2013 NCASBO
Annual
Conference
Program Setup &
Internal Controls
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Purchasing/Procurement Cards
What is a
P-Card?
– A credit card issued by financial institution
specifically for purchases instead of issuing
a purchase order for every purchase
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Purchasing/Procurement Cards
How does the CCS P-Card function?
Just like a credit card, but with the
limitations of a debit card.
Qualified purchases are made without the
need for a requisition or purchase order.
In ISIS, the P-Card has the characteristics
of a blanket purchase order.
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What we will cover……
1. Developing parameters for your P-Card
Program
2. Selling the P-Card program to your
Superintendent and School Board
3. Choosing a P-Card provider for your school
system
4. Establishing Internal Controls
5. Training & Training materials
6. Analyzing Data
7. Preventing Fraud & Misuse
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Developing Parameters
for your P-Card Program
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Developing Parameters
There are three basic questions that need
to be answered before entertaining the
idea of a P-Card program
1. How will I incorporate the P-Card into my
existing purchasing process?
2. Who will I allow to be issued P-Cards?
3. How am I going to implement the P-Card
program?
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Developing Parameters
Incorporating the P-Card in your existing
Purchasing process
 It is a valuable tool for quickly and efficiently purchasing
and paying for small-dollar expenditures.
 The P-Card rules should be a subset of your normal
Purchasing Policy and procedures.
 Determine when the P-Card would be required and when a
requisition must be completed.
 Investigate opportunities of where the P-Card could be
used for larger, regular purchases. (Fuel is an example)
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Developing Parameters
Incorporating the P-Card in your existing
Purchasing process
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Developing Parameters
Who will I allow to have P-Cards?
• Need to determine how you want the P-Card embossed
(school/dept names, individuals, or combination of both)
• Determine the maximum number of P-Cards should 1
person be responsible for
• Determine if you have locations that are not secure
enough for P-Card to be stored
• Ask yourself the question…”Do I trust this person with
a credit card?”
• Determine if contractors or other non-employees will
be issued a P-Card (My suggestion is NO!!!!)
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Developing Parameters
How am I going to implement the
P-Card program?
• Develop an implementation schedule beginning with approval
to start a program through full implementation (this could
be as long as a year depending on your situation)
• Start with a trial period of schools, departments, and
individuals you trust that would actually use the P-Card
(most first-time users are very afraid)
• Document the processes in the trial period for use when
training goes system-wide
• Know what you want your end result to be and have the
patience to see it through
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Developing Parameters
How am I going to implement the P-Card program?
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Selling the P-Card
Program to your
Superintendent & Board
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Selling the P-Card Program
Convincing your Superintendent and Board that a
P-Card program is a viable purchasing option is
probably the toughest task.
Do your research, stick to the facts, and don’t
get involved with emotional arguments.
The political and public fallout of an incident of
fraud or misuse is the biggest fear most of them
would have in giving employees P-Cards.
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Selling the P-Card Program
Positive items to help sell the P-Card program
1. Operational Cost Savings
2. The Rebate
3. Data Analysis on Spending
4. Happy Vendors
5. Employee Satisfaction
6. Reduction of cash at schools
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Selling the P-Card Program
Operational Cost Savings
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Selling the P-Card Program
Operational Cost Savings
• Requires fewer steps than the traditional purchase
order method
• Staffing re-allocation and/or reduction because of
fewer purchase orders to create and invoices to pay
• Small savings on items like checks, envelopes, and
postage
• Increased cash flow (can hold on to the money as much
as 45 days before payment to the financial institution)
• Becoming a more accepted way of doing business (in
US, approximately 75% of organizations use P-Cards)
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Selling the P-Card Program
Operational Cost Savings
CASWELL COUNTY SCHOOLS
P-Card Historical Cycle Data
Year
FISCAL YEAR P-CARD HISTORICAL INFORMATION
# Transactions
$ Amount
Per Trans. Avg.
