to stay vigilant, and make certain that adequate internal controls and protocols exist to ensure sound financial management.
We have provided the following best practice recommendations to help readers develop and maintain a sound company credit card program.

• Develop a written policy – Organizations should document a credit card policy that details the rules for using the card, and includes the acknowledgement that the employee takes responsibility for the card and agrees to follow the guidelines and use the card only for business purposes. The written policy should address issues such as:
  • When are receipts required?
  • When do charges need to be pre-approved, and what is the process for seeking approval?
  • What are permitted and prohibited transactions?
  • Who receives the credit card incentive rewards?
  • What are the consequences when an employee deviates from the policy?
• Prohibit personal expenditures – Company credit cards should only to be used for company-related purchases.
• Limit credit card usage – Cards should be used only when necessary, and when another form of payment is impracticable. In addition, companies should only issue credit cards to employees who truly need them, and should try to keep the overall number of credit cards at the organization as low as possible. Management should also regularly review the credit card limit of each card to determine if the amount is appropriate.
• Require employees to sign-off on policy – Each employee who is issued a credit card should sign off on the credit card policy before the card is issued.
• Store in a safe location – Each employee with a credit card should make sure it is secured in a safe location.
• Have Board approve issuance – For nonprofit organizations, the Board of Directors should formally approve the issuance of credit cards.
• Establish spending limits – Each employee who has a credit card should have a limit that is appropriate for their typical expenditure levels.
• Have bills approved by a supervisor or management – Employees’ monthly original credit card bills should be approved by their manager or another supervisor, and this review should be evidenced, for example, by a signature on the bills or an electronic bill sign-off. For nonprofit organizations, senior management’s credit card statements and supporting receipts should be reviewed by a member of the Finance Committee or Board on a periodic basis.
• Reconcile monthly – The monthly credit card bills should be reconciled timely to receipts by the Finance Office. The Finance Office should follow up promptly on any missing receipts.