Prepaid gift card purchased to pay for services rendered

I had a member in my unit who purchased a prepaid credit card in order to pay someone who provided services at our stake youth conference. I believe the service provider asked for this form of payment. The member submitted the receipt for the prepaid credit card and asked for reimbursement, but obviously this doesn't provide evidence that the card was used to compensate the speaker.

I am not concerned about fraud--I know this member used the card to compensate the service provider. I am more wondering what the best approach would be to document and then reimburse the expense to avoid an audit exception. My plan is to request [in addition to the receipt for the prepaid credit card] (1) a letter from the member stating why the card was purchased and to whom it was given, (2) a bill from the service provider, and (3) a letter from the service provider stating that the prepaid credit card was received as payment for the service rendered.

Thoughts? Is there any way to avoid an audit exception on this?

Speak with your stake audit committee chairman. He is one of the stake presidency counselors, usually the second counselor. The three options mentioned would most likely provide the evidence of the expense. I would favor the second and the third and only resort to the first if those two are not available. I would also discourage the practice of using a prepaid card in the future.

This raises my auditor radar. It feels like the service provider is trying to avoid having a payment flow through a bank account, which is a potential sign of tax evasion. It is also a little dodgy if the service payment was more than $600 since the argument could be made that the Church paid the member and the member paid the vendor. Who gets to generate the 1099?

scgallafent wrote: Wed Sep 22, 2021 6:14 pm This raises my auditor radar.

You're not the only one. But since OP indicated this was a done deal and was wondering how to do it after the fact, I didn't jump in.

But unless someone can come up with a good (and legal) reason, I'd try to avoid such vendors in the future.

I agree, it raised my “auditor radar“ as well. The amount was below $600, and I already asked the member not to make payments this way in the future. Interestingly, the member mentioned that this is a very common approach to pay individuals their speaking fees for church activities. I’m surprised any financial clerk would be OK with this approach.

devonerickson wrote:Interestingly, the member mentioned that this is a very common approach to pay individuals their speaking fees for church activities.

My radar goes up with the paying speaking fees for church activities. They must be using a different handbook.

lajackson wrote: Fri Sep 24, 2021 3:40 pm

devonerickson wrote:Interestingly, the member mentioned that this is a very common approach to pay individuals their speaking fees for church activities.

My radar goes up with the paying speaking fees for church activities. They must be using a different handbook.

(General Handbook 38.8.19, second bullet point. Using a pre-paid card sounds like a way to get around the letter of the law at the expense of the spirit of the law.)

As this was a Stake Activity, I'd suggest trying to verify if the Stake President is fully aware of the exact nature of this practice (as he is responsible to ensure GHB 38.8.19 is followed). It could be that all he sees is a "Services Rendered for Stake Youth Conference" expense, without realizing it's essentially speaking fees (and not food, etc). I don't have an "auditor radar" so I couldn't say if it's preferable to alert the Audit Committee of your concern or directly contact the Stake President. But I do think your awareness of this, allows you to take a bit of initiative to get better clarity on this "common approach".

lajackson wrote: Fri Sep 24, 2021 3:40 pm

devonerickson wrote:Interestingly, the member mentioned that this is a very common approach to pay individuals their speaking fees for church activities.

My radar goes up with the paying speaking fees for church activities. They must be using a different handbook.

Speaking fees was the wrong term. For guest speakers who travel long distances, our stake pays them to help cover their travel expenses. The amount paid was to cover gas and mileage for their vehicle. A member of our stake who often speaks at events at other stakes said that using prepaid cards is a common practice to "reimburse" the speaker for their travel, but I would much prefer reimbursement via check for expenses actually incurred.

devonerickson wrote: Mon Sep 27, 2021 12:41 pm Speaking fees was the wrong term. For guest speakers who travel long distances, our stake pays them to help cover their travel expenses. The amount paid was to cover gas and mileage for their vehicle.

Going back to 38.8.19 (talking abut guest speakers):

The person’s travel expenses are not paid either with local unit budget funds or by private contributions.

I'm not sure what the alternatives are. Perhaps that's allowable if the activity is financed by the Approved Member Activities budget that's common with youth camps. But that depends on how you interpret "private contributions".

Would anyone like to update that General Handbook reference? 38.8.19, in the only General Handbook I have access to is now about the Internet. Thanks!

sheepie59 wrote: Mon Jul 25, 2022 4:18 pm Would anyone like to update that General Handbook reference? 38.8.19, in the only General Handbook I have access to is now about the Internet. Thanks!

Yes the reference has changed. It is now 38.8.17.

Moderators and administrators do not edit historical posts to adjust references. Anyone who sees something like a reference in the General Handbook changing can post a update in a new post in the same thread.