What is the GSA SmartPay 2

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What is the GSA SmartPay 2 Purchase Card
Program?
Elizabeth Skolnik Camesha Everett Office of
Charge Card ManagementGeneral Services
Administration
June 2009
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Value to the Customer

• Learn about the GSA SmartPay purchase charge
  card program
• Learn about relevant legislation and regulations
• Understand specific roles and responsibilities
• Learn about fraud and misuse of charge cards,
  indicators, and preventative measures
• Learn and share best practices of charge card
  program management

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Agenda

• GSA SmartPay Program Overview
• Introducing GSA SmartPay 2
• Purchase Charge Card Overview
• Legislation, Regulations, and Oversight
• Roles and Responsibilities
• Purchase Charge Card Misuse/Abuse and Fraud
• Best Practices for Managing Your Purchase Charge
  Card Program

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GSA SmartPay Program Overview

• GSA SmartPay, established in 1998, is the
  largest government charge card program in the
  world
• The GSA SmartPay program enables over 350
  Federal agencies, organizations, and Native
  American tribal governments to obtain charge card
  products and services through Master Contracts
  that GSA has currently established with three
  banks JP Morgan Chase, U.S.Bank, and Citibank.
• Agencies issue task orders against these existing
  Master Contracts to obtain charge card products
  and services

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Evolution of the GSA SmartPay Program
Epoch 1
Epoch 2
Epoch 3

• Dramatic increase in
• the number of cards
• Cardholders empowered to use cards to conduct
  Government business
• Assisted with workload management/loss of
  acquisition personnel

• Focus shifted to
• accountability and
• compliance
• Improved card utilization (reduction in number of
  purchase cards)
• Increased internal controls

• Cards evolve as strategic
• business tool
• Strategic sourcing leveraging buying power of
  the government to achieve savings and best value
  procurement
• New products and services greater business
  intelligence
• Enhanced security

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Program Stakeholders

• Agencies/organizations
• Use charge card products and services to support
  their missions and operations
• GSA Office of Charge Card Management (OCCM)
• Provide overall program management and advocacy
• Banks (Bank of America, Citibank, JPMorgan Chase,
  Mellon Bank, and US Bank)
• Provide charge card products and services through
  GSA Master Contracts
• Associations (MasterCard and VISA)
• Partner with the banks to issue GSA SmartPay
  charge cards
• Office of Management and Budget (OMB)
• Perform oversight of the government-wide charge
  card program

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Business Lines

• Purchase Cards
• Use to purchase supplies and services in support
  of agency/organization missions and operations
• Travel Cards
• Cover travel and travel-related expenses
• Only GSA SmartPay 2 cardholders can access the
  City Pair Program
• Fleet Cards
• Use to purchase government vehicle fuel and
  maintenance services
• Issued to vehicles, rather than individuals
• Integrated Cards
• Offers functionality of two or more of the three
  business lines

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Charge Card Benefits

• Administrative savings and efficiency
• In FY08 agencies/organizations reported 1.72
  billion in savings, up from 1.67 billion in FY07
• Travel cards provide access to the City Pair
  program
• 72 average discount off comparable commercial
  fares
• Rebates based on dollar volume and payment
  performance
• Electronic transaction data, enabling better
  reporting and ability to detect waste, abuse, and
  fraud
• Currently working to obtain Point-of-Sale
  discounts from various vendors and merchants
• GSA SmartPay provides program-wide
  representation on regulations and issues
  impacting the program

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Tax Exemption

• Government purchases are tax exempt, although
  some merchants may still apply taxes to the
  purchases
• Each state has different policies and procedures
  around the tax exemption of purchases made with
  GSA SmartPay cards
• The GSA SmartPay website provides information on
  each states requirements often cardholders will
  need to print a tax exemption certificate to
  give to the merchant
• Visit the GSA SmartPay website and click on tax
  information
• The Office of Charge Card Management (OCCM) has
  requested updated information from states for GSA
  SmartPay 2 this information is posted to the
  website
• Tax exemption and recovery plans and processes
  are an important part of managing your charge
  card program.
• For tax questions contact Camesha Everett at
  camesha.everett_at_gsa.gov.

