Did you know you need to report all personal purchases made on a government credit card to SAO?

Washington governments take good stewardship seriously. A key part of this stewardship is understanding when and how governments must report suspected losses, including the personal use of government credit cards.

The Office of the Washington State Auditor supports this important responsibility, and it starts with state law. State law RCW 43.09.185 requires state agencies and local governments to immediately report to the State Auditor’s Office (SAO) “…known or suspected loss of public funds or assets or other illegal activity.” The law also requires SAO to write policies about loss reporting, which can be found on SAO’s website at: Fraud Program | Office of the Washington State Auditor.

Following these rules at your government may sound straightforward, but we’ve noticed a few areas of confusion that can lead to governments underreporting suspected losses, particularly when it comes to the personal use of government credit cards. We’ve put together the following q-and-a to provide clarification.   

What if an employee accidentally made a personal purchase with a government card?

The law actually names two categories of things to report: “known or suspected loss of public funds or assets,” and “other illegal activity.” That second category includes any personal use of a government’s credit card.

Personal use is never allowable under state law.

In all cases – regardless of dollar amount, an employee’s intent, or the number of times an employee made a personal purchase – governments need to report these losses, even if they are temporary or accidental.

For a detailed analysis, see the Attorney General’s Office letter (PDF) dated June 2, 2011, on MRSC’s website.

What if the employee reimbursed the government for the use of the government credit card?

Regardless of whether the employee responsible for the loss paid it back, or the government sought recovery from their bank or insurance company, it must be reported to SAO. Governments may believe that because they were made whole, they didn’t have a resulting “loss” to report. But the law’s requirements are clear: governments must report suspected losses to SAO promptly.

In other words, the eventual “resolution” has no bearing on a government’s duty to report it.

If the employee pays it back before month-end, how does that qualify as a “loss” to be reported?

This is the most common question we get on reporting personal credit card use. Due to the law’s requirements about “immediate” reporting, our Office needs to know as soon as the government suspects a loss or other illegal activity has occurred. If an employee charges, for example, a $100 personal purchase on the government’s credit card and pays it back shortly after, the government should still immediately report the $100 charge to SAO.

Will SAO issue a fraud investigation report on all instances of personal credit card use, even if they are accidental?

No. The requirement to report certain events to SAO is separate from whether the event constitutes a misappropriation of public funds, or whether SAO will investigate or report on it. When we learn of losses, we first determine whether to investigate. We consider a number of things, including what was purchased, the circumstances around the purchase, how often this employee makes personal purchases, their roles and responsibilities, the government’s controls over credit card use, the dollar amount, whether they self-identified the purchase and much more.

Even when we don’t investigate, reporting to SAO allows audit staff to help determine where the control breakdown occurred, provide resources and recommend how to prevent future losses.

Do governments also need to report all credit card charges made by external bad actors?

A: No. SAO’s General Loss Reporting Policy (PDF) provides a reporting exception for external credit card fraud. Specifically, the policy states that governments do not need to report “Unauthorized credit card attempts and/or transactions initiated by an external party, that are determined fraudulent by the bank and refunded.”

For more information

We want to be partners in good government. If you have questions about loss reporting, please contact the Special Investigations team at fraud@sao.wa.gov.