Gift card purchases—a prize or problem?

Gift cards can be useful for different business purposes, including employee rewards—that is, when the purchase is properly approved, accounted for and taxed as necessary. Gift cards can also be a source of accounts payable fraud, as Mary Schaeffer describes below. Then there is the question of whether to allow gift card purchases via a P-Card. In my experience, organizations are diverse in their opinions, but there is one thing every organization should do.


The Gift Card Issue

by Mary S. Schaeffer, AP Now

As you may have noticed, many restaurants offer gift cards. A few go so far as to add a line to the credit card receipt so the diner can add on a gift card at the time he or she is adding the tip to the bill. This is fine if the person is paying for the meal themselves.

Unfortunately, a few unscrupulous employees have taken to adding on a gift card when taking a business associate out for a meal. If they gave the gift card to the associate, this might be acceptable. However, they could be pocketing the gift card for personal use. This is just one of the reasons a growing number of organizations are now requiring the detailed meal receipt.

The Solution

The solution to this problem comes in two parts. First, mandate use of a corporate credit card, as you might get detailed Level 3 data to help uncover gift card fraud. Also, the transparency of commercial card transactions acts as a deterrent. If you make use of the card optional, those who want to play games will most definitely decide not to use the card. 

The second part of the solution involves the receipt. Companies everywhere are starting to look at receipts in a whole new way—and the change is not exactly what you might expect. This new approach is based on experiences organizations have had as they’ve reviewed documentation provided by traveling employees. Advances in technology have provided greater visibility into reimbursement requests and not everyone is pleased with what they’ve uncovered. Some are starting to ask for the detailed meal receipt.

Now, if you start to require the detailed meal receipt, don’t be surprised if you don’t find gift cards on your employees’ documentation. I would hope your employees would be smart enough to NOT put a gift card on their bill if they know they are going to have to turn in the detail. 

Gift cards can be legitimate employee rewards, but they can also be a source of fraud when an employee buys and pockets as a present.

Gift cards can be legitimate employee rewards, but they can also be a source of fraud when an employee buys and pockets as a present.

Gift Card Purchases via a P-Card

by Lynn Larson, CPCP

Some organizations allow P-Cards to be used for gift card purchases and some do not. For others, it might be an exception. Whatever the case, your policies should address it one way or another. You could even have a stand-alone “Gifts Policy,” but ensure your card program policies refer to it and, if possible, link to it.

If allowed, the policy should specify: 

  • who can purchase gift cards and for what reason(s)
  • what type of pre-purchase approval is required and who else needs to know (e.g., Payroll)
  • the documentation requirements, such as who the gift card is for, why and when it was (or will be) given

Unfortunately, for organizations who do not allow it, there is no systemic way to block gift card purchases. Auditing becomes your best defense. Consider giving more scrutiny to purchases from stores that offer gift cards, such as big box retailers, pharmacies, grocery stores and gas stations. Transactions reflecting an even dollar amount (e.g., $100) might be another clue.


About the Authors

Mary S. Schaeffer, a nationally-recognized accounts payable consultant, is the creator of the AP Now website. She speaks regularly at live and online events; has written 18 business books, most focused on accounts payable issues; and has created many CPE courses for CPAs. Additional information can be found at www.ap-now.com.

Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

 

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