It should come as no surprise that this story about company credit card abuse does not begin with a direct quote from someone who puts willy-nilly purchases on the boss' tab. Let's face it: Who is going to publicly cop to living large on the company credit card?
Still, it doesn't take much prodding to get people to spill the beans about someone they know -- or someone someone else knows -- who charged personal items to their employer. (Most start with a hushed, "I heard about this guy at my old company...")
I got a great story from a co-worker on my way to the water cooler. And another on the way back to my desk.
This stuff is gold for the office gossip mill.
Coffee, cash, corrective vision surgery
Enough teasing; here are the water cooler stories. One woman -- a corporate bigwig -- was caught charging pricey outfits to her company when she traveled for business. (Evidently, she didn't pack properly for her travels.) But her shopping slipups didn't stop there. When examined more closely, her expense reports revealed that a regular $30 "breakfast" charge was actually an accumulation of daily receipts from the local bagel store. The one on her way to the office.
When her bosses discovered the transgressions, they ordered her a coffee to go.
Then there's the one about a friend of a friend who took a $1,000 cash advance from his company credit card. As an advertising salesperson, plying clients with high-priced drinks, dinners, shows, and whatnots are considered the standard cost of doing business and such charges are routinely rubber-stamped in the accounting department. With a cash advance, who would be the wiser if he picked up some groceries -- or got a decent haircut -- on his way home?
But what if he got corrective vision surgery?
A Nuclear Regulatory Commission employee did, using the corporate Amex account for the $4,000 procedure. That one didn't slide by the Office of the Inspector General, reported in its "Fraud Bulletin" (some sizzling reading if you have a good imagination).
What did slide by (at least for a number of years) were $1.8 million in charges to the Washington Teacher's Union corporate credit card by former chief Barbara Bullock. When the Feds took an inventory of her apartment, the luxury list included a set of English bone china, Herend porcelain, wigs, artwork (William Tolliver, semi-nude female, for what it's worth), four Fendi purses, three fur coats, two Chanel handbags, and one strand of Tiffany pearls.
Mind-boggling that she didn't make the "Best-Dressed Public Servant" list, especially given her $106,840 salary.
Trust vs. accounting ease
Despite such egregious abuses (there's more titillating reading if you Google "corporate credit card fraud"), when it comes to company credit cards, expenses are notoriously hard to keep track of. At businesses where employees are required to travel, it doesn't take much to generate a mountain of receipts. Companies have the choice to either reimburse employees for expenses after the fact or let them use the company plastic.
There are two kinds of company cards. Business credit cards are like the ho-hum plastic you carry in your wallet. They have a credit limit and a minimum payment due each month. Each card issued is billed separately. Charges not paid off in full are subject to interest payments.
Corporate charge cards are paid in full monthly, and usually do not accrue interest. Companies must pay annual or monthly fees for this type of card. Employers using corporate charge cards have the option of having all charges appear on one bill or to receive separate bills for each card issued.
In either case, abuse can occur. Deadlines for turning in receipts often means that latecomers are given less scrutiny than those who turn in their expense reports early. When just one person is tasked with signing off on expenses, things can get overlooked.
When it comes to the labor involved in adding up receipts and comparing them to credit card bills, companies must weigh the costs of accounting labor against the price of dishonesty.
Not all company credit card abuses are the fault of an unscrupulous employee. Even unintentional abuse is easy. After all, it's just another piece of plastic in the wallet, and when you're fumbling for your card at the grocery story, mistakes can occur.
Consider the Christian Science Monitor reporter whose company credit card number was hijacked after he charged a waffle breakfast in Amman, Jordan. Wonder what the finance department thought of the $3,100 transaction for three Russian-made night-vision rifle scopes.
While there is no centralized data on the amount of money lost through corporate credit card fraud, ask anyone in any accounting department, and they'll agree that the price of streamlined accounting can run steep.
Plastic padlock
Employers worried about company credit card abuse have instituted some safeguards. Many corporate cards have single-purchase limits, for example, allowing less than $1,000 in purchases made online.
Cards also have filters -- merchant codes that prevent charges at certain retail establishments such as salons, drugstores, or clothing stores. When an employee tries to put her pedicure or Prozac on company plastic, the card will automatically be declined. If an employee has had trouble with the plastic police in the past, the boss will find out. Each person given access to the company credit card is subject to a credit check. (Here are some tips on performing credit report triage, should you need it.)
In addition to their added security features, company credit cards come with perks that should sound familiar: miles, rebates, teaser rates, free balance transfers. At the same time, businesses shopping for plastic must consider fees, interest rates, and card features with any card they choose. According to data provided by Mintel's Comperemedia, a Chicago-based market research company, issuers such as Bank of America, Capital One, and Wells Fargo are aggressively pursuing corporate credit card business.
The How-To Network has some guidelines for managing company credit cards, both for employers and employees with access to plastic. Perhaps most important for all parties involved is to know the rules. For example, if meals and beverages are allowable charges, but alcohol is not, make that clear in the employee handbook.
Oops, I charged it again
The company rules of credit cards should also include what happens to abusers. What happens to the office manager who puts a pack of M&Ms on the Staples charge card? Depending on the seriousness of the blunder, anything from a wrist-slap to termination.
But it's not just job loss that will put a crimp on your shopping style. If you charge a bunch of stuff to the company and aren't able to pay it back, the company will treat the purchases as extra wages, and you will be taxed on them.
Want to know what happened to that guy from the Nuclear Regulatory Commission who put his laser vision correction on company plastic? After paying it back, he got a wrist-slap of 14 days of unpaid suspension.
Heck, even after corrective vision surgery, he'll need glasses to see if that punishment left a mark.
Dayana Yochim has never been entrusted to wine and dine anyone with a company credit card. She is the author of The Motley Fool's Guide to Couples & Cash, which required very few purchases to complete.
