Federal Acquisition Service U.S. General Services Administration Changes Affecting the GSA SmartPay® 2 Purchase Card Program David J. Shea, CPCM, PMP Director,

Federal Acquisition Service

U.S. General Services Administration

Changes Affecting the GSA SmartPay® 2 Purchase Card Program

Changes Affecting the GSA SmartPay® 2 Purchase Card Program

David J. Shea, CPCM, PMPDirector, Office of Charge Card Management (OCCM)Federal Acquisition Service

David J. Shea, CPCM, PMPDirector, Office of Charge Card Management (OCCM)Federal Acquisition Service

June 2009June 2009


Value to the Customer

Gain a general understanding of the GSA SmartPay® 2 Purchase Card Program

Learn what improvements have been made under the GSA SmartPay® 2 Program

Learn about the impact of legislative and executive actions

2


Agenda

Welcome Program Overview GSA SmartPay® 2 Changes Legislative Update OMB Circular A-123, Appendix B GAO Purchase Card Audit Additional Program Information Q & A

3


Welcome

What are your objectives for this course? What issues would you like to discuss? What topics do you want to understand better

as a result of your participation in today’s course?

4


Program Overview

GSA SmartPay® provides federal employees with a secure, convenient, and efficient payment and procurement tool in the form of approximately 3 million government purchase, travel, fleet, and integrated charge cards

GSA SmartPay®, established in 1998, is the federal government-wide charge card program that provides program service to over 350 federal agencies, organizations, and Native American tribal governments

The transition to the GSA SmartPay® 2 Master Contract was completed in November 2008 with three banks providing charge card products and services: Citibank, JP Morgan Chase, and U.S. Bank

5


Program Overview

Charge cards provide the following benefits:• Administrative savings and efficiency, estimated at $1.7 billion

in administrative processing cost avoidance (e.g., reduced procurement time, streamlined payment procedures and paperwork) in FY08 for purchase cards alone

• Refunds based on dollar volume and payment performance • Electronic transaction data, enabling better reporting• Worldwide acceptance

6


Program Overview

In FY08 alone: • Total FY08 program spend was over $30 billion, a

12.7% increase over FY07• Over 100 million purchase, travel, and fleet

transactions were processed through approximately 3.2 million cards

• Agencies earned over $187 million in refunds The ten largest customers (across business lines)

account for more than 90% of total program spend

7


Program Overview: Purchase

FY08 - $19.8 billion in spend; 25.5 million transactions; 276 thousand cardholders8


GSA SmartPay® 2: Master Contract Overview Fixed price, Indefinite Delivery/Indefinite Quantity

(ID/IQ) type contract• Three year base period (11/08 – 11/11) • One four-year option & one three-year option

(ending November 29, 2018)• The base year period began on 11/30/2008

To use the contract Agencies/Organizations can: • Place task order with selected banks based on

identified needs and best value • Pool with other agencies/organizations, or • Tag-along with other agencies/organizations

9


GSA SmartPay® 2: Program Improvements

Increased security requirements – increased emphasis on security of both personally identifiable information (PII) and procurement data to minimize risk to individual cardholders and to agencies

Strategic sourcing support – leveraging the buying power of the government to achieve savings and best value procurement

Increased data requirements – more focus on Level 3 data, which provides better insight into program performance for OCCM and agencies

10


GSA SmartPay® 2: Program Improvements

Improved Program Technology• Increased capability of EAS systems to provide

flexibility in reporting and account management− Ability to generate ad hoc reports− Ability to change category block templates (e.g., MCC

blocking)− Ability to dispute transactions electronically− Improved ability for A/OPCs to turn cards “on” and “off”

• Transaction monitoring to detect misuse, fraud, waste, and abuse

− Email alert service

11


GSA SmartPay® 2: Enhanced Products and Services

Contactless cards – facilitate faster point-of-sale transactions; the card does not leave the hand of the cardholder

Debit cards – help to control the amount of outstanding credit with cardholders

Pre-paid (stored value) cards – provide capability to load and reload cards with specific dollar values. Cards can be issued with required value on short notice.

