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Survey: Some Ohio Governments Lack Credit Card Policy; Tax Dollars Put at Risk
• Some Entities Have Limits in Excess of $1 Million • New Legislation Would Require All Entities to Establish Guidelines
Columbus – Some local governments in Ohio may be putting taxpayer money at risk because they have not instituted basic policies to prevent dishonest employees from abusing government credit cards, according to a survey released today by Auditor of State Dave Yost.
Many local governments have no formal credit-card policy detailing oversight of credit card use. Almost half of those responding to the survey said they do not have a list of allowable credit-card expenses to guide government employees who use the cards, increasing the chances of misspending.
Some local governments also have huge credit limits that create the potential to saddle taxpayers with enormous debt, including 32 local governments with limits of $100,000 or more, with four reporting limits of $1 million or more.
Some entities have failed to segregate credit card duties, allowing one person not only to make credit card purchases, but to also reconcile credit-card accounts, leaving the door open to theft. Since 2011, at least $1.2 million has been stolen or misspent at Ohio governments through credit card abuse.
A special report, Credit Card Dangers: Local Governments At Risk Of Theft, also revealed that some entities use debit cards for transactions, a high-risk way of spending funds because it is a direct link to government funds without many safeguards.
“While many local governments avoid debit cards altogether and have strict controls on credit-card use,” Auditor Yost said, “some are flirting with danger by using debit cards. Many more put their tax dollars at risk by failing to establish policies to ensure that credit cards are used for legitimate government purposes and not for the personal enrichment of government employees, who have misused them to buy big-screen televisions, cars and visits to strip clubs.”
While the majority of the 1,646 local governments responding to the survey reported modest credit limits ranging up to $10,000, some reported limits ranging from $100,000 to more than $5 million. The use of high credit limits deserves more scrutiny and at the very least demands stringent oversight and internal controls.
“The results of the survey should concern Ohioans because we don’t have enough controls on this plastic, and we collectively are on the hook for the debt,” Yost said.
Respondents to the survey, conducted April 20-28, reported that many entities make the cards available to a large number of people, with some entities saying 20 people or more have access to the cards. The greater the number of people with access to the credit cards, the greater the risk of fraud or improper expenditures.
“The residents of our many communities should ask their local officials how much money can be charged to their credit cards and whether they have a credit card policy in place,” Yost said. “With the exception of a select few entities, the Ohio Revised Code offers little direction to the majority of local governments about how to use credit cards to safeguard taxpayers’ substantial investment in their villages, school districts, cities and other government entities.”
House Bill 312, introduced today by State Rep. Kirk Schuring (Canton) and Rep. Dave Greenspan (Westlake), would require local governments to establish credit card policies to protect tax dollars. The bill would:
- Require all government entities to enact a credit card policy detailing allowable uses, number of cards, who can use them, credit limits and reissue periods.
- Require for some governmental entities, that accounts and policies be reviewed regularly by an appointed compliance officer other than the treasurer of the government entity.
- Ban the use of debit cards, except for certain law-enforcement purposes.
- Authorize the Auditor of State to create rules for the disclosure and audit of credit-card rewards accrued by local governments.
“This legislation encourages and promotes additional transparency and oversight for spending Ohioans’ tax dollars, while affirming a responsive and responsible form of governing,” Rep. Greenspan said.
Said Rep. Schuring: “I’m honored to be a part of Auditor Yost’s efforts to put safeguards around the use of credit cards by local governments, and I want to commend him for the time he has taken to develop the framework for this legislation. Without the checks and balances that are incorporated in this bill, there is potential exposure for local governments to negligently use or abuse credit cards in a way that will ultimately cost taxpayer dollars.”
Auditor Yost said the survey was invaluable in helping to better understand the magnitude of the issues surrounding credit card usage. “We are grateful to those local officials who participated, because through their help, the legislature will be able to stitch a hole in the fabric of our financial safety net.”
The survey was sent to representatives of 5,494 entities, including cities, counties, libraries, park districts, townships, villages, school districts and entities related to those types of government. Some 1,646 entities responded to the survey, although not all questions were answered by all respondents.
In addition to the warnings issued in this report, Auditor Yost issued a bulletin last year on proper controls on credit cards.
An interactive map of credit and debit card misuse is available here.
A recording of the July 26 press conference is available here.
The Auditor of State’s office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 5,900 state and local government agencies. Under the direction of Auditor Dave Yost, the office also provides financial services to local governments, investigates and prevents fraud in public agencies and promotes transparency in government.