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Introducing GSA SmartPay 2

• On November 30, 2008 agencies/organizations
  transitioned to the new GSA SmartPay 2 charge
  card and began processing transactions through
  one of the GSA SmartPay 2 banks
• Citibank
• JPMorgan Chase
• US Bank
• All major customers, with the exception of DHS
  travel and purchase, transitioned successfully to
  GSA SmartPay 2 on or before November 30, 2008
  DHS travel and purchase will transition on
  February 28, 2009 (DHS fleet has already
  transitioned)

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GSA SmartPay 2 Enhanced Products and Services

• Contactless cards faster transactions, the card
  does not leave the hand of the cardholder
• Pre-paid (stored value) cards capability to
  load and reload cards with specific dollar
  values cards can be issued with required value
  on short notice
• Cardless accounts provides established
  vendor-specific charge accounts without physical
  cards
• Convenience checks improved ability to issue
  and reconcile checks online such as
• Electronic transaction records that must include
  merchant name
• Online imaging of cleared checks

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GSA SmartPay 2 New Products and Services
Continued

• 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
• Detailed minimum security standards including
  FISMA and Payment Card Industry (PCI) security
  standards
• GSA has conducted bank security system reviews
  and determined that bank Electronic Access
  Systems (EAS) are Certified and Accredited (CA),
  and are Section 508 compliant
• Increased data requirements more focus on Level
  3 data, which provides better insight into the
  program for agencies/organizations and GSA
  SmartPay

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GSA SmartPay 2 New Products and Services
Continued

• Improved Program Technology
• Increased capability of bank EAS systems to
  provide flexibility in reporting and account
  management, including the ability to
• Generate ad hoc reports
• Change category block templates (e.g., MCC
  blocking)
• Dispute transactions electronically
• Enable A/OPCs to turn cards on and off
• Data mining tools provided by associations such
  as MasterCards Expert Monitoring System (EMS)
  and VISAs Intellilink offer additional insight
  into card program data and trends
• Transaction monitoring to detect misuse, fraud,
  waste, and abuse (e.g., email alert service)

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GSA SmartPay 2 Purchase Card
Purchase
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Purchase Charge Card Overview

• The purchase card program provides cards to
  federal employees to make official government
  purchases for supplies, goods, and services under
  the micropurchase threshold of 3,000
• The purchase charge card is both a procurement
  and payment mechanism for micropurchases
• For purchases above the micropurchase threshold,
  the purchase card may be used as an ordering and
  payment mechanism, not a contracting mechanism
• The following items may not be purchased with the
  purchase card, as per the GSA SmartPay 2 Master
  Contracts
• Long-term rental or leasing of land or buildings
• Travel or travel-related expenses
• Cash advances

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Purchase Charge Card Overview (continued)

• All purchase card accounts are Centrally Billed
  Accounts (CBA), and the liability for
  transactions made by authorized cardholders is
  borne by the government
• Use of the card by a person other than the
  cardholder, who does not have actual, implied, or
  apparent authority for such use, is not the
  liability of the government
• If the card is used by an authorized cardholder
  to make an unauthorized purchase, the government
  is liable for payment and the agency/organization
  is responsible for taking appropriate action
  against the cardholder

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Purchase Charge Card Program Performance FY08

• In FY 2008 purchase charge cards
• Generated over 19.8 billion in spend up from
  18.7 in FY07
• Processed 25.4 million transactions
• Were utilized by 276,000 cardholders
• Annual spend volume has almost doubled since FY98
  (approximately 10 billion to 19.8 billion in
  FY08)
• The government saves on processing costs and
  generates revenue through volume 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/organization to correct improper or
  erroneous payments on an invoice

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Convenience Checks

• Convenience Checks provide increased flexibility
  to acquire supplies and services, when the
  purchase card is not accepted
• These transactions are similar to purchase card
  transactions in that they are listed as line
  items in the monthly statement and invoice
• A/OPCs are responsible for the implementation of
  the appropriate internal controls and oversight
  of convenience check activity
• There is no authorization process for convenience
  checks agencies/organizations may have a dollar
  limit printed on the check, but there is no
  automated process to pre-approve the amount of
  the purchase

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Relevant Statutes and Legislation

