Looking for a change in the way your school district makes purchases and pays vendors? Consider what many school across the country, as well as some schools districts in New York, are doing. Here’s a look at some of the advantages and disadvantages of the program, as well as the impact to current purchasing procedures.
Similar to credit cards, Procurement Cards, or p-Cards are used to consolidate the purchase of multiple items or services into one monthly payment. The cards can be issued to individuals within the district (recommended) or to the district as a whole to be checked out whenever a requisitioner needs it. One of the main benefits of p-Cards is the reduction in check processing costs. Instead of reviewing each and every purchase made, whether from an open Purchase Order (PO) or otherwise, the business office can review a p-Card statement and reconcile the backup for the purchases to the statement. Payment is then submitted for all purchases made from the p-Cards for the month (this can be an ACH payment).
As internal auditors and claims auditors for many school districts on the Island, our function is to ensure any changes in the control process over purchases and accounts payable adhere to a school’s purchasing policy as well as General Municipal Law. Implementing a p-Card system does not supplant the normal purchasing procedures in place. A PO will still need to be set up and approved before making purchases using the card. Although the p-Card puts greater responsibility on the cardholder for making appropriate purchases, the p-Card program has the ability to set thresholds and restrictions for what can be purchased. For example, a separate p-Card can be used for meals during travel. In addition, a daily limit can be imposed on cardholders and certain vendors can be blocked. While p-Card programs generally have the ability to restrict purchases in many ways, it is impossible to be able to restrict every type of purchase, and therefore, there is a risk that a purchase may not be appropriate (though this risk is similar when there are blanket or open purchase orders).
The program allows cardholders to log on and see how much of their budget is left and shows their spending history. The business office would not have to monitor the remaining balance of the PO or the budget line. Instead, the card would be declined if there is no remaining balance in the amount encumbered for that card’s purchases.
There are no start-up fees or annual charges for implementing and using the p-Card Program; however the District must spend at least $10,000 using the p-Card to be eligible. The District need not meet this $10,000 minimum in the beginning, but must commit to growing the p-Card Program to that level (see p-Card Program FAQ’s in nysasbo.org).
If the p-Card Program is implemented, it is important to carefully select and train those employees who will be using the cards. As with any district purchase, employees need to ensure compliance with the district’s purchasing policies. There is web training available on a weekly basis provided by the bank that administers the card to ensure you are using the card to its fullest potential. All cards have fraud insurance and the rebates on purchases using these cards provides an additional stream of income for districts.
The above features reflect those of the NYSASBO p-Card Program (partnering with Illinois ASBO) and much of the information can be found on their website. There are other p-Card Programs that may have slightly different capabilities. Based on our research and understanding of p-Cards, the program seems highly effective in monitoring and managing budgets, reducing payment processing time and costs, and ensuring critically-needed purchases are procured quickly. The restrictions that can be placed on cards enable districts to control the spending of the cardholders, which effectively eliminates the risk of overspending and reduces the risk of inappropriate purchases.
The State of Oklahoma Department of Central Services’ Audit Unit issued an article outlining the differences between using purchase orders and using p-Cards titled “White Paper: Purchase Card vs. Purchase Orders.” The differences outline the benefits of a p-Card Program:
- 100% transparent to the public via web
- Real time view of transactions
- Blocked vendors from use
- Instant changes to caps on transaction values
- Caps can be raised for individual purchases
- Limits on types of purchases made
- 1 voucher per billing cycle
- Vendor fraud coverage
- Small town & remote business acceptance
- 100% external continuous monitoring
- Individual purchaser is personally liable
- Tracked fraud and misuse data
- Required training to all participants
- Required refresher training
- Only through open records requests
- Only viewable after invoice is processed
- No vendors blocked from use
- No instant changes to caps on values
- Untimely process to raise or lower caps
- No limits on type of purchases made
- No rebate
- 1 voucher per transaction
- No vendor fraud coverage
- Limited acceptance
- Limited external monitoring
- Limited personal liability
- No tracking of fraud and misuse data
- Limited training to limited participants
- No refresher training