Fraud alert

Last year a village in Madison County became a case study for why Ohio needs better rules to regulate the use of local government-issued credit cards.
In a fraud that unfolded between 2012 and 2016 in Mount Sterling, Administrator Joseph A. Johnson stole $724,000 from the village. About $330,000 of that amount was acquired through his misuse of a village credit card for personal purchases.
In March, Johnson was sentenced to 10 years in prison after being convicted of theft in office.
While the credit card fraud was the most significant investigated by Ohio Auditor Dave Yost since 2011, it was not the only one. There have been at least 35 cases of credit card fraud involving local governments in Ohio since 2011, totaling more than $1.2 million.
Two findings for recovery involved entities in surrounding counties. The Perrysburg School District in Wood County and the Agricultural Society of Wyandot County were both ordered to make repayments for fraudulent credit card activity by employees.
Yost released a report this week detailing some of the shortcomings of local government use of credit cards. Not coincidentally, a bill that would require local governments to establish safeguards to better protect Ohio’s tax dollars was introduced in the Legislature this week.
Government credit card guidelines, which are largely lacking in the Ohio Revised Code, would appear past due.
Yost’s report suggests some entities are not doing enough to prevent dishonest employees from abusing government credit cards.
Only about half of the 1,646 entities which responded to a survey which served as the base of the report have a formal credit card policy detailing oversight of card use. Many do not even have a list of allowable credit card expenses to guide use of the cards, which increases the chances of misspending.
Some entities, meanwhile, have very high credit limits, according to the report. Thirty-two have limits of $100,000 or more and four exceed $1 million. Some entities have more than 20 people with access to government-issued credit cards.
Yost has suggested that having rules like requiring employees to sign out credit cards after showing an ID, requiring two signatures for a transaction, explaining what a charge is for, and requiring the user to sign the card back in after use would help reduce fraud. He also said debit cards should rarely be used by government entities because it’s more difficult to recover misappropriated funds when they are used.
The Legislature should carefully consider Yost’s recommendations when it hears testimony on the bill this fall.
In the meantime, the auditor’s report should sound an alarm about the potential for fraud. Every government office that authorizes even one credit card should review existing guidelines and implement more stringent ones, if needed, to make sure it doesn’t become the next case study.



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