Use of Gift Cards by Local Government Entities
The increasing popularity of gift card use by local government entities raises both legal and internal control issues.
Legal issues include the lack of authority to use gift cards as a method of distributing public funds, and the analysis by the Minnesota Attorney General that because “gifts” lack consideration they violate the State Constitution which requires a public purpose for all public expenditures.
Internal control issues arise because the cash equivalent nature of gift cards can make their handling, dissemination and use difficult to trace increasing the opportunity for theft and misuse.
The Office of the State Auditor has prepared the Use of Gift Cards Statement of Position discussing these and other issues related to gift cards use by local governments.
We urge local units of government considering the use of gift cards to consult with their legal counsel as well as their internal or external auditor.
Date this Avoiding Pitfall was most recently published: 2/24/2023