Review Rate
2009-2010
2010-2011
2011-2012
2012-2013
162
2,804
3,336
2,037
$21,363.06
$689,264.38
$1,317,245.85
$812,216.45
$131.87
$245.81
$394.86
$398.73
100.00%
99.73%
99.87%
100.00%
Totals:
8,339
$2,840,089.74
$340.58
99.86%
FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS
# of POs Issued
Difference
Administrative Cost Savings:
$71 per PO Reduced
2008-2009
1,311
N/A
2009-2010
1,492
181
2010-2011
420
(1,072)
$76,112.00
2011-2012
408
(12)
$852.00
Year
Totals:
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3,631
(903)
$76,964.00
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Selling the P-Card Program
The Rebate
Most financial institutions will provide a rebate
incentive based on how much is spent using the
P-Card and/or how often you remit the payment.
Don’t get very specific with rebate numbers
because that will be decided when you choose a
vendor, but let your Superintendent and Board
know it will be a part of the criteria in
evaluating proposals and emphasize it will
provide additional revenue if targets are met.
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Selling the P-Card Program
The Rebate
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Selling the P-Card Program
Data Analysis on Spending
Most P-Card software can provide a wide variety of
standard reports to analyze spending.
The ability to create customized reports is also
available in most programs.
Transactions are broken down into 3 levels of data
transmitted to the credit card companies.
The vendor’s point-of-sale technology depends on
what level of data is transmitted.
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Selling the P-Card Program
Data Analysis on Spending
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Level I
Level II
Level III
Standard Data
Variable Data
Detailed Data
X
X
X
Date
X
X
X
Supplier Name
X
X
X
Transaction Amount
X
X
Tax Amount
X
X
Customer-Defined
X
X
Supplier Postal Code
X
Ship From/To Postal
X
Freight Amount
X
Line-Item Detail
Code
and State
Codes
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Selling the P-Card Program
Happy Vendors
Vendors that accept card payments get their money
within 2-3 days and it helps increase their cash flow.
Operational savings with invoicing and collection
activities.
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Selling the P-Card Program
Employee Satisfaction
Allows schools and departments to purchase the
items they need quickly to serve teachers &
students.
Employees feel empowered to complete their jobs
more efficiently by providing flexibility in where to
purchase the goods.
How effectively they do their purchasing can result
in huge overall savings for the school system.
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Selling the P-Card Program
Reduction of Cash in the schools
Replacing Petty Cash funds in schools and departments
reduce the possibility of misappropriation or theft.
EXAMPLE:
Charlotte-Mecklenburg used to issue petty cash
checks to all site coordinators in the After School
program and switched to using P-Cards at these sites
for purchases of supplies and materials. The program
produced better controls on spending because the
coordinators knew people were tracking the purchases.
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Choosing the right P-Card
provider for your school system
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Choosing a P-Card Provider
Once a decision is made to begin a P-Card program,
the following items must be discussed to ensure the
school system is getting the best all-around financial
institution:
1. What credit card companies issue P-Cards?
2. What financial institutions offer P-Cards?
3. What options do I have in choosing a provider?
4. What criteria do I use to get the best provider?
5. What features do I want in the program?
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Choosing a P-Card Provider
What credit card companies issue P-Cards?
There are 3 basic credit card companies that issue
P-Cards to financial institutions:
VISA
MasterCard
American Express
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Choosing a P-Card Provider
What financial institutions offer P-Cards?
Many major financial institutions offer P-Cards as a
product of their credit/corporate card programs.
Some examples are as follows:
Bank of America (State Contract Vendor)
American Express
Wells Fargo
BB & T
SunTrust (Caswell County’s Vendor)
JP Morgan Chase
Commerce Bank
HSBC
US Bank
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Choosing a P-Card Provider
What options do I have in choosing
a provider?
P-Card programs are services being provided by a
financial institution so therefore you have a wide
range of options listed below:
Choose the State Contract vendor
Prepare a Request for Qualifications
Issue a formal Request for Proposal
Compare and choose (not recommended)
Whatever route is chosen please make sure you have
a good idea on how much annual spending will be.
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Choosing a P-Card Provider
What criteria do I use to get the
best provider?
Establishing criteria for provider selection is crucial
to how you view the program operating in the most
efficient manner. I like to break down the criteria
in 3 different areas:
1. Critical Assessment Factors
2. Other Assessment Factors
3. Rebate Details
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Choosing a P-Card Provider
What criteria do I use to get the
best provider?
Critical Assessment Factors
1.
