use of procurement cards - including control and auditing pasbo conference march 9, 2006 presented...
TRANSCRIPT
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Use of Procurement Use of Procurement Cards - Including Cards - Including
Control and AuditingControl and Auditing
Use of Procurement Use of Procurement Cards - Including Cards - Including
Control and AuditingControl and Auditing
PASBO ConferencePASBO ConferenceMarch 9, 2006March 9, 2006
Presented by:Presented by:
Daniel R. McConachieDaniel R. [email protected]@msn.com
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•How to integrate procurement card purchases into your purchasing system
•How to build internal controls for effective program implementation
•Implementation issues
•Questions
Agenda
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Why Use Procurement Cards
• NIGP Survey Indicates that 81% of Public Entities are Using Procurement Cards in 2005
• Benefits Received:– Reduction in Number of Small Dollar Purchase Orders
– Improved “Processing Efficiency”
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Aligning card usage with state laws
• Sealed competitive bids are required for purchase of more than $10,000 of similar types of materials from a single vendor during the same budget year.
• Board authorization for use of cooperative purchasing agreements (i.e. use of state contract pricing, etc.) in place of the sealed bid requirement.
• Price quotations solicited from multiple vendors if the anticipated expenditures for the specified types of materials will exceed $4,000 but is below $10,000 for a single purchase.
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Sealed Bid – Term Contract
• Create term contracts through the sealed bid procedure to cover credit card purchases that may exceed $10,000 from a single vendor
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Sealed Bid – Multiple Vendor Awards
• Make multiple awards to all vendors that meet the requirements of the terms and conditions for the term contracts through the sealed bid procedure
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Board Resolution – Cooperative Purchasing
Agreement• Cooperative purchasing agreements may be
established by Board Resolution with other governmental entities that have entered into term contracts through the sealed bid procedure
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Board Resolution – Use of State Contracts
• Use of state contracts have been established by the legislature as an alternative to the sealed bid procedure for school districts making purchases exceeding $10,000
• It is recommended that a Board Resolution be approved authorizing purchases in excess of $10,000 using state contract pricing
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Why Use Procurement Cards – Practical
Example• Purchase Orders issued in 2004
– 14,570 purchase orders
– Average order value $1,593
• Procurement Card Transactions in 2004
– 27,501 purchases
– Average purchase amount $167
• 65% of the Total Transactions Involved only 16% of the Expenditures
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Planning the Controls for the Implementation
• The Hierarchy (reporting levels)• The Merchant Category Code Groups• Access/Restrictions (by dollar amount, number of
transactions and/or MCC codes)• Declining Balance Cards• The Application• The Employee Usage Agreement
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The Hierarchy (reporting levels)
• Up to seven levels– District
– Department
– School/Office
– Program
– User
• Summary statement for each level
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What is a Merchant Category Code
• Four digit MCC code• Used by VISA to
identify type of products or services provided by vendor
• Only one MCC code per charge station/ cash register
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The Merchant Category Code Groups
• Assigned to cards on an individual basis
• Establish the categories of vendors from which the card user is allowed to make purchases
• Established selectively for each type of employee assignment
• Pittsburgh MCC Groups– Office Staff
– School Staff (general)
– School Staff (home ec)
– School Staff (special ed)
– Tradesmen (each trade)
– Repair Shops
– School Safety
– Gasoline/Diesel Fuel
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Office Staff MCC Group
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Home Ec MCC Group
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Merchant Category Code restrictions
• Access to Merchant Category Code (MCC) groups are assigned to each card individually
• Up to nine different MCC groups may be assigned to each individual card
• The Merchant Category Codes assigned to each MCC group limit the categories of products / stores for which a specific procurement card may be used
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Dollar limits—single transactions and cycle
limits
• Spending limits may be established for each individual transaction, based on a daily spending allowance or total expenditures within a monthly billing cycle
• Pittsburgh has established spending limits for most procurement cards at $500 per single transaction and $5000 per month
• Limits may also be established for the maximum number of transactions allowed each day or within the billing cycle
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Declining balance cards versus standard
procurement cards• Declining balance cards are limited by all the
same dollar limit, transaction limit and MCC code restrictions as a standard procurement card
• However, the cycle dollar limit for the declining balance card does not replenish with each new monthly cycle
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The Application• User Information
• Establish Restrictions:– Dollar Limits
– Transaction limits
• Reporting Level
• MCC Group Access
• Default Budget Account
• Authorized Signature
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The Usage Agreement• Establish the criteria under
which the card is to be used
• Designate that the use of the procurement card is for business purposes only
• Identify the responsibilities of the card holder in using the card
• Make clear that the card is and remains the property of the School District
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Update / Change Card Profile
• Require written documentation from users for all changes requested to their account
• Develop standard format for notifying card provider of commonly requested changes in card account controls– Move to a new school or office (default account
number, statement address, place in hierarchy)– Change last name for user– Cancel a procurement card account
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Daily Decline Report
• Reason for Charge Being Rejected• MCC Code of the Rejected Vendor• Amount of the Attempted Transaction
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Annual card maintenance• Change default account number to reflect
changes to the account codes in the new budget year.
• Update expenditure level for declining balance procurement cards (in Pittsburgh, updates to the expenditure level are allowed just once in each budget year.
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•Assignment of cards to individuals•Restrict the obtaining of cash•Monthly credit or usage limit•Single transaction limit•Merchant category code (MCC)•Employee reconciliation of purchases to billing statements•Statement/sales receipt retention procedure•Cardholder report of activity to management•Supervisor review/sign off approval
Elements that should be included in a board policy on
procurement cards
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•Procurement card transactions will undergo extensive scrutiny:
•Local auditor•Internal auditor (if applicable)•Auditor General
•Monthly review process is key to the success of the program
Holding end users accountable
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Questions