Auditor Yost Seeks Improvements to Credit, Debit Card Laws

By the Auditor of State’s Office

Thursday, March 9, 2017

Combing through heaps of local government bank records, auditors over the years have uncovered credit and debit card charges for lavish trips, jewelry and a whole lot of alcohol – all at the expense of Ohio’s taxpayers.

In the past three years alone, auditors found Ohio’s local governments and traditional school districts suffered losses of more than $250,000 from credit and debit card expenditures that were undocumented or did not serve a proper public purpose.

“We’ve seen too many cases where poor oversight set the stage for dishonest public employees to enjoy shopping sprees and all-expense-paid trips by charging the costs to a local government’s credit or debit card,” Auditor Yost said.

To combat misuse, the Auditor’s legislative team is working with stakeholders to craft changes to state law that would require local governments and school districts to implement a standard system of internal controls for credit card use.

“Across the board, not every type of government has a statute specifying allowable uses of credit cards,” said Corey Jordan, legislative director for the Auditor of State’s office. “The goal here is to provide a level of uniformity.”

The legislative team’s proposal is based on the state’s requirements for counties, spelled out in section 301.27 of the Ohio Revised Code. The proposed legislation would require 14 types of entities, including townships, to enact a policy addressing how credit cards will be used, who can use them, the number of cards issued, a time frame for cards to be reissued and credit limits on each card. 

It also would require the fiscal officer and governing or legislative body to conduct quarterly reviews of the amount of cards in use, as well as the self-imposed limits on the cards. Similar to counties, the proposal would create a penalty for individuals who knowingly misuse a local government’s credit card, in accordance with ORC 2913.21.

In addition to townships, the proposed changes would apply to Ohio’s counties, cities, villages, school districts, educational service centers, community schools, STEM schools, college preparatory boarding schools, information technology centers, water districts, park districts, libraries and agricultural societies.

Credit and debit card policies at many of these entities already satisfy or surpass the proposed requirements, said Jordan, who stressed that local governments could build upon the proposed internal controls to further safeguard their share of public funds.

“We encourage local government leaders to take a serious look at these cards so they know what cards are out there, what they are used for and who’s using them,” Jordan said. “Ultimately this is about trying to help local governments better police themselves in an area that is ripe for mischief.”

The proposal also addresses debit cards and their vulnerability to fraud and abuse. Unlike credit cards, debit cards lack a reconciliation process and can result in immediate withdrawal of cash from a checking account, making it difficult to track funds. Under the proposed changes, debit cards would be limited to law enforcement purposes and where required to establish an online bill pay account.

Yost said his office is actively seeking feedback on the proposal, which is still in its early stages. Local governments can offer their thoughts by emailing CMJordan@ohioauditor.gov.

“Credit cards are used for just about everything nowadays,” Auditor Yost said. “We want to preserve the convenience of paying with plastic without putting Ohio’s tax dollars at an increased risk for fraud, waste and abuse.” 

This article was first published in the Ohio Township Magazine.