Cardless accounts – provide established vendor-specific charge accounts without physical cards

Convenience checks – improve ability to issue and reconcile checks online, including features such as:

• Electronic transaction record must include merchant name

• Online imaging of cleared checks 12


Legislative Update

American Recovery and Investment Act of 2009

Passed in February 2009 and includes over $500B in new spending

What impact will it have on GSA SmartPay® 2?• Increased card activity for many agencies/organizations• Enhanced reporting requirements• Agencies/organizations must not co-mingle Recovery Act funds

with other sources of funding, even below micropurchase threshold

13


Legislative Update

American Recovery and Investment Act of 2009

Section Reporting Requirement Period

2.2 Major communications Immediate

2.3 Formula block grant allocation reports Immediate

2.4 Initial weekly reports to help populate early phases of Recovery.gov

3/3/09 – 5/12/09

2.5 Monthly financial reports Starting 5/8/09

2.6 Award-level reporting consistent with what is currently required for USAspending.gov

Starting 5/5/09

2.7 Agency-wide Recovery Act plans NLT 5/1/09

2.8 Program-specific Recovery Act plans NLT 5/1/09

2.9 Recipient reporting Starting 7/10/09

14


Legislative Update

Tax Increase Prevention and Reconciliation Act of 2005

Background on proposed change

• The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) requires Federal, State, and local government entities to withhold income tax when making payments to persons providing property or services (in an amount equal to 3% of such payment).

• The proposed regulation states that the withholding requirements will not apply to any payment that is less than the payment threshold amount of $10,000.

15


Legislative Update

Tax Increase Prevention and Reconciliation Act of 2005 (cont’d)

How does this regulation apply to the payment of charge cards?

• Payment occurs at the point of sale when the government charge card or payment card is tendered and not when the government entity pays the card company.

• The government entity is liable for the withholding and reporting associated with the payment, this liability is not transferred to any other party involved in the charge card or payment transaction.

16


Legislative Update

Tax Increase Prevention and Reconciliation Act of 2005 (cont’d)

How does this regulation affect GSA SmartPay® Purchase cards?

• Any payment under $10,000 is not subject to withholding.

What is the timeline for the new regulation?

• Payments are subject to withholding under section 3402(t) if made after December 31, 2011, or the date that is six months after the publication of final regulations.

• If there is a material modification to an existing contract, payments under the contract would become subject to the withholding requirements of section 3402(t).

17


GAO Purchase Card Report

In March 2008, GAO released a report that analyzed purchase card transactions governmentwide. The purpose of the report was to:

• Determine if internal control weaknesses existed in the government purchase card program

• Identify examples of fraudulent, improper, and abusive activity

GAO asked agencies/organizations to provide documentation on selected transactions to prove that the purchase of goods or services had been properly authorized and signed for

18


GAO Purchase Card Report (cont’d) As a result of this report GAO recommends that GSA and the Treasury

work with agencies/organizations to:• Improve internal control over the government purchase card program• Strengthen monitoring and oversight of purchase cards • Provide guidance on how cardholders can document independent receipts and

acceptance of items obtained with a purchase card• Provide agencies/organizations guidance regarding what should be considered

sensitive and pilferable property (e.g. computers, palm pilots, digital cameras, fax machines, can be easily converted to personal use)

• Remind travelers who receive government-paid-for-meals at conferences or other events, they must reduce the per diem claimed on their travel vouchers by the specific amount that GSA allocates for the provided meal

• Remind cardholders to obtain prior approval or subsequent review of purchase activity for purchase transactions that are under the micropurchase threshold

• Cancel convenience check privileges of cardholders who improperly use these checks

19


OMB Circular A-123, Appendix B

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 the 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

20


OMB Circular A-123, Appendix B (cont’d)

Revised in January 2009 in response to recommendations made by GAO regarding the Federal purchase card program as well as agency comments and suggestions

• Updated the micropurchase threshold to reflect the current $3,000 threshold• Expanded descriptions for erroneous and improper purchases including

practices for minimizing such purchases• Added a requirement for charge cardholders, approving officials, or both to

reimburse the government for any unauthorized transactions or erroneous purchase card transactions that were not disputed

• Incorporated guidance on disciplinary actions for fraud and other egregious abuse of a government charge card

• Updated performance metrics• Added a chapter on internal controls for convenience checks• Added a chapter on controls related to property acquired with government

charge cards 21


Training Resources Purchase-specific GSA SmartPay® online training:

Cardholders: Charting the Course (http://www.gsa.gov/sppurchasetraining)

A/OPCs: (http://www.gsa.gov/aopcpurchasetraining) Agency/organization-provided training Bank-provided training GSA SmartPay® Annual Training Conference Materials (available online, and hard copies may be ordered by

visiting http://apps.fss.gsa.gov/cmls): Blueprint for Success: A Guide for Purchase Card Oversight Mini card-sized brochure – “Helpful Hints for Purchase Card

Use”

22


Questions?

David J. Shea, CPCM, PMP

[email protected]

(703) 605-2867

You will find a wealth of contract and program information, training, publications, the GSA SmartPay® 2 Master Contract, and points of contact at our website:

www.gsa.gov/gsasmartpay

23

Documents

Federal Acquisition Service U.S. General Services Administration Changes Affecting the GSA SmartPay® 2 Purchase Card Program David J. Shea, CPCM, PMP Director,