Small Business Fraud Prevention: Bringing in the Reigns on the Company Credit Card

Alex Helfand, ENCE, Computer Forensic Specialist

Company credit cards offer the convenience and simplicity of documenting multiple expenses on one itemized bill.  However, without the proper controls in place, credit cards can also open the doors of your organization to occupational fraud.  Fictitious expense schemes can lead to significant losses for organizations; employees can use the card for personal expenditures or can submit a separate expense report for the same expenses that appear on the credit card statement in hopes of being reimbursed twice.

Fortunately, many of these schemes can be prevented with the proper internal controls.  No matter how few employees have access to a card, you should implement the following controls to help prevent and/or detect credit card fraud.

  • Issuance of credit cards – Keep a log of all employees who have been issued cards, including the card numbers, and a maximum allowable charge or monthly limit.   The monthly limit should be enforced by the card company.  When issued a card, have each employee sign an agreement that acknowledges their receipt of the card and that details company polices.
  • Approval of expenses – Similar to standard expense reimbursements, employees should provide an itemized receipt for each expense incurred on the credit card, including an explanation of the business purpose of the expense and the individuals for whom it was incurred. All supporting materials should be turned in to a delegated individual, such as a department supervisor, for approval prior to payment.The supervisor should review each transaction to verify that it is an allowable expense based on the organization’s policies and is for a legitimate business purpose. Also, the supervisor should compare each receipt to verify the vendor and the description of the transaction per the credit card statement.
  • Payment of the credit card bills – The credit card statement should be sent directly to an individual who does not carry the card, such as the accountant for employee credit cards.  The Chief Financial Officer should receive the statement for the credit card used by the bookkeeper to pay company invoices.  This individual can then compare the statement against the provided expense report and receipts.
  • Termination of cards – In your company credit card policies, include procedures for dealing with potential abuse or misuse of the credit card as well as for the termination of an authorized card-carrying employee.  I recommend immediately cancelling the card and removing authorization for the individual.   Even when the card company has been notified of cancellation, the card should be returned to your company and shredded so that further use is not possible.  Also, your policies should address procedures for payment of all charges already incurred on the card at the time of cancelation.

Depending on the size of your organization, there are many levels of fraudulent activities and schemes that can take place with the use of corporate credit cards. It may be beneficial to hire a forensic accountant to evaluate current controls and recommend strategies to improve controls and policies.

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