# Presentation: 446092

## Managing Your GSA SmartPay® Purchase Card Program 

**April 2008**

**Managing Your GSA SmartPay® ****Purchase Card Program**

## Value to the Customer

- Gain Knowledge and Resources
- Share Best Practices
- Learn about the future of GSA SmartPay®

## Agenda

- Overview of the GSA SmartPay® Program
- Purchase Card Program Facts and Statistics
- Management and Oversight Best Practices
- Considerations for the Future
- Questions and Answers

**Notes:**
Today I am going to give you an overview of the GSA SmartPay® Program and provide you with specific purchase charge card program information and statistics.  I will  be discussing with you some management and oversight best practices, and considerations for the future of the GSA SmartPay® program.  

## GSA SmartPay® Program

- Provides Purchase, Travel, Fleet, and Integrated charge cards to over 350 government agencies and organizations
- 5 Bank Contractors:  Bank of America, Citibank, JPMorgan Chase, 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

**Notes:**
GSA SmartPay® is the federal government’s charge card program.  In general, the charge card is used as a mechanism by the government to pay for commercial goods and services, travel and travel related expenses and vehicle fleet expenses (fuel and maintenance).  The integrated card provides more than one of the business lines in one card.
The contract with each of the banks is collectively referred to as the “Master Contract”.  It is administered by GSA.  
The charge cards are on either a VISA or Mastercard platform.  Merchants who accept VISA and Mastercard can also accept the GSA SmartPay® charge card.

## Purchase Card Program Overview

**FY06 - $18.7 billion in spend; 25 million transactions; 283,861 cardholders**

**Notes:**
Let’s take a look at the purchase card program and its growth government-wide from 1999 to the present.  

In FY2007, there was $18.7 billion in spend; 25 million transactions; and 283,861 cardholders.

You will notice that although the chart displays a significant increase in spend and transactions, the number of cardholders has actually decreased since 2000....leveling off between 2004-present. The reason for the lower numbers in cardholders is actually a good sign....managing the purchase card program means managing cardholder accounts.  By closing accounts and reducing the number of cardholders, agencies have reduced the risk of fraudulent activity and misuse of the purchase card.

## Management and OversightOMB Circular A-123, Appendix B

- OMB Circular A-123, Appendix B, *Improving the Management of Government Charge Card Programs*:
- Consolidates and updates government-wide charge card program requirements and guidance issued by various government agencies (i.e., OMB, GSA, Treasury, and other federal agencies)
- Outlines requirements affecting three business lines of the government charge card program (purchase, travel, and fleet)
- Establishes standard minimum requirements and suggested best practices for government charge card programs that may be supplemented by individual agency policy and procedures

**Notes:**
In presenting information on how to effectively manage your purchase card program....I want to discuss for a moment, OMB Circular A-123, Appendix B, Improving the Management of Government Charge Card Programs.  (ask audience if they are familiar with the OMB requirements).
The Office of Management and Budget (OMB) issued OMB Circular A-123, Appendix B, in August 2005.  It became effective in October 2005 and was revised in February 2006.  It requires agencies to maintain internal controls that reduce the risk of fraud, waste, and error in government charge card programs.

REFER to slide.
The guidance provides requirements to federal agencies in managing their government charge card programs.  Its purpose is to establish standard minimum requirements and suggested best practices for government charge card programs that may be supplemented by individual agency policy and procedures.

The Circular addresses requirements for a charge card management plan, training, risk management, refund management, requirements for micro-purchases under Section 508 of the Rehabilitation Act, and best practices.  In addition, it also provides references to helpful websites.  We’ll touch on a  few of these topics throughout the presentation.  Additionally, there is a tool on our website which is a Charge Card Management Plan Template, which will assist you in managing your program and help to implement some of the policies outlined in the OMB Circular.

## Management and Oversight

- Necessity at any size program
- Best practices:
- Strong commitment and leadership by senior management
- Commit the necessary resources
- Maintain lines of communication at all levels

**Notes:**
Management and oversight are important to the program AND it is necessary no matter the size of your agency or charge card program.  As a best practice, it is often said that a strong commitment and leadership by senior management is necessary to managing a charge card program well.  Moreover, with management’s support the program is managed more effectively and efficiently.  
OMB Circular A-123, Appendix B requires that a management plan be established for an agency charge card program.  The OMB Circular requirements have helped agencies to maintain internal controls needed to managing their charge card program(s). 

Maintaining the lines of communication can help when seeking management involvement and support.  It is essential for a successful purchase card program.

Some areas of consideration when managing your purchase charge card program include mandatory training (as required by the OMB Circular); setting reasonable account limits;  blocking merchant category codes (MCCs); deactivation and closing of accounts; review of account statements; and reviewing the ratio of Approving Officials to cardholders.  We’ll touch on some of these areas in detail throughout the presentation.

