A Review of State Agencies’ Use of Procurement Cards
Procurement cards are credit cards issued to public employees to make purchases on behalf of the state. Mississippi adopted a procurement card program in 2002, thus reducing the state’s use of traditional purchase order methods (e. g., disbursement of paper checks).
The Office of Purchasing, Travel, and Fleet Management, an office within the Department of Finance and Administration, is responsible for administering the procurement card program. Procurement cards are provided to the state through UMB Bank, a financial institution located in Kansas City, Missouri.
Spending in Mississippi’s procurement card program more than quadrupled between calendar years 2010 and 2014. Mississippi has spent approximately $93 million through procurement cards over the past four years, following the national trend of increasing program spending. OPTFM intends to increase the amount of spending conducted through the program by encouraging more state entities to participate in the program.
Procurement cards provide users with cost and time savings through electronic (versus paper-based) procurement. Procurement card programs typically generate monetary rebates, which then may be spent at the discretion of the users.
How does the state manage and oversee the procurement card program?
Procurement cards eliminate the mandatory use of traditional methods designed to prevent purchasing abuse and misuse (e. g., paper-based requisitions, multiple approval signatures). Therefore, strong management and oversight become vital to protect the use of state funds.
The Office of Purchasing, Travel, and Fleet Management (OPTFM) has designated one employee, the Procurement Card Administrator, to manage the state procurement card program. The administrator is primarily responsible for the day-to-day management of the program and has collateral duties related to contracts and travel. OPTFM has put forth guidelines for participating agencies’ use of procurement cards.
OPTFM requires that each program participant have a designated procurement card coordinator who is to oversee appropriate use of the card at the agency level. Agencies’ procurement card coordinators are responsible for training, reconciliation, and distribution of information about the procurement card program. OPTFM also requires that each cardholder sign an agreement acknowledging liability and that he or she adheres to purchasing laws, maintains receipts, safeguards the card, and reviews monthly statements for accuracy.
Have state agencies complied with procurement card guidelines?
PEER used transaction data to select three state agencies (a small, medium, and large agency based on the amount of procurement card expenditures and frequency of card transactions in July 2015) to test for compliance with procurement card guidelines.
In the three state agencies selected for a review of compliance with procurement card guidelines, PEER found sixty instances in a sample of FY 2015 transaction data in which agencies did not comply with three specific OPTFM requirements for the procurement card program (i. e., itemized receipts, no payment of sales tax, and documentation). Collectively, the sixty violations translated into a twenty-three percent rate of noncompliance for the transactions reviewed. Additionally, PEER found other instances of noncompliance, including lapses in agencies’ security over procurement cards. These incidences of noncompliance demonstrate OPTFM’s inability to ensure the accuracy and legitimacy of purchases made with procurement cards at the individual agency level.
PEER believes that the causes of noncompliance with procurement card guidelines in the three agencies reviewed may be traced back to deficiencies in training, monitoring, and auditing related to the procurement card program.
Has the state received the full benefit of the rebates from the procurement card program?
State law lacks provisions that provide guidance to OPTFM regarding state agencies’ accrual of, access to, and use of procurement card rebates. As a result, certain agencies are not aware that they have earned a monetary rebate. The state procurement card guidelines do not address monetary rebates and agencies are not informed about rebates they have earned unless they are receiving the rebates directly. Rebates are an indisputable benefit of the program, yet little attention has been paid by the state to ensure that this benefit is distributed and accounted for in a transparent manner.
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