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Article updated: 8/2/2011 4:49 AM

Keeping tabs on taxpayer-backed 'p-cards'

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By Emily Miller

We all know about credit cards and debit cards. Now, meet the "p-card".

In recent years, use of the p-card -- procurement cards issued directly by government to employees to make work-related purchases -- has exploded. Nationwide, p-card spending jumped to $17.7 billion in 2006, compared with only $3 billion in 1996, according to the latest data.

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Basically, a p-card acts as a taxpayer-financed debit card. The p-card draws funds for purchases directly from designated bank accounts, which are backed by the tax revenues of a school district, suburb or other public body. Only permissible items can be bought with a p-card.

Although the federal bureaucracy is leading the way in p-card distribution, many local governments in Illinois -- including Grayslake Elementary District 46, which the Daily Herald and Better Government Association reported on Monday -- are now issuing them to employees.

This growing popularity is forcing many government providers to rethink how p-cards are being managed.

According to the General Accountability Office, the independent federal watchdog agency, p-card waste, fraud and abuse often come as a result of inadequate program operating procedures and ineffective program oversight.

Common examples include making personal purchases, using the p-card for unauthorized buys such as alcohol or nonessential goods and services, "gold-plated" expenses, subsequent theft of purchased goods, and use of the p-card for goods or services that should be subject to a bidding process.

Without oversight, the waste of taxpayer dollars is virtually unavoidable. To avoid problems, here are some suggested best practices for governing bodies:

• Develop a comprehensive written p-card policy. This policy will outline what is and is not allowed and should also indicate who is allowed to hold a p-card. That list of employees should be limited to those who need to make purchases in the course of their daily job.

• Detail disciplinary action. Each government entity should have a written p-card oversight plan that outlines both oversight and disciplinary actions necessary to rectify any misuse.

• Limit p-card use. Permissible use of the p-card should be limited only to necessary government expenses under a certain dollar amount, though each public body should develop its own specific lists of permissible expenses based on its public duty.

• Improve communication. Cardholders should be made aware of the policy through an interactive training program that goes beyond just reading and signing the p-card policy.

• Finally, a mandatory and documented review by a supervisor or approving official, someone other than the cardholder, should occur for all purchases. Using a checklist, the supervisor or reviewing official should:

--Review an itemized invoice showing everything that was purchased and what was paid for each item.

--Ensure the purchase serves a legitimate government need specifically permitted in the p-card policy, not a personal or impermissible one.

--Ensure a transaction has not been split into segments to avoid maximum purchase amounts, or to get around the competitive bidding process.

--Monitor the items purchased to ensure no excessive or "gold plated" expenses were incurred.

--Verify that the items ordered were actually received by the public body.

--Promptly report and attempt to reconcile all financial discrepancies within a set timetable, and help to enforce disciplinary action where appropriate.

Without strong financial internal controls dictating both appropriate use and required oversight of the program, there is nothing to deter erroneous use of p-cards, or to promptly detect and eliminate misuse and abuse.

• Emily Miller is the Better Government Association's Policy and Government Affairs Coordinator.

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