## Management and OversightAgency Policies

- Recommended agency policy should address the following areas to ensure that clear guidance is provided to Agency/Organization Program Coordinators (A/OPCs), Approving Officials (AOs), and cardholders:
- Delegation of contracting authority
- Training requirements
- Account limits
- Uses of the card
- Receipt and acceptance of supplies and services
- Reconciling accounts
- Span of control for A/OPCs and AOs
- Criteria for establishing accounts
- Criteria for deactivating or canceling accounts with minimal activity
- Merchant Category Code (MCC) blocks

**Notes:**
Agency policy plays an important factor in managing your purchase card program.  Here are a few recommended areas to consider when establishing guidance to A/OPCs, AOs, and cardholders.

As I stated in the previous slide, we’ll touch on a few of these areas in detail throughout the presentation.  The main point to see is how important policy and the involvement of management support are necessary if you are to manage your purchase card program efficiently and effectively.

## Management and OversightDelegation of Contract Authority

- FAR 1.603-3(b) Agency heads are encouraged to delegate micro-purchase authority... Individuals delegated this authority...shall be appointed in writing in accordance with agency procedures
- Are your Approving Officials (AOs) appointed in writing?
- What procedures are in place when these appointments are terminated?

**Notes:**
By giving employees cards, agency heads delegating micro-purchase authority.  Approving officials, the people whose job it is to ensure that the cardholder uses his/her card appropriately should also be appointed in writing.

Agencies should have established procedures for handling (1) cardholders that leave the agency (e.g. cards should be collected and destroyed and accounts closed); (2) cardholders that move to a different office within the agency (e.g. if card is no longer needed, revoke/close account; if card is still needed, make sure the appropriate people are reviewing transactions)  

Additionally, the micro purchase threshold may have changed since your last training session.  Please refer to the FAR to determine if your agency policy is updated to this alteration.

## Management and OversightPreventative Measures

- What is your criteria for establishing a purchase cardholder account?
- How are reasonable single and monthly purchase limits determined?
- Is there criteria in place for deactivating or closing an account?

**Notes:**
Some criteria you may want to consider before issuing a purchase cardholder account / card: 
Employees who have demonstrated responsible decision-making skills.
Employees who need to procure products and services on an on-going basis.
Employees who have completed training.

Credit limits restrict single purchase, daily, weekly, or monthly expenditures by the cardholder.  IAW your agency policy, you may set the limits which best meet the agency’s needs.  Setting limits that are realistic but not excessive will deter cardholder misuse.  Review cardholder spending activity and patterns in order to lower limits without jeopardizing an employee’s mission.  AOPCs have the authority to raise limits at any time in response to emergency or unforeseen situations.

A/OPCs are encouraged to review the number of cardholders as part of the Annual Review Process.  When a cardholder is on extended leave or when you suspect misuse or fraudulent activity, cards with little or no activity should be deactivated or closed.  

## Management and OversightPreventative Measures

- Establish periodic audit reviews of cardholders and AOs
- Define responsibilities of cardholders, AOs, A/OPCs, and agency auditors
- Verify compliance with policy
- OMB recommendation:  Conduct reviews as needed, but not less than annually

**Notes:**
Audits are performed to ensure compliance with policy and to detect fraud and misuse.  Audits may review internal and external operations and are general in nature—not focused on specific actions or individuals.  While investigations tend to look at more specific areas or individuals inside and outside an organization.  A strong bond between your purchase card program and the Office of the Inspector General is key to successful management of your purchase card program.  While *audits* are often seen as a negative action, they can be used as a positive *preventative measure* in managing your program.

A key factor in managing your purchase card program is to have the responsibilities and roles of the key players clearly defined and established.  Again, this is where training and education is important for cardholders, AOs and AOPCs.  Agency policy should include direction regarding separation of duties to minimize the risk of fraud.  Responsibilities of cardholders, AOs, and AOPCs should not overlap to ensure that management controls are not circumvented.  Assignment of duties such as authorizing, approving and recording transactions; receiving assets; approving cardholder statements, certifying funding, etc. should be assigned to separate individuals to the greatest extent possible.

Know your agency’s existing policy and make sure that all key players are compliant with the policies and regulations.  Implementation and compliance of the policies is necessary when successfully managing your purchase card program effectively. 

## Management and Oversight Training

- Has training been received prior to appointment—for AOs and/or A/OPCs or prior to issuance of a purchase card—for cardholders?
- Are copies of training certificates kept on file in a centralized location?
- How often is refresher training provided?
- How do you track training completion?
- Are learning objectives properly defined and tested?

**Notes:**
In accordance with the OMB Circular A-123, Appendix B, training is required for A/OPCs, Approving Officials, and cardholders. 

Here are some questions to ask when managing your purchase charge card program and developing *training* requirements.  

Keep in mind that in accordance to the OMB Circular, *refresher* training is required at a minimum every 3 years, or more frequently depending on your agency policy.  This required training is meant to address agency policy, as the GSA training is not specific enough for your agency cardholders.  You should refer to your agency policy to determine what training in necessary. 