• American Recovery and Reinvestment Act of 2009
• Enacted in February 2009 the bill includes a
  section on the Tax Increase Prevention and
  Reconciliation Act of 2005 (TIPRA). The bill
  delays the withholding of tax on government
  contractors until December 31, 2011. This is a
  one-year delay from the original date.
• P.L. 109-222 Tax Increase Prevention and
  Reconciliation Act of 2005 (TIPRA)
• Section 511 mandates a three percent tax
  withholding on all payments made to government
  contractors.
• Given commercial charge card payment model,
  concerned withholding cannot be accomplished in a
  sensible manner.
• GSA/OCCM is participating in OMB/OFFM Section 511
  working group.
• FAR Case 2006-026 Government-wide Commercial
  Purchase Card Restriction for Treasury Offset
  Program Debts
• The Office of Charge Card Management provided
  comments to the FAR Secretariat comment period
  closed February 29, 2008.
• Proposed rule would prohibit use of purchase card
  as a payment tool under contracts held by vendors
  with a Federal debt until such time as the debt
  is resolved. In the meantime, contract payments
  would be processed using a method subject to
  levy.
• S. 789 Credit Card Abuse Prevention Act of 2007
• OCCM has provided multiple sets of comments to
  OMB and Hill staff.
• Latest draft of legislation is an improvement.

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Public Laws and Regulations for Purchase Cards

• Office of Management and Budget (OMB) Circular
  A-123, Appendix B
• Establishes standard minimum requirements and
  best practices for improving the management of
  government charge card programs
• For more information, visit http//www.whitehouse
  .gov/omb/circulars/a123/a123_appendix_b.pdf
• Federal Acquisition Regulations (FAR)
  http//www.acquisition.gov/far/
• Agency/organization-specific policies and
  established procedures

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Responsibilities of the A/OPC

• Agency/Organization Program Coordinators (A/OPCs)
  are primarily responsible for overseeing the
  agencys/organizations purchase charge card
  program in support of its mission and operations
• A/OPCs work with the Office of Charge Card
  Management (OCCM), GSA SmartPay banks,
  cardholders, and agency/organization management
• A/OPC responsibilities are outlined in the GSA
  SmartPay Master Contract and will vary among
  agencies/organizations
• Level 1 A/OPCs are the highest ranking A/OPC
  within the agency/organization and the primary
  agency/organization point of contact with OCCM

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Responsibilities of the A/OPC (continued)

• A/OPC responsibilities may include tasks such as
  
• Promoting appropriate use of purchase charge card
  by cardholders
• Ensuring cardholders receive appropriate training
• Monitoring account activity and managing
  delinquencies
• Taking appropriate action regarding charge card
  fraud, misuse or abuse
• Working with the bank to ensure agency and
  cardholder needs are met
• Resolving any technical and operational problems
  between the bank and the cardholder as necessary
• Managing agency/organization post-transition
  challenges or issues with the new GSA SmartPay 2

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Responsibilities of Cardholders

• Use of the charge card appropriately, in
  accordance with agency/organization policy, laws,
  and governmental regulations
• Keep up to date with required training, including
  refresher training
• Look out for communications from A/OPCs and take
  appropriate action

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Responsibilities of Approving Officials (AO)

• Approving Officials are responsible for
• Ensuring that all purchases made by the
  cardholder are appropriate and charges are
  accurate
• Resolve all questionable purchases with the
  cardholder
• Certifying the monthly invoice resulting from the
  purchases of the cardholders within his/her
  account structure
• Verifying receipt of the purchase

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What is Purchase Card Misuse/Abuse and Fraud?

• The use of a purchase card for anything other
  than official federal government goods and
  services is considered to be misuse/abuse of the
  card, and depending on the facts, may involve
  fraud
• Common examples of misuse/abuse include
• Personal use or unauthorized purchases
• Use for or by someone other than the cardholder
• Purchases from an unauthorized merchant

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Non-Cardholder Fraud

• Non-cardholder fraud involves use of the card or
  cardholder data by an unauthorized person
• High-risk situations for non-cardholder fraud
  include
• The card was never received
• The card was lost
• The card was stolen
• Altered or counterfeit cards
• Account takeover

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Possible Indicators of Misuse/Abuse or Fraud

• Merchant Category Code (MCC) appears to be
  outside the cardholders general area of
  responsibility
• The account has been closed due to fraud and a
  new card has been reissued
• The cardholder frequently disputes transactions
• The cardholder has had multiple authorizations
  declined
• The cardholder makes transactions on non-work
  days
• The cardholder consistently hits his/her monthly
  limit
• The merchant address appears to be a home address

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Possible Indicators of Misuse/Abuse or Fraud
(continued)

• The cardholder has several transactions with the
  same merchant within a short period of time
  (e.g., 48 hours), and the transactions total more
  than 3,000 (micropurchase threshold)
• The cardholder is unable to provide proof of
  purchases such as receipts
• The cardholder has multiple transactions of even
  dollar limits (e.g., 20, 100)
• The cardholder repeatedly does business with the
  same merchants (minimal rotation of sources)