Control & Data Capture
2. Financial Offers & Incentives
3. General Ledger Interface Capabilities
4. Strength of the Relationship (Customer Service)
5. Ability to provide all the required services
6. Ability to provide requested optional services
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Choosing a P-Card Provider
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Choosing a P-Card Provider
What criteria do I use to get the
best provider?
Other Assessment Factors
1.
Ability to put your logo on the P-Card
2. Disaster Recovery Plan
3. Card Management process
4. Payment Terms
5. Length of transaction details availability
6. Fraud prevention measures (data-mining software)
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Choosing a P-Card Provider
What criteria do I use to get the
best provider?
Rebate Details
1.
Minimum card spend to earn a rebate
2. Rebates can be tied to how often provider is paid
3. Spending thresholds
4. Changes in rebate terms
5. State contract issues
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Choosing a P-Card Provider
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Establishing Internal Controls
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Establishing Internal Controls
Internal Controls must be established
in order allow a P-Card program to
function as a successful, long-term
purchasing solution.
Effective internal controls will make
card users accountable and responsible
while reducing the opportunity for
collusion and fraud.
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Establishing Internal Controls
Internal Control needing to be addressed
1. Structure of approval roles
2. Blocks and Restrictions
3. Calendar of Events
4. Penalties for Non-compliance
5. Audits and Reviews
6. Support Documents
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Establishing Internal Controls
Structure of Approval Roles
P-Card programs must have a system of checks and
balances where multiple levels are approving
transactions to prevent misuse or fraud.
The roles in a P-Card program should be clearly
defined in both policy and the day-to-day operations.
CCS has 4 levels of approvals per transaction:
P-Card Coordinator – Admin Asst., School Treasurer
Cardholder Manager – Principal, Department Director
P-Card Manager/Administrator – Purchasing Dept.
Accounting Administrator – Finance Officer
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Establishing Internal Controls
Structure of Approval Roles
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Establishing Internal Controls
Blocks and Restrictions
Allowing P-Cards to be used at certain
merchants or only purchasing specified items
must be a part of the internal controls.
Most card providers have multiple ways you
can institute blocks on P-Cards.
School systems should also define what
purchases would and would not be allowed on
P-Cards.
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Establishing Internal Controls
Blocks and Restrictions
Most commonly used blocks from card providers
1.
Merchant Commodity Codes (MCC)
This is a 4 digit number that defines the type of
merchant and the school system would define
which are valid for use.
2. Credit Limits / Spending Limits
Most card providers can allow multiple dollar
limits on card use such as monthly or transaction
limits.
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Establishing Internal Controls
Blocks and Restrictions
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Establishing Internal Controls
Blocks and Restrictions
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Establishing Internal Controls
Blocks and Restrictions
Most commonly used restrictions
1.
Who is allowed to use a card
2. Budget Code restrictions
3. Different MCCs for specific departments or
individuals
4. Equipment or items being purchased via State
Contract
5. Items for personal use
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Establishing Internal Controls
Blocks and Restrictions
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Establishing Internal Controls
Blocks and Restrictions
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Establishing Internal Controls
Calendar of Events
Creating a calendar of events is a good
internal control feature because users know
that certain program expectations have to be
met and that non-compliance could result in PCard program penalties.
CCS combines our P-Card calendar with our
Accounts Payable calendar since both are
related in getting the bills paid.
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Establishing Internal Controls
Calendar of Events
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Establishing Internal Controls
Penalties for Non-compliance
Accountability and Responsibility are two
critical factors in effective internal controls
for your P-Cards.
P-Card programs must have enforceable
penalties so card users understand that
having a P-Card is a privilege and not a right.
CCS uses a P-Card Violation Form each time a
P-Card is not used within the program rules.
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Establishing Internal Controls
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Penalties for Non-compliance
CCS Types of P-Card Violations:
Failure to Review or provide
documentation on time
Lack of documentation
Splitting transactions to circumvent
card limits or bidding requirements
Inappropriate purchase
Personal purchase
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Establishing Internal Controls
Penalties for Non-compliance
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Establishing Internal Controls
Penalties for Non-compliance
CCS Standard Suspension Process:
• 30 Days at 3rd violation of the current
fiscal year
• 60 Days at 4th violation of the current
fiscal year
• Indefinitely at 5th violation of the current
fiscal year
– Cardholder Manager may apply for
reinstatement of privileges in writing to the
P-Card Manager after 75 days.
