Purchase Card Best Practices

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Purchase Card Best Practices

• Bradley Forrestel
• Barbara A. Johnson

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Agenda

• Overview of the GSA SmartPay Program
• GSA SmartPay purchase card program benefits,
  facts and statistics
• Liability
• Restricted uses
• Management and Oversight Best Practices
• Fraud indicators preventative measures
• Challenges facing the Purchase Card Program

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What Is GSA SmartPay?

• Its the federal governments charge card
  program. This program provides a means of payment
  for commercial goods, services, travel and travel
  related expenses, and vehicle fleet expenses.

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Why Does the Government Have a Charge Card
Program?
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GSA SmartPay Program

• Provides Purchase, Travel, and Fleet charge cards
  to over 350 government agencies and organizations
• 5 Bank Contractors Bank of America, JP Morgan
  Chase, Citibank, Mellon Bank, and US Bank
• Contract Period of Performance 5 year base
  period with 5 one-year options (1998 through
  2008)
• Each agency negotiates separate task orders
  tailored to their needs or pools with other
  agencies

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Liability

• Centrally Billed Accounts (CBA)
• Liability rests with the Government
• All purchase and fleet cards are CBA
• Travel cards are CBA or IBA
• Individually Billed Accounts (IBA)
• Liability rests with the traveler
• Card issued to employee at agencys request
• Employee reimbursed by agency for allowable
  expenses
• Employee receives bill and makes payment to bank

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Benefits of Purchase Card Use

• Streamlines procurement/payment processes
• Enables accelerated mission performance
• Eliminates imprest funds/cash
• Worldwide acceptance of Visa/MasterCard
• Improves accountability and audit ability
• Administrative savings

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FY05 Purchase Card Overview

• Cards in circulation 301,217
• Total expenditures 17.4 Billion
• Total transactions 25.9 Million
• Average transaction size 672
• Average transactions per cardholder 7 /month
• Average spend per cardholder 4,814 monthly

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What Is the GSA SmartPay Charge Card Used for?

• The purchase charge card is used to purchase
  supplies and services in accordance with the
  Federal Acquisition Regulations. The purchase
  charge card is the preferred procurement and
  payment tool for micro-purchase, as prescribed in
  FAR 13.301.

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Restricted Use

• The master contract says the purchase charge
  card shall NOT be used for
• Long-term rental or lease of land or building
• Travel or travel related expenses
• Cash advances

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Authority

• Delegation of micro-purchase authority to
  cardholders under FAR 1.603-3
• FAR 13.2 says micro-purchases shall be
  distributed equally among qualified contractors
  and may be awarded without soliciting competitive
  quotations if the price is considered reasonable
  
• FAR Part 8 applies to micro purchases

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Things to Be Included in Agency Policies

• Management oversight
• Setting of account limits
• Statement review
• Approving Official (A/O) span of control
• A/OPC review

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Who Should Have Cards?
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Management and Oversight Best Practices

• Necessity at any size program
• Best practices
• - Strong commitment and leadership by senior
  management
• - Commit the necessary resources
• - Make training mandatory
• - Setting Account Limits
• - Approving Official (A/O) span of control
• - A/OPC reviews/actions
• - Merchant Category Code blocks
• - Deactivation of cards
• - Statement reviews

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Training Objectives

• Standards of conduct/ethics
• State consequences of misuse
• Address applicable procurement laws
• Agency policies and procedures
• Bank procedures

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Training Cardholders

• Is training required prior to card issuance?
• Are copies of training certificates kept on file
  in a centralized locations?
• How often is refresher training provided?
• Are learning objectives properly defined and
  tested?

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Training Tools

• GSA SmartPay on-line -(Blueprint for Success)
• GSA SmartPay contractors
• Agency training programs

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What Is Cardholder and Non-Cardholder Fraud?
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Misuse of the Purchase Card

• Improper purchases
• Abusive purchases

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Fraud

• Cardholder fraud
• Unauthorized use of the purchase card for
  personal use or gain
• Non-cardholder fraud
• Use of the purchase card or data by an
  unauthorized person

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Indicators of the Potential for Fraud in a
Purchase Card Program

• Weak management
• Weak internal controls
• History of impropriety
• Failure to follow legal or technical advice
• Unethical leadership
• Missing or altered documents
• Promise of gain with little likelihood of being
  caught
• Unexplained decisions and/or transactions

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Indicators of Cardholder Misuse or Fraud

• Purchases
• Which exceed cardholder limits
• Without funding
• For personal consumption
• Made by people other than the cardholder
• Which do not meet the governments requirements
• Which are not authorized by the agency

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More Indicators of Cardholder Misuse or Fraud

• Blocked MCC transactions
• Unsuitable merchant name
• Multiple transactions at the same merchant
• Account closed multiple times
• Multiple disputes

• Repeated declines
• Weekend activity
• No receipts or proof of purchases
• Even dollar amounts
• Split transactions
• Outside MCC range
• Excessive disputes

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What to Do If You Suspect Misuse or Fraud?

• As an A/OPC, if you suspect fraud or misuse your
  next steps should be
• Contact cardholder to verify transaction
• Document your findings
• Report to the
• Approving official
• Finance officer
• IG or Office of Special Investigations

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Remedial Actions

• Counseling
• Disciplinary action
• Notation in performance evaluation
• Reprimand
• Suspension or cancellation of account
• Suspension or termination of employment
• Criminal prosecution

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Fraud and Misuse Preventative Measures

• Agency policy
• Credit limits
• Span of control
• Merchant Category Codes (MCC)
• Audits and investigations
• Deactivation
• Automated transaction review

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Fraud and Misuse Reporting Tools Electronic
Access Systems

• There are 4 categories of reports
• General account information
• Transactions, payments, and disputes
• Account delinquency
• Statistical or summary

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Reports Specific to the Purchase Card Program

• Account activity report
• Statistical summary report
• Summary quarterly purchase report

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Additional Essential Reports

• Official invoice
• Invoice status report
• Transaction dispute report
• Renewal report
• Detailed electronic transaction file

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The Right Tools Recap

• Benefits of the card
• Statistics
• Authority foundation of purchase card use
• Policy
• Training tools
• Management oversight
• Fraud indicators preventative measures

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Best Practices

• Track cardholder and A/O training
• Ensure proper authorization prior to purchase
  card issuance
• Schedule annual cardholder reviews
• Effectively use information resources
• Document questionable transactions
• Timely report suspected misuse or fraud

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Challenges Facing the Purchase Card Program

• Piloting new technologies (data mining,
  preauthorization, electronic commerce)
• Leveraging Governments buying power
• OMB Credit Worthiness
• Defining agency policy
• Training of cardholder on proper card usage
• Management oversight and surveillance

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Website References

• GSA SmartPay
• www.gsa.gov/gsasmartpay
• Master Contract, State Tax Letters, Purchase Card
  A/OPC Listing, Contractor Points of Contact, and
  Purchase Card Oversight (Blueprint for success)
• www.gsa.gov/aopcpurchasetraining
• Online training for A/OPCs
• www.gsa.gov/sppurchasetraining
• Online training for cardholders

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Website References

• Ethics resource library
• www.usoge.gov/home.html
• FAR
• www.arnet.gov/far

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Questions ?
?
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GSA SmartPay Thank You!

• Bradley Forrestel
• Contract Specialist/Account Manager
• 703-605-2799
• Bradley.forrestel_at_gsa.gov
• Barbara A. Johnson
• Contract Specialist/Account Manager
• 703-605-2811
• Barbaraa.johnson_at_gsa.gov
• Thank you for the opportunity!