Program Setup & Internal Controls

1. 2013 NCASBO Annual Conference P-Card Program Setup & Internal Controls

2. 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

3. 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 withoutthe need for a requisition or purchase order. In ISIS, the P-Card has the characteristics of a blanket purchase order.

4. What we will cover…… • Developing parameters for your P-Card Program • Selling the P-Card program to your Superintendent and School Board • Choosing a P-Card provider for your school system • Establishing Internal Controls • Training & Training materials • Analyzing Data • Preventing Fraud & Misuse

5. Developing Parameters for your P-Card Program

6. 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?

7. Developing Parameters Incorporating the P-Card in your existing Purchasing process • It is a valuable tool for quickly and efficientlypurchasing 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)

8. Developing Parameters Incorporating the P-Card in your existing Purchasing process

9. 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!!!!)

10. 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

11. Developing Parameters How am I going to implement the P-Card program?

12. Selling the P-Card Program to your Superintendent & Board

13. 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.

14. 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

15. Selling the P-Card Program Operational Cost Savings

16. 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)

17. Selling the P-Card Program Operational Cost Savings

18. 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.

19. Selling the P-Card Program The Rebate

20. 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.

21. Selling the P-Card Program Data Analysis on Spending

22. 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.

23. 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.

24. 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.

25. Choosing the right P-Card provider for your school system

26. 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?

27. 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

28. 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

29. 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.

30. 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

31. 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

32. Choosing a P-Card Provider

33. 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)

34. 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

35. Choosing a P-Card Provider

36. Establishing Internal Controls

37. 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.

38. 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

39. 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

40. Establishing Internal Controls Structure of Approval Roles

41. 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.

42. 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.

43. Establishing Internal Controls Blocks and Restrictions

44. Establishing Internal Controls Blocks and Restrictions

45. 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

46. Establishing Internal Controls Blocks and Restrictions

47. Establishing Internal Controls Blocks and Restrictions

48. 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.

49. Establishing Internal Controls Calendar of Events

50. 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.