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Addressing Misuse/Abuse and Fraud

• A/OPCs have the responsibility to report any
  suspected or actual fraud to the appropriate
  authorities within the government
• If fraud is suspected of a cardholder, merchant,
  or other third party, A/OPCs may file a complaint
  with the agencys Inspector General for
  investigation
• Many agencies/organizations provide a fraud
  hotline number for reporting misuse/abuse and
  fraud

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Consequences of Misuse/Abuse and Fraud

• Reprimand
• Counseling
• Cancellation of card
• Notation in employee performance evaluation
• Suspension of employment
• Termination of employment
• Criminal prosecution

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General Charge Card Program Management Best
Practices

• Engage management at the highest levels
• Train A/OPCs and cardholders
• Review credit limits and lower as appropriate
• Use the banks Electronic Access System (EAS),
  data mining tools, and/or agency/organization
  technology to run reports for reviewing
  questionable transactions and monitor charge card
  spending

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General Charge Card Program Management Best
Practices (continued)

• Provide the GSA SmartPay card-sized booklet,
  Helpful Hints for Purchase Card Use, with each
  cardholder application
• Publish frequently asked questions (FAQs) related
  to the purchase card on your agencys/organization
  s website
• Create a monthly newsletter to reinforce
  agency/organization charge card policies and
  procedures
• Eliminate manually performing data analysis by
  developing ad hoc reports that can be generated
  as needed
• Perform an annual review of all issued cards to
  determine if each cardholder meets the criteria
  for continued participation in the federal
  government purchase charge card program

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Best Practices for Convenience Checks

• The number of convenience check accounts and the
  number of checks on hand should be limited to
  reduce risk
• Checks should be secured at all times
• Before a check is issued, every reasonable effort
  should be made to use the purchase card
• Cardholders should record the date, check number,
  payee and amount of each check in their files

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Best Practices for Preventing Misuse/Abuse and
Fraud

• Set reasonable spend limits
• Restrict use through MCC Blocks
• Deactivate cards as appropriate
• Review cardholder activity through reports
  generated from bank Electronic Access Systems

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Set Reasonable Spend Limits

• Monthly credit limits should correspond to
  historical spend patterns and the requirements of
  the job
• Limits may be raised easily to accommodate
  special circumstances
• Higher credit limits increase risk of fraud and
  misuse/abuse

Restrict Use Through MCC Blocks

• Block certain merchant category codes (MCC) to
  prevent unauthorized use
• Remember MCC blocks are NOT foolproof! Work
  with merchants/contractors to correct inaccurate
  MCCs

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Deactivation

• Deactivate purchase charge cards when not in
  frequent use by cardholders
• A/OPCs may quickly deactivate/reactivate cards
  electronically or through the banks customer
  service
• If a card is deactivated, authorizations will be
  declined at the point of sale
• Notify cardholder of deactivation, and
  communicate procedures to re-activate (e.g., who
  to call, when to call)
• Be wary of automatic billing (e.g. magazine
  subscriptions) and forced transactions (e.g.
  vendor manually charges card)
• Close purchase charge card accounts for
  employees/cardholders who leave the agency

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Cardholder Activity Review

• Segregate questionable transactions
• Look for patterns of suspicious behavior
• Decline transactions could indicate misuse
• Review questionable transactions through
  Exception Reports

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Training Best Practices

• Provide a comprehensive face-to-face cardholder
  training as orientation for new cardholders
• Address standards of conduct/ethics and clearly
  state consequences for misuse
• Discuss agency/organization policy
• Ensure cardholders and A/OPCs fulfill the
  required refresher training requirements at a
  minimum every three years, or more frequently as
  per agency/organization policy
• Ensure that training is easily accessible

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Training Resources

• Purchase-specific GSA SmartPay online training
• Cardholders Charting the Course
  (http//fss.gsa.gov/webtraining/trainingdocs/smart
  paytraining/index.cfm)
• A/OPCs (http//apps.fss.gsa.gov/webtraining/train
  ingdocs/aopctraining/index.cfm)
• 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/cml
  s)
• Blueprint for Success A Guide for Purchase Card
  Oversight
• Mini card-sized brochure Helpful Hints for
  Purchase Card Use

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Questions?

• Elizabeth Skolnik
• Elizabeth.skolnik_at_gsa.gov
• [phone]
• Camesha Everett
• camesha.everett_at_gsa.gov
• [phone]
• 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