Department Credit Cards: Worth the Risk?

by | March 15, 2023

Editor’s note: This article is part of a series. Click here for the previous article.

Gordon Graham here again and thanks to so many of you for taking the time in the weeks following my last few articles to share your personal experiences with financial risks. Not to bore you early on, but these issues are indeed universal! And as I mentioned at the close of the last article, one of the key issues is credit card misuse by law enforcement personnel.

If you are completely bored some night with nothing to do and you have finished Netflix, Prime, Hulu, Acorn, Sony, HBO and all the rest, switch to MeTV (Memorable Entertainment) to see if you can pick up an old episode of Highway Patrol starring Broderick Crawford (“Don’t give your blood to the highway—give it to the blood bank.”) And after you’ve done that, go to your favorite search engine and type in “credit card misuse by government employees.” You will be shocked at the number of hits you get.

How do I know this? In preparing to write this piece I had in my mind that there is misuse of credit cards by cops and other government employees, but I had no idea of the magnitude. If you look at some of these stories, the numbers are in the millions, possibly billions, of dollars.

If you further drill down on some of these hits you will be shocked at what some government employees have bought using a government credit card. Here is a sampling of some of the purchases: Cash back, liquor, car payments, liquor, fur coats, liquor, massages, liquor, dental work, liquor, clothes, liquor, shoes, liquor, makeup, liquor, dinners, liquor, ammunition, liquor, televisions, liquor, sundries, liquor, and lots of other inappropriate purchases including liquor.

Just to show you the magnitude of this, in 2003, the Inspector General at one federal agency found widespread misuse of credit cards, with more than $7.7 million in improper charges within six months. The IG’s findings concluded with “10 percent of the total charges in the agency during this time were not authorized.”

If you are a frequent reader of these ramblings I write on a monthly basis, you know that when I look at any risk my first question is, “Can I eliminate the risk?” As I type this, my brain goes back to my time in the late 60s at the all-boys St. Ignatius High School (now College Preparatory and now Co-Ed). The principal had invited two San Francisco Police Department cops to give the sophomore class a talk on the opportunities in becoming a SFPD Explorer.

Frankly I was surprised that SFPD came back, because the year prior they sent two SFPD cops to talk to freshmen about the dangers of marijuana. They put a joint on a paper plate and passed it around the class so that everyone could “know what a joint looks like”—and there was some consternation when the plate got back to the cops with two joints on the plate. But that is another story.

Back to the Explorer program. It looked very interesting to me but I was busy working a couple of jobs so I could pay for the tuition at the school and I could not make the time commitment required to be an Explorer. I was further upset when I learned from my classmates who were Explorers that there were actual girls in the Explorer Program, recruited from the all-girls Catholic high schools. The problem with an all-boys school is that by definition there are no girls there.

My dad taught me something early on in life that I still do today: “Read a newspaper every day—know what is going on.” That was true in the 60s and is true today. Not to digress, but I am shocked at how little people (including public safety personnel) know about what is going on in the world, our nation, our respective states and our communities. But way back then I was reading the San Francisco Examiner and every couple of years I was reading about an SFPD cop who got arrested for having sex with an underage girl in the SFPD Explorer Program.

After high school and four years at San Francisco State College (and what an exciting four years those were, as the Vietnam War protests were a daily event and SFPD had their “Tac Squad” on the campus quelling the protests—check it out on YouTube), I joined the California Highway Patrol.

Now, the CHP did not have an Explorer Program. But when I reported into the Central Los Angeles office in 1973, I was now reading the LA Times daily—and once a year I would read about an LAPD cop, or an LASO deputy, getting arrested, fired and prosecuted for—you guessed it—having sex with an underage female Explorer! Twenty years later I was giving advice to the executives. Our recruitment numbers were down and there was talk about creating an Explorer Program to serve as a recruitment tool. Based on my knowledge of these programs, I recommended we do not do that, but they did—and you will never guess what happened!

I am not opposed to Explorer Programs, but if you have one, you MUST have some control measures—policies and procedures—to make sure that one-on-one situations do not occur. Requiring all activity to be done in groups will help prevent inappropriate behavior.

Now that I have digressed substantially, allow me to get back to the focus of this article—misuse of government credit cards, specifically public safety agency credit cards. Here is a thought: Eliminate the risk! No one gets a credit card, period. If you need to buy something for your agency, either get a purchase order or put it on your own credit card and fill out a form to request reimbursement. You have now eliminated the misuse of credit cards—and my guess is you will reduce “essential” purchases because now people will have to fill out a form, and they hate doing that so they will avoid making the purchase.

I recognize the above paragraph is “nonworkable” in just about every agency. Some employees do not have credit cards, or do not have a high enough credit limit, or some other reason why some employees will need a government credit card. If that is the case—and I guess it is—you will need some control measures (again: policies and procedures) to ensure these cards are not being misused. These control measures must include language concerning responsibilities of the cardholder, spelling out spending limits, requiring regular usage reports, prohibiting the use of cards for personal expenses, and requiring stringent usage review.

I am way past my allotted word count for this writing, but I would like to wrap up with this. Senator Grassley from the great state of Iowa had some major concerns about misuse of government credit cards, so he authored a bill (read: recommended control measures) to proactively prevent problems. Depending on the size of your agency, some of these recommendations will not apply to your department, so pick and choose—but make sure the last sentence in the above paragraph is your guide on how to structure your program.

Go to your favorite search engine and type in “credit card misuse by government employees.” You will be shocked at the number of hits you get.

Here are the required safeguards and internal controls in Senator Grassley’s bill:

  • Performing credit checks for travel card holders and issuing restricted cards for those with poor or no credit to reduce the potential for misuse
  • Maintaining a record of each cardholder, including single transaction limits and total credit limits so agencies can effectively manage their cardholders
  • Implementing periodic reviews to determine if cardholders have a need for a card
  • Properly recording rebates to the government based on prompt payment
  • Providing training for cardholders and managers
  • Utilizing available technologies to prevent or catch fraudulent purchases
  • Establishing specific policies about the number of cards to be issued, the credit limits for certain categories of cardholders, and categories of employees eligible to be issued cards
  • Invalidating cards when employees leave the agency or transfer
  • Stipulating that employees cannot approve their own purchases
  • Reconciling purchase card charges on the bill with receipts and supporting documentation
  • Submitting disputed purchase card charges to the bank according to the proper procedure
  • Making purchase card payments promptly to avoid interest penalties
  • Retaining records of purchase card transactions in accordance with standard government record-keeping polices
  • Utilizing mandatory split disbursements when reimbursing employees for travel card purchases to ensure that travel card bills get paid
  • Comparing items submitted on travel vouchers with items already paid for with centrally billed accounts to avoid reimbursing employees for items already paid for by the agency
  • Submitting refund requests for unused airline tickets so the taxpayers don’t pay for tickets that were not used

So thank you Senator Grassley for helping me with this piece. I look forward to our next visit, during which I will continue my ramblings on “Family Nine—Financial Risks” with some thoughts on charity events.

Until then, please work safely!

GORDON GRAHAM is a 33-year veteran of law enforcement and the co-founder of Lexipol, where he serves on the current board of directors. Graham is a risk management expert and a practicing attorney who has presented a commonsense risk management approach to hundreds of thousands of public safety professionals around the world. Graham holds a master’s degree in Safety and Systems Management from University of Southern California and a Juris Doctorate from Western State University.

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