## Management and OversightSpan of Control

- Recommended range: 1:5 or 1:10 (one AO for every 5-10 cardholders)
- Consider volume
- Familiar with operations
- Able to act independently

**Notes:**
The most common AO to cardholder ratio is between 1:5 and 1:10.  Though this is not a requirement...neither is it mandated by government-wide policy, it is a shared best practice across the government for managing a purchase card program.
Because the AO is responsible for ensuring that all purchases made by the cardholder are appropriate and the charges are accurate, it is necessary that AOs be familiar with the process for reviewing a transaction.  The number of cardholders assigned to an AO should be reasonable, considering the volume of cardholder activity and the organizational structure.  The AO should have direct knowledge of the cardholder’s role in the agency and the ability to verify receipt of the purchase.  As a shared best practice, when appointing AOs and/or AOPCs, consider factors such as grade, position, training, and an employees ability to act independently to ensure that they can successfully perform their duties.  This is a good practice in managing your purchase charge card program.

## Management and OversightMerchant Category Codes (MCCs)

- What MCCs are necessary for agency mission?
- Block certain MCCs to prevent unauthorized use
- MCC blocks are NOT 100% foolproof—work with the bank to assist you in determining which MCCs should be restricted and/or blocked

**Notes:**
Merchant Category Codes (MCCs) are an effective tool to control a cardholder’s spending activity thereby managing your purchase card program efficiently.  MCCs are established by the bankcard associations and banks to identify different business types.  Merchants select the code(s) best describing their businesses.  By limiting the type of businesses where the purchase card can be used and the types of MCCs available to the cardholder, you can manage your card program and eliminate misuse, abuse, and fraudulent activity of the purchase card.  

Keep in mind that MCC blocks are not 100% effective!  Though it is a good preventative measure.

## Management and OversightElectronic Access Systems (EAS)

- Does your agency make use of the bank’s electronic access system to manage cardholder accounts?
- Reports assist with cardholder oversight
- General account information
- Transaction, payments, and disputes
- Statistical or summary reports

**Notes:**
Contractors under the GSA SmartPay® program have in place an EAS—electronic access system—by using the system(s) A/OPCs can perform a number of functions to assist them in managing an agency’s purchase card program.  Reporting tools can help in detecting misuse and fraud as well as manage cardholder accounts.  Some reports include Account Activity Report; Declined Authorizations; Disputes; Unusual Spending Activity; and Ad Hoc Reports.  

The systems are developed to help manage your purchase card program.  What types of EAS tools are you currently receiving from your banks?  

## Management and OversightRefund Management

- Does your agency policy maximize the opportunity for refunds?
- Productivity refunds:  based on the timeliness and/or frequency of payments to the bank (faster payments = higher refunds)
- Sales refunds:  based on the dollar or *spend* volume during a specified time period
- Corrective refunds:  payments made to the agency to correct improper or erroneous payments on an invoice adjustment

**Notes:**
In accordance with OMB Circular A-123, Appendix B, proper management of refunds is critical to ensuring that agencies maintain cost-effective charge card programs.  To drive down costs, while ensuring that charge card programs effectively support the agency mission and financial controls, charge card managers must strive to:
Employ the necessary internal controls to identify and collect corrective refunds
Obtain the best competitive deal from the banks in terms of sales and productivity refunds offered balanced against the services provided and
Utilize proper cash management decision-making to maximize agency sales productivity refunds

Three types of refunds:  sales, productivity, and corrective (refer to slide).

## GSA SmartPay® ProgramConsiderations for the Future

- Piloting new technologies (data mining, pre-authorization, electronic commerce)
- Leveraging the government’s buying power
- Balancing risk and reward
- Legislative compliance
- Learn more about all these topics at the GSA SmartPay® conference, July 22-24, 2008 (Denver, CO)

**Notes:**
New technologies:  Banks and associations continue to come up with new technologies to help with fraud, waste, and abuse issues, among others.

Leveraging the government’s buying power through strategic sourcing.  This is another OMB Circular initiative.  Review spend and make a recommendation to the Chief Acquisition Officer.

Legislative compliance – Tax recovery efforts for both state and local taxes – OMB Circular.  Section 508 requirements.

Mention the upcoming GSA SmartPay® conference being held in Denver, CO.  The conference is intended for AOPCs, AOs, billing officials, IG staff, and other agency officials who manage a charge card program.  The training is not intended for cardholders.

## GSA SmartPay®Questions and Answers

- 	Bradley Forrestel
-  _[bradley.forrestel@gsa.gov](mailto:bradley.forrestel@gsa.gov)_
- (703) 605-2799
- Liz Skolnik
- 	 _[elizabeth.skolnik@gsa.gov](mailto:elizabeth.skolnik@gsa.gov)_
- 	(703) 605-5736
- You will find a wealth of contract and program information, training, publications, and points of contact at our website: www.gsa.gov/gsasmartpay
- Treasury Financial Management Manual provides guidance to management of a purchase card program.  A copy can be obtained from the following website:
- 	http://www.fms.treas.gov/tfm/vo11/v1p4c450.txt

**Notes:**
Thank you for attending the training.

Provide information on the guidebook:  Blueprint For Success:  A Guide for Purchase Card Oversight.  A resource for managing your purchase card program.

Also, Helpful Hints for Purchase Card Use– Training took for Cardholders.

These publications can be ordered through our website!