Program Setup

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2013 NCASBO Annual Conference
P-Card

• 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
• How will I incorporate the P-Card into my
  existing purchasing process?
• Who will I allow to be issued P-Cards?
• 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 questionDo 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 dont 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
• Operational Cost Savings
• The Rebate
• Data Analysis on Spending
• Happy Vendors
• Employee Satisfaction
• 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 CASWELL COUNTY SCHOOLS CASWELL COUNTY SCHOOLS CASWELL COUNTY SCHOOLS CASWELL COUNTY SCHOOLS CASWELL COUNTY SCHOOLS
P-Card Historical Cycle Data P-Card Historical Cycle Data P-Card Historical Cycle Data P-Card Historical Cycle Data P-Card Historical Cycle Data P-Card Historical Cycle Data
           
FISCAL YEAR P-CARD HISTORICAL INFORMATION FISCAL YEAR P-CARD HISTORICAL INFORMATION FISCAL YEAR P-CARD HISTORICAL INFORMATION FISCAL YEAR P-CARD HISTORICAL INFORMATION FISCAL YEAR P-CARD HISTORICAL INFORMATION  
Year Transactions Amount Per Trans. Avg. Review Rate  
           
2009-2010 162 21,363.06 131.87 100.00  
2010-2011 2,804 689,264.38 245.81 99.73  
2011-2012 3,336 1,317,245.85 394.86 99.87  
2012-2013 2,037 812,216.45 398.73 100.00  
           
Totals 8,339 2,840,089.74 340.58 99.86  
           
           
   
FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS FISCAL YEAR PUCHASE ORDER HISTORY / EFFICIENCY SAVINGS  
Year of POs Issued Difference Administrative Cost Savings Administrative Cost Savings  
      71 per PO Reduced 71 per PO Reduced  
2008-2009 1,311 N/A      
2009-2010 1,492 181      
2010-2011 420 (1,072) 76,112.00 76,112.00  
2011-2012 408 (12) 852.00 852.00  
           
Totals 3,631 (903) 76,964.00 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. Dont 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 vendors
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
Level IStandard Data Level IIVariable Data Level III Detailed Data
X X X Date
X X X Supplier Name
X X X Transaction Amount
X X Tax Amount
X X Customer-Defined Code
X X Supplier Postal Code and State
X Ship From/To Postal Codes
X Freight Amount
X Line-Item Detail
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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-Mec
klenburg 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
• What credit card companies issue P-Cards?
• What financial institutions offer P-Cards?
• What options do I have in choosing a provider?
• What criteria do I use to get the best provider?
• 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 M
asterCard 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
Countys 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
• Critical Assessment Factors
• Other Assessment Factors
• Rebate Details

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Choosing a P-Card Provider
What criteria do I use to get the best provider?

• Critical Assessment Factors
• Control Data Capture
• Financial Offers Incentives
• General Ledger Interface Capabilities
• Strength of the Relationship (Customer Service)
• Ability to provide all the required services
• 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
• Ability to put your logo on the P-Card
• Disaster Recovery Plan
• Card Management process
• Payment Terms
• Length of transaction details availability
• 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
• Minimum card spend to earn a rebate
• Rebates can be tied to how often provider is paid
• Spending thresholds
• Changes in rebate terms
• 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
• Structure of approval roles
• Blocks and Restrictions
• Calendar of Events
• Penalties for Non-compliance
• Audits and Reviews
• 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
• 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.
• 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
• Who is allowed to use a card
• Budget Code restrictions
• Different MCCs for specific departments or
  individuals
• Equipment or items being purchased via State
  Contract
• 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 P-Card 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
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 providers 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
• Proper documentation of the transaction
• Any unusual items on the receipt
• Maintaining their transactions on some type of
  ledger to track card balances
• Are approvals being done on a regular basis
• Login frequency to the card providers program
• 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 taxpayers interest.
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Establishing Internal Controls
Support Documents

• Examples of Support Documents used by CCS
• Cardholder Agreement
• Online Training Completion
• P-Card Tracking Log
• Food Pre-approval
• P-Card Ledger
• Missing Documentation
• 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. Trainin
g 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
• P-Card Website
• Online Training
• Tutorials
• Newsletters
• Card Providers 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
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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
• Requirement of Training before issuing a P-Card
  to an employee
• Cardholder Agreement
• P-Card Log
• Card Sleeves
• Confidentiality in reporting
• Daily logins to SunTrust
• 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