TOPIC: Expanding Purchasing Card Usage
OFFICE: Office of the Budget / STATE: PA / DATE: 03/28/2011
QUESTION / ISSUE:
We’d like to know if other states are taking steps to expand purchasing card usage and what those steps are. Also, we’d like to know what thresholds other states have for purchasing card transactions. We currently have a $5K single transaction limit, but are thinking of raising it to $10K.
Alaska / In Alaska, we base the single transaction limit on the cardholder’s procurement authority. So some of our purchasing cards have up to $200,000 allowed.
Our state has also been working to increase the usage of the card:
  • We educate our users. We published a Procurement Information Message (PIM) advocating the use of the card. We also publish the information in our Alaska Administrative Manual.
  • In 2005, our legislature passed into law a requirement to make payment by electronic methods (card, FEDI, wire transfer). The Alaska Administrative Code provided for a few allowable exceptions.
  • For the last two years, we have published metrics which were distributed to each department that measures the percentage of transactions made via FEDI, card and paper warrants.
  • We added an indicator to our vendor file that lets A/P staff know if the vendor accepts payments by credit card. To populate this field, we used data from our bank’s online reporting system, and added the Y/N selection to our vendor EDI agreement forms.
  • We plan on having a card administrator forum this spring and one of the questions we want to ask and discuss is what types of purchases do the departments not use the card for, and why. We’re hoping that will generate discussion and collaboration between agencies on more card usage, and also find out if there are some actions we can take as statewide administrators to resolve difficulties that prevent them from using the card.
We would like to see continued increase in the use of the card and we are always looking for new ideas too.
Arizona / The State of Arizona is in the process of expanding the use of our P-card program by:
  1. Opening up the card for use on 1099 reportable services. Under current state policy, this is prohibited. However, now that payment settlement entities (i.e., US Bank) are responsible for issuing 1099s on reportable services purchased through the P-card, this allows us to open up the card for these purchases. We will be modifying our state policy to reflect this change.
  2. Working with US Bank to identify vendors with whom the state has a large spend volume that also accept the P-card to identify opportunities to drive payments to the P-card or a "P-card type" solution (i.e., a product similar to an e-payables program except on the P-card platform).
  3. Meeting with our agencies along with US Bank to educate them on opportunities for expanded P-card use.
  4. Potentially increasing the single transaction limit on payment type activities with the P-card. For example, use of the P-card to pay a monthly invoice as opposed to an over the counter transaction using plastic (AZ differentiates payment vs. purchasing activities with our P-card in state policy). Our current single transaction limit for payments with the P-card is $10,000, however, with the 3% withhold requirement set to take affect after 12/31/11, if the P-card is used to make payment, it will be exempt from the 3% withholding. We have not come up with a new proposed limit yet.

Michigan / The State of Michigan has a $2,500 single transaction limit. We are currently considering raising the limit. We are in the process of analyzing cost per transaction for credit card purchases versus other methods of payment.
Missouri / In the State of Missouri, agencies are asked to continually search for new opportunities to move eligible payments to the P-card. We recently removed the restriction of no 1099-reportable transactions due to a change in federal reporting, and expect to see an increase in those purchases to the program. Our standard card limits are $1,000/transaction and $3,000/month, but that is provided as a guideline. We encourage agencies to select limits based on their purchasing needs. We have some cards with a $500/month limit all the way up to $25,000/month. Anything over $25,000 has to be authorized by our office, and accounts with >$50,000/month must be ghost accounts (no plastic). Some of those accounts for pharmaceuticals can run up to $100,000/month.
Montana / We are always interested in increasing the usage, but we are not actively trying to increase usage.
New York / On March 5, 2010 New York State's Office of Taxpayer Accountability issued a Policy Memo (see March 5, 2010 OTA Policy Memo, attached) directing agencies and public authorities to expand their use of the procurement card for small dollar purchases (defined as under $2,500). Also, the Office of General Services (OGS) hosts an annual Purchasing Forum where there is a training session regarding the use of procurement cards. In the 2010 session OGS and Citibank recapped the benefits regarding the cost savings
including:
  • Reduce costs associated with paper intensive voucher payment methods. The OSC audit estimated cost of $36 per transaction.
  • Increase the benefit of the rebate offered to state agencies for procurement card purchases.
  • The state lost an opportunity to receive an additional $4 million in rebates had they used the card more.
  • Ability to block MCC codes.
In addition, the Office of the State Comptroller (OSC) also identifies agencies making frequent small dollar payments by voucher and encourages those agencies to use the procurement card for those purchases (see Small Dollar Payments, attached).
The majority of our agencies have a single payment limit of $15,000. However, some agencies may have single payment limits of $1,000 or $5,000. This may be the agency's choice or OSC has determined that, based on an internal controls review or prior history, that there is a high risk for inappropriate use. On the other hand, our state universities have higher limits due to higher procurement limits set by legislation.

Oklahoma / The State of Oklahoma has the following limits on the P-card:
$5,000 single transaction limit except when items are:
  • On Statewide Contract as bid by Department of Central Services Central Purchasing Division
  • orRegulated Utilities.
In those two cases, the dollar amount is unlimited.
We have legislation to add Interagency Purchases and Professional Services to the unlimited dollar threshold.
We have a new Governor this year. In her State of the State speech in January, she pushed the use of technology including P-card. She urged agencies and higher education to use the state’s program especially on small dollar purchases.
We also have drafted a letter to go out to the agencies, signed by the Director of Central Services, the Director of the Office of State Finance, and the State Treasurer, urging agencies to use their P-cards for small dollar transactions when possible. This letter hasn’t gone out yet, but we’re hoping.
We just recently changed from JPMorgan Chase to Bank of America with better rebate terms and all. We have had a good response to the Governor’s address and see the P-card usage really increasing.
Virginia / In Virginia we are about to go live with a ePayables tool which takes your typical A/P spend for check or ACH and if we can put it on a card are doing so - this is after the voucher is processed through the A/P system. We are aiming at doubling our rebate in about 2 years doing this.
Our transaction limit typically is up to $5,000 but we do have a Gold card program with limits typically to $50,000 a transaction and $250,000 a month. We do have higher ones especially for year-end purchases, but this works well for only those who truly can support the higher limit need.
Utah / In Utah, our standard thresholds are much lower than yours are. Ours are $5,000 monthly and $1,000 per transaction. Our agencies may request higher limits, which we evaluate on a case by case basis.