COUNTY ADMINISTRATION OFFICE - R. ESPINOSA

Adopt a procurement card program for County purchases, approve the modifications and updates to the San Benito County Procurement Card Policy, and delegate authority to the County Administrative Officer to make minor changes and updates that don't substantially alter the Policy.

SBC FILE NUMBER: 119

SUMMARY: 

The adoption of a procurement card program, governed by policies approved by the San Benito County Board of Supervisors, would allow the continuation of increased efficiency, savings, local business preference, and other operational advantages that the current procurement card pilot program has provided for the County. Based on the success of the pilot program adopted in 2015, the County Administration Office and the County Auditor’s Office recommend the implementation of a procurement card program as well as updates to the San Benito County Procurement Card Policy.

BACKGROUND: 

State of California agencies, including local governments, are eligible to participate in the State’s “CAL-Card Program”, a procurement card for small value purchases. The CAL-Card Program allows government employees to use a VISA card issued by U.S. Bank to purchase supplies and services for governmental purposes. Spending limits can be customized as determined by the needs of the agency and daily and monthly limits may be set for the total transaction value and number of transactions. CAL-Card/U.S. Bank also provide a web based system that allows approvers such as Department Heads to review all purchases on a statement prior to payment. This review process reduces the risk of fraudulent or non-business related purchases. Approvers have access 24/7 through the web based system to view all pending transactions before the close of each statement date.

There are no annual fees for the use of the CAL-Card at this time. However, there are late fee penalties on the entire past due amount that is not paid by the due date. According to the current agreement, Participating Addendum 7-14-99-22, participating agencies do not pay an administrative fee to be part of the CAL-Card program. The program includes a variety of incentives, detailed in the Participating Addendum and subsequent amendments.

Generally speaking, procurement card programs provide the following benefits:

•  Increased customer department satisfaction.
•  Reduction of processing of internal purchasing documents.
•  Reduction of the volume of invoices and checks to process.
•  Shortened time necessary to pay vendors for purchased items.
•  Increased usage of local vendors.
•  Improved timeliness of delivery.
•  Eliminated use of employee’s personal credit cards for County related business.

During the pilot program, County staff tested the effectiveness and compatibility of the Procurement Card Program by using CAL-Cards to replace the purchase of certain goods, working with the web based system, evaluating internal controls, and experiencing how the program works with the New World ERP system. Various departments participated in the pilot program to ensure that all types of purchases were tested. Additionally, the pilot program included thorough training of cardholders and their managers and an evaluation to determine if the aforementioned benefits, as well as those identified in the Procurement Card Policy, and other criteria for efficiency, savings and operational advantages were achieved. The pilot program was governed by the Procurement Card Policy, a document that was created based on components of internal control – authorization, separation of duties, recording, and access.

Impacts on Fiscal Controls

Under a procurement card program there is no prior approval of the purchase by the department's management as signatures are not required on a per item basis.  The cardholder would be delegated the authority to make purchases of pre-approved groups of commodities (listed in the Procurement Card Policy under the "Allowable Purchases" section) within their authorized dollar limit. Cardholders are prohibited from making certain purchases as detailed in the "Prohibited Purchases" section. At the end of a statement cycle the purchases would be reviewed and approved by the designated CAL-Card Approver via the web-based system followed by signing of card statements by the cardholder and the approver. The statement and backup documentation, including original receipts, correct number of quotes as required per County Purchasing Code, and all other documents would then be given to the Auditing Department for payment of the statement.

Instead of issuing multiple checks to pay multiple vendors, the Auditor-Controller would issue one check to U.S. Bank for a variety of purchases on a statement. This lessens review of vendor claims by the Auditor-Controller. The Auditor-Controller's responsibilities would be limited to verifying that the department's authorization for payment equals the monthly bank statement, less credits, taken by the department, which are not reflected in the statement.

Additionally, the Procurement Card Policy states the Auditor-Controller’s authority to conduct regular audits of departmental compliance with the program, as needed.

Departments’/Organizational Responsibilities

Under a procurement card program, departments that use the CAL-Card would be responsible for maintaining documentation that supports all of their expenditures and the monthly audit function would be the responsibility of the department head.

Cardholders would be required to retain all original invoices resulting from card purchases and submit these to the department's fiscal/administrative staff for review and approval. For each procurement card billing cycle and payment, the department would be required to (1) reconcile all invoices to the procurement card statement, (2) audit each invoice for compliance with County policy, and (3) request credit for inappropriate charges. Original invoices would be retained in the department for the statutory required time period of five years.

Under the procurement card program, cardholders would be placed in one of the applicable following groups, though lower limits can be placed on individual cards: 

These responsibilities are defined in more detail in the Procurement Card Policy.

1. Approve a procurement card program for County purchases.
2. Approve the modifications and updates to the San Benito County Procurement Card Policy. 
3. Delegate authority to the County Administrative Officer to make minor changes and updates that don't substantially alter the Policy.