Gift Card Policy

Approved by: The President History: Issued -- March 12, 2012 Revised -- Last Reviewed -- Related Policies: Prohibited Transactions, Financial Transaction Authority Additional References: Gift Card Approval Form, Gift Card Log Responsible Official: Controller tel. (202) 319-5031

I. Introduction

University faculty and staff occasionally want to use gift cards or gift certificates to compensate individuals such as event volunteers or research study participants. As cash-equivalent instruments, gift cards are governed by tax rules and internal control requirements. These rules and requirements must be followed and communicated to those involved before purchase or distribution of any gift cards. When gift cards are distributed, they must be distributed in accordance with the guidelines set forth in this policy.

This policy applies to all University personnel and is limited to gift cards funded by the University or where payments will be made by the University from some external funding source (a grant or research contract). The portions of the policy related to tax reporting are also applicable to distributions of any gifts and awards of non-cash tangible items with a fair market value greater than $50 if funded by the University.

II. Definitions

A. Gift Card means a stored-value or similar instrument issued in lieu of cash or check. For purposes of this policy, "gift card" includes gift certificates.

B. Responsible Employee means the faculty or staff member in the department disbursing the gift cards that is responsible for the documentation, internal control and other requirements of this policy. For sponsored projects, the Principal Investigator (PI) is the Responsible Employee and cannot delegate this role.

C. Study Subject means an individual about whom an investigator conducts research and obtains data through intervention or interaction with the individual.

III. Allowable Uses and Limits

Gift cards may only be distributed for the following purposes:

• Compensation for Study Subjects in studies approved by the University's Institutional Review Board (IRB)

• Prizes, recognition awards or tokens of appreciation for students

• Prizes for employees

Gift cards cannot be used as a bonus, honoraria, or other means of compensation to employees. Such payments must be processed through the payroll system.

Individual gift cards should be valued at $50 or less unless a special exception is approved by the Controller.

IV. Approvals

Prior to purchase, gift card usage must be approved by the departmental fund manager (or PI) and the Controller by completing the Gift Card Approval Form. Once approval notification has been received from the Controller, the cards can be purchased using the method described below. Included on the Gift Card Approval Form is a Statement of Responsibility that the Responsible Employee must sign to signify that he or she understands the additional responsibilities associated with gift card stewardship and distribution.

V. Approved Purchase Method

SunTrust Visa gift cards are the only University-approved gift cards. Departments can purchase SunTrust Visa gift cards from the University Cashier's Office. This process centralizes gift card administration, facilitates tracking for purposes of compliance with IRS tax regulations and eases the purchase process for departments.

Once the Controller has approved the Gift Card Approval Form, the department can take that form to the Cashier's Office. The Cashier's Office will release the requested gift cards to the custody of the Responsible Employee and initiate the process to transfer funds from the purchasing department to Treasury Services. The Cashier's Office will maintain a modest inventory of gift cards in denominations of $10, $25 and $50 on-site. When the Cashier's Office re-orders gift cards, the shipment will take 7 - 10 days; therefore, the department should plan ahead when making its request.

Gift cards should be purchased no more than one month before disbursement. For a situation where the gift cards will be disbursed over a longer period of time, the gift cards should be purchased in increments with each increment tracked on a separate Gift Card Log.

VI. Required Documentation

The Responsible Employee is required to maintain the following documentation:

Gift Card Approval Form

This form is the official approval method, as noted above. The Form will be completed by the department, approved by the Controller and given to the Cashier's Office as authorization for purchase and release to the Responsible Employee.

Gift Card Log

For IRS tax reporting purposes, the department is required to complete the Gift Card Log, which lists the parties receiving the gift cards and information required for IRS tax reporting purposes. The Responsible Employee will give the Gift Card Log to the Controller by the earliest of the following dates: a) ten (10) business days after all gift cards have been distributed, b) sixty days (60) after gift cards were purchased from the Cashier's Office, or c) November 15 of the current calendar year.

VII. Internal Controls

The Responsible Employee has primary responsibility for safekeeping, maintenance and proper usage of the gift cards and for advising faculty, staff or students who handle the cards that they must follow this policy. Gift cards must be safeguarded at all times and accounted for as if they were cash. For sponsored projects, the PI must maintain all records regarding the Study Subjects. The following controls are required at a minimum:

A. Custody

The Responsible Employee holds custody over the cards and should always know where they are. Custody may be transferred temporarily from the Responsible Employee to other departmental personnel for disbursement purposes, but the Responsible Employee still holds primary responsibility for the safekeeping of the cards.