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Establishing Internal Controls
Audits & Reviews
Periodic audits and reviews of P-Card
transactions also adds to the internal
controls by providing a “second look” of
suspected transactions beyond the approval
process and helps when there could be a
possibility of collusion to commit fraud.
CCS uses reports and data in our card
provider’s program to help determine if any
transactions need more detailed reviews.
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Establishing Internal Controls
Audits & Reviews
Items to look for in Audits & Reviews
1.
Proper documentation of the transaction
2. Any unusual items on the receipt
3. Maintaining their transactions on some type of
ledger to track card balances
4. Are approvals being done on a regular basis
5. Login frequency to the card provider’s program
6. P-Card location is known at all times
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Establishing Internal Controls
Support Documents
Having documents throughout the P-Card program are
good internal controls to support the activity from
start to finish.
Documents should be established in every area of the
program so each card user understands their
responsibility in the success of the whole program.
Support Documents also provide information to
outside entities that the program does have
processes in place to protect the taxpayer’s interest.
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Establishing Internal Controls
Support Documents
Examples of Support Documents used by CCS
1.
Cardholder Agreement
2. Online Training Completion
3. P-Card Tracking Log
4. Food Pre-approval
5. P-Card Ledger
6. Missing Documentation
7. Encumbrance Request
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Training & Training Materials
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Training & Training Materials
If you expect the P-Card program to
succeed, then the training and training
materials you provide to the employees will
be the determining factor.
Training must be looked at as an ongoing
process and must be updated periodically as
the program grows and becomes more
efficient.
Training materials must be readily available
and serve as a knowledge base to employees.
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Training & Training Materials
Caswell tries to provide some type of training class
every quarter and most of the time is spent going
over problems we see in the program.
While in Charlotte-Mecklenburg, I held training
sessions once a month and it open to any card user
to come and get problems solved and to create a
bond of success.
It is incumbent that card users are provided a
positive atmosphere of success. They must believe
that you will not let them fail if they do their part.
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Training & Training Materials
Examples of Training Materials used by CCS
1. P-Card Website
2. Online Training
3. Tutorials
4. Newsletters
5. Card Provider’s Help inside their
program
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Training & Training Materials
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Training & Training Materials
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Training & Training Materials
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Training & Training Materials
ESP Tutorial for
P-Card Coordinators
ESP Tutorial for
Cardholder Managers
How to approve a transaction
Information, Support, &
Requirements
P-Card Ledger Tutorial
P-Card Ledger & Reconciliation
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P-Card Forms Tutorial
Instructions for all P-Card forms
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Training & Training Materials
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Training & Training Materials
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Analyzing Data
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Analyzing Data
Analyzing the data received after you begin your
P-Card program is critical to how you want to
grow your program and become more efficient and
maximizing the rebate potential.
Your P-Card provider should have a wide variety
of reports that can be run to analyze data.
Develop your own documents that focus on what
you really want to achieve and can provide simple
information to your Superintendent and Board.
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Analyzing Data
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Analyzing Data
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Preventing Fraud & Misuse
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Preventing Fraud & Misuse
Make no mistake, there is no 100% way to prevent
fraud or misuse in your P-Card program.
A combination of all the items we have discussed
today go a long way in preventing fraud and
misuse or helping in discovering it early.
If card users know all the processes in place to
prevent it, then it is unlikely to be an employee.
Take the time to train your card users in identity
theft so they can be aware of their surroundings
when using the P-Card.
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Preventing Fraud & Misuse
Examples of items used by CCS
1. Requirement of Training before issuing a PCard to an employee
2. Cardholder Agreement
3. P-Card Log
4. Card Sleeves
5. Confidentiality in reporting
6. Daily logins to SunTrust
7. Reviews of declined transactions
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Preventing Fraud & Misuse
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Preventing Fraud & Misuse
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Preventing Fraud & Misuse
Not What You Want!!!
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Preventing Fraud & Misuse
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Good Resource for more information:
National Association of Purchasing Card
Providers (NAPCP)
www.napcp.org
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Questions and Discussion
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