EasyProcure,EasyProcure, TheThe EducationEducation ProcurementProcurement CardCard WhatWhat cancan thisthis programprogram dodo forfor youryour school?school? Sponsored by: Pennsylvania Association of School Business Officials (PASBO) Pennsylvania Association of School Administrators (PASA) Pennsylvania School Boards Association (PSBA) Pennsylvania School District Liquid Asset Fund (PSDLAF) Page 1 INTRODUCTION School districts are turning to procurement cards to reduce the costs associated with small dollar purchases as well as to streamline purchasing and payment procedures. Anyone having a credit card knows how spending can get out of hand; but procurement cards are full of advantages for districts and are something that can be controlled. The district has to implement strict rules on how the cards can be used. They are great substitutes for other purchasing methods when they are used the right way. Procurement cards may not work in every situation, needless to say you are not going to be able to pay for your new high school project and it will not eliminate the need for a purchasing department. But if you decide to begin offering procurement cards to your employees, here are a few tips to consider. Start small, outline your needs and identify the risk associated with your needs. Written policies and procedures are a must. Board policy for procurement cards may include the following areas: • Number of cards to be issued. • Who the cards will be issued to (individuals, departments, or cost centers). • What the cards will be used to purchase. • Types of purchases where competitive solicitation is required. • Credit or usage limit. • Single transaction limit. • Daily usage limits. • Merchant Category Codes (MCC). • Reconciliation of purchases to billing statements. • Cardholder report of account activity to management. • Statement and sales receipts retention. • School/Department/Supervisor by location to review, approve and sign off on cardholder statements certifying the purchases made are legitimate purchases for district business. • Designation of individual/s authorized to be the contact for the district and bank to manage and monitor the program. This person will need to be able to setup or cancel accounts. • Cardholder agreement. • Block/restrict cash advances from card. • Random audits of statements for the cardholder to justify charges. • Address card misuse. • Training cardholders on the nuances of the procurement card process. In order to maintain control over spending, the district needs a good system in place. Monitoring account activity with weekly reports and a procedure for reconciling charges ensures that only authorized transactions are posted. This is the key to making the program run smoothly. Issue cards only to those who need a card. The spending and transaction limits and the merchant category blocking feature allow the district to maintain significant controls over expenditures. The district is able to control purchases to specific vendors/merchant, by excluding restaurants, flower shops, beverage establishments as well as controls on a card-by-card basis or by groups. The procurement card can replace a petty cash system making it easier to correct charges and it allows the district better control over purchases and any Page 2 discrepancies. Because all purchases are documented, it leaves a paper trail that can be used for your auditors. The procurement card allows for thorough recordkeeping and better management controls. How can the district prevent abuse of the card, such as personal use? Once the employee has been trained on how to use the procurement card and has signed the agreement stating that the card will only be used for school district purposes and any misuse of the card would be grounds for immediate termination of employment, the process begins. The cardholder identifies needed purchases and makes the allowable purchase. The order or purchase can be made in person, or by phone, fax, internet, or email using the procurement card, eliminating the need for mailing purchases orders. An original receipt showing what was purchased must be obtained. The cardholder verifies all charges, matching receipts to the monthly statement. Disputed transactions will be handled by the cardholder. He must ensure there is documentation for each transaction, assign account codes, reconcile and sign off on the monthly statement and forward the statement with all the receipts to his supervisor/department director within the timeline that has been established. The supervisor/department director will review the reconciled statement as “approved for payment”, and sign off on the statement certifying the items and/or services are for the use of the school district and return the statement with the receipts to the Business Office. Let cardholders know that random audits of their statements will be done. As part of the audit, the statement will be reviewed item by item with the employee to justify the charges. Any questionable items would be discussed with management. How can transactions be allocated to the proper account and object code? Check with your software provider as to whether their software can interface with the bank and allow the district to properly account for all the purchases made by each cardholder and post these transactions to the general ledger. The procurement card has been cost effective for us in obtaining low-cost supplies and services. Travel and training costs have worked well using the procurement card process. In most situations using the card eliminated travel advances and the accounting department did not have to track and reconcile the advances. Cardholders also benefit, since they do not have to go through the lengthy process of requesting and waiting for the travel advances to be processed. Registration fees for professional development have also been cost effective because we don’t miss out on the early registration discounts. The maintenance department is one area that the district has been able to dramatically see the effectiveness of the procurement card in reducing the administrative burden associated with small dollar purchases. The procurement card eliminated the need for open accounts and blanket purchase orders, thereby streamlining the settlement process. The maintenance staff and head custodians love the convenience of buying supplies and other low-dollar items with the purchasing cards. Procurement cards have worked for us and they can work for you. Develop written polices and procedures to include merchant controls, credit limits and reconciliations. Internal controls are a must. Procurement cards offer a wealth of advantages. As long as management controls are in place the procurement card is less risky than credit cards and no more risky than existing procedures for petty cash systems, expense reports, travel advances or small-dollar purchases where the only monitoring, in many cases, is to ensure that they are properly coded. Page 3 Page 4 Page 5 Page 6 Great Valley School District Procedures Manual Procurement/Purchasing Card PURPOSE To provide guidance on the proper use of Great Valley School District’s Purchasing Card and establish procedures, which meet the following criteria: • Provide an efficient and cost effective method of purchasing and paying for goods and services. • Reduce the use of petty cash, blanket purchase orders, and prepaid purchase orders. • Ensure Purchasing Card purchases are in accordance with the procedures of the District and Pennsylvania Statutes. • Reduce the time and money spent processing low dollar transactions. • Ensure that the District bears no legal liability from inappropriate use of Purchasing Cards. • Provide for disciplinary action if the Purchasing Cards are misused. SCOPE These procedures will apply to all Great Valley School District employees participating in the program. BACKGROUND Great Valley School District is making available to designated employees delegated authority to make minor purchases directly through a Purchasing Card Program. This will allow departments flexibility to purchase small routine materials and supplies. Certain controls have been developed for the Purchasing Card that does not exist in a traditional credit card. These controls ensure that the card is used only for specific purchases, within the spending limits and merchant code restrictions. Page 7 CARD DESCRIPTION The Purchasing Card shall contain the Great Valley School District’s logo, "Great Valley School District", Cardholder's name, tax exemption number and an expiration date. The Card has been uniquely designed to avoid confusion with personal credit cards. The Business Administrator will set limits for each cardholder: The limits shall, generally, be as follows: All cardholders: Single per Transaction Limit: TBD (but less than $1,000) Transactions/Authorizations per Day: Every Billing Cycle (Monthly) Limit: TBD (but less than $4,000) Purchases beyond the “Single per Transaction Limit” must be made in accordance with the State Statutes. The Purchasing Card may be used as a method of payment for purchases exceeding $4,000. Such exceptional purchases will conform to the Pa. School Code and require the appropriate approval of the immediate supervisor prior to purchase. Charges for purchases shall not be split to stay within the single purchase limit. Splitting charges will be considered abuse of the Purchasing Card Program and a clear violation of the Pa. School Code. 1. DEFINITIONS Account Clerk--Employees designated by District Administrator