The Cashier's Office will record the serial numbers of the gift cards held in inventory and distributed to departments for purposes of tracking custody of each card.

B. Physical Access

Gift cards must be secured at all times (e.g. in a locked box in a locked cabinet or drawer) with limited access.

The Finance Division is responsible for safeguarding any gift card related tax documentation and must keep these records secured with limited access at all times. The Cashier's Office will keep its inventory in the safe.

C. Tracking

Gift card disbursements must be documented on the Gift Card Log, designed to uniquely identify each payment in order to document the use of the card for audit and tax purposes. Because of IRS requirements, a recipient cannot receive the gift cards if he or she refuses to provide the requested information. If the Responsible Employee disburses the card without obtaining this information, he or she may be personally responsible for funding the gift card purchase. Due to the nature of the data collected on the Gift Card Log, please treat the Log as confidential information under the Information Assurance Policy. As noted on the Gift Card Log, information to be included for each card shall include at a minimum:

• Purpose of the payments

• Recipient name

• Federal tax ID number (for tax reporting purposes): EMPLID is acceptable for any existing employees. Social Security Number is required for all others.

• Permanent address (not campus address)

• Payment amount

• Whether the recipient is/was a University employee in the same calendar year as the gift card distribution

• Date of disbursement

• Partial serial number of the gift card

• Signature of the recipient, confirming receipt

D. Inventory

Departments holding more than one gift card must perform a physical inventory at least on a weekly basis, with the results reconciled to the current Gift Card Log. The inventory should be performed by someone other than the Responsible Employee but in the presence of the Responsible Employee. Any discrepancies must be reported immediately to the Controller.

The Cashier's Office will inventory the centrally held gift cards at least weekly.

VIII. Tax Reporting

In addition to annual W-2 reporting for all payments to employees in a given year, IRS regulations require reporting of any non-employee who receives a total value of $600 or more from the University in a calendar year. Because of these requirements, the University requires that a complete Gift Card Log be maintained for all recipients of gift cards or reportable non-cash tangible gifts.

The IRS considers gift cards to be tax reportable as compensation when issued or awarded to the recipient, regardless of value. Gifts to employees paid by University funds (source of funding makes no difference) must be taxed as ordinary income to the employee. Gifts, rewards, and gestures of appreciation cannot be provided to employees as disguised compensation. The value of the gift cards (or reportable non-cash tangible gifts) will be included on an employee's annual W-2 in taxable income. The employee's earnings will be reduced by FICA and Medicare taxes, as applicable, at the next pay period after the gift earnings are applied.

For non-employees, the University will file a Form 1099-MISC to report the awards when the value of total payments are more than the designated 1099-MISC threshold in a calendar year.

It is the Responsible Employee's duty to make the employee aware of the tax implications of the gift.

IX. Lost Cards

The Responsible Employee will be held responsible for any gift cards in their possession that are lost or misplaced. Any shortage must be reported immediately to the Controller.

The Controller, in conjunction with the Vice President of Finance and Treasurer, the Department of Public Safety and the Office of Human Resources, may investigate the circumstances surrounding the loss. If the investigation findings demonstrate the Responsible Employee did not use adequate internal controls, as defined by this policy, he or she cannot be the Responsible Employee for any future gift card disbursements and may be asked to reimburse the shortfall with personal funds.

If the investigation indicates there might have been an intentional misappropriation of the gift cards, the Vice President of Finance will consult with the Office of General Counsel and either the Associate Vice President of Human Resources (for employees), the Provost (for faculty), or the Vice President of Student Life (for students), on the appropriate next steps. Consequences may include termination of employment and referral of the matter to a law enforcement agency.

X. Grant-Funded Disbursements

University research projects may utilize gift cards to compensate Study Subjects. When gift cards are being purchased with grant funds, the following criteria must be met in addition to the other guidelines noted previously in the policy:

• The gift card payment must be allowable by the stated terms and conditions of the specific grant.

• The gift card must only be for Study Subject incentive payments.

• Costs for Study Subject payments must be included in the grant budget.

• The PI must maintain a Gift Card Log for tax reporting purposes, as described earlier in this policy.

HENNA PERSIAN MED BROWN