Credit Cards & Purchasing Cards (P-Card) (USFR Memorandum No. 253) Paula Gustafson Michael Stelpstra February 1, 2012
Credit Cards & P-Cards What Memo No. 253 covers: Policies & Procedures Card Issuance Transaction Controls Payment Process Periodic Reviews Transaction Red Flags P-Card Specific Processes Rebates & Incentives
Cost/Benefit Analysis The cost/benefit analysis of your purchasing practices could include reviewing: Who: is making the purchases? What: are they purchasing? Where: are the purchases being made? When: are the purchases being made?
Cost/Benefit Analysis Some other factors that should be considered: How much time/salary does it take to process a traditional purchase transaction vs. card transaction? How much time might it take to monitor the card program due to the increased risk of unapproved or fraudulent transactions?
Competitive Process Some factors that should be considered when selecting a vendor for a card program include: Does the program allow for online management? Does the vendor charge annual fees or per-card issuance or replacement costs? Is the program user-friendly?
Competitive Process Additional factors to considered when selecting a vendor for a card program include: Does the program have a comprehensive system of controls that can be managed on a per-card basis? Does the program have the ability to create and manage multiple levels of online security and authority?
Policies & Procedures Whether board adopted or set by management should include: An accounting system to account for and control the cards. Clearly defined separation of responsibilities for issuing cards; requesting, authorizing, and executing purchases; and payment processing.
Policies & Procedures An authorized employee to oversee the initial issuance and use of cards. Outline the specific purposes for which the cards may be used.
Policies & Procedures Detailed purchase restrictions and spending limits on cards and transaction amounts. Procedures for canceling, deactivating a card or disputing charges. Designate an employee to be responsible for tracking users and coordinating the cards.
Limits Tracking Training Card Issuance Issuing cards should be based on the District s policies and procedures and include: Card User Agreement
Card Issuance Maintain complete list of card users. Track card possession and physical security of cards. Ensure district cards are checked-out and returned promptly.
Card Issuance Training based on amount of card use and level of authority. Additional training for reconciliation and review.
Card Issuance All card users should sign a card user agreement that: Acknowledges receipt & understanding of district card policies & procedures Loss of card use privileges Possible personnel actions Withholding of wages
Card Issuance Deducting Unauthorized Purchases Example Hours Rate Total Regular 40.00 $10.00 $400.00 Minimum 40.00 $7.65 $306.00
Transaction Controls Overall goals are to ensure purchases: Comply with Procurement Rules USFR purchasing guidelines Are properly authorized For an appropriate district purpose Within budget or available cash balance
Transaction Controls If you do use P.O.s they should include: Documentation of the approval process. Verification the purchase is for a valid district purpose. Monies are available. Applicable procurement requirements have been met.
Transaction Controls If P.O.s are not used, district management should: Ensure strong controls. Monitor budget and cash balances. Adjust card limits, if needed. Use declining balance cards, if appropriate. Limit card users to purchases from vendors with existing contracts.
Supporting Documentation Purchase documentation should include: Purchase requisitions & purchase orders Invoices, packing slips & receiving reports Transaction receipts for point of sale transactions Description of item(s) purchased & purpose Card user s signature & date documentation was submitted.
Supporting Documentation Transaction receipts should include: For fuel & vehicle repair purchases-vehicle license number or odometer reading, Employee ID, if applicable. District purpose, if necessary.
Supporting Documentation Transaction logs should be: Reconciled from supporting documentation to the billing statement. Signed by card user or individual designated to track transactions.
Supporting Documentation Other types of transactions: Prepaid items Internet Phone Fax
Review & Payment Process Goals established & process outlined: Timely payments Legitimate purposes Master billing statements Individual billing statements Transaction logs
Review & Payment Process Completion of reconciliation process: Electronic access Accounts Statement information Card user reconciliation All required support attached Submitted timely
Review & Payment Process Review & approval of reconciliation including: Confirming supporting documentation. Verifying purchase transactions. Initialing & dating reconciliation. Submitting statement & support for payment.
Periodic Reviews Management review should include: Compare budget vs. actual expenditures Monitor purchase types Verify compliance with procurement rules and USFR purchasing guidelines. Corrective action
Periodic Reviews Compliance Audits Periodic audits by employee independent of monthly card process. Document review and findings. Corrective action needed/taken.
Transaction Red Flags Possible warning signs for errors, improper or fraudulent transactions, which require: Investigation Resolution
Transaction Red Flags Red flags may include: Purchases that appear to be of a personal nature. Transaction that occur during non-work hours. Purchases without detailed receipts, shipping documents, or receiving reports. Transactions consisting of unnecessary or unauthorized items. Charges for meals already reimbursed.
Transaction Red Flags Red flags may include (continued): Excessive fuel purchases. Purchases from vendors with a known conflict of interest. Multiple same-day purchases with the same vendor. Purchases inconsistent with employee s job duties.
P-Card Specific Processes Merchant Category Codes Block unauthorized types of vendors and categories of merchandise. Apply purchasing limits.
P-Card Specific Processes Payment Cards Used to pay for previously acquired goods or services. Possible higher spending limit. Same reconciliation requirements as traditional cards.
Rebates & Incentives Cost increase or rebate? Buyer beware! Not all programs are equal!
Rebates & Incentives Factors for accounting treatment: If the rebate is received in the same fiscal year as the original expenditure, including the encumbrance period, the rebate may be recorded as a reduction of the original expenditure.
Rebates & Incentives Factors for accounting treatment (cont.): If the rebate is received after the close of the fiscal year in which the original expenditure was made, the rebate should be recorded as miscellaneous revenue in either the fund of the original expenditure or the Auxiliary Operations Fund.
Rebates & Incentives Factors for accounting treatment (concluded): When determining how the rebate should be recorded, consideration should be given to how easily the rebate amount can be associated with the fund, program, function, and object code of the original expenditure. Rebates recorded as miscellaneous revenue in the Auxiliary Operations Fund may be used for any district purpose.
Questions? asd@azauditor.gov (602) 553-0333