Debit Cards

Does your organization use a debit card? 

If it does, even if the card is not used very often and procedures are in place for its use, it presents a significant risk for funds to be stolen.  A debit card is essentially the same as cash.  Anyone who has access to the card has access to your bank account.  Once a purchase is made funds are immediately withdrawn from the organization’s bank account.  It is more difficult to recover funds used fraudulently with a debit card than with a credit card.  There is also no limit on the amount of funds that can be used for a purchase.

Debit cards can also be used to withdraw funds directly from the organization’s bank account through an ATM.  A nonprofit should never withdraw cash using a debit card due to the lack of documentation supporting the transaction.  There is no related invoice or receipt showing the business purpose of the use of the funds.   In addition, there is no control over the individual obtaining the funds.

Instead of using a debit card, a nonprofit should utilize a credit card for purchasing goods or services that cannot wait for a check to be processed. 

Be sure to implement a credit policy that includes the following:

• Who has access to/can use the credit card
• Available credit limit
• Types of purchases that can be made
• Types of purchases that cannot be made
• Under no circumstances should cash advances be allowed
• Consequence of charging nonbusiness related expenses
• Documentation required for charges
• Process for submitting the documentation
• Review process for the monthly credit card statements

By using a credit card instead of a debit card, your organization can greatly reduce the opportunity for its funds to be utilized in a fraudulent manner.

Contributed by: Carrie Minnich, CPA, MAcct |Director | DWD CPAs & Advisors