HomeMy WebLinkAbout06.a. Receive overview of Procurement Card (P-Card) procedures and reconciling items Page 1 of 5
Item 6.a.
CENTRAL SAN
July 26, 2022
TO: FINANCE COMMITTEE
FROM: KEVIN MIZUNO, FINANCE MANAGER
REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE OVERVIEW OF PROCUREMENT CARD (P-CARD)
PROCEDURES AND RECONCILING ITEMS
At the February 22, 2022 Finance Committee meeting, Committee members asked staff to provide an
overview of the P-Card expense report auditing, reporting, and payment process. Committee members
also asked for an update on how reconciling issues are tracked and resolved as well as a synopsis of
current reconciling items to-date. The purpose of this Committee memo is to provide additional
information to respond to those inquiries.
Process Overview
To facilitate a more efficient, cost-effective method of obtaining and paying for large volume, relatively low-
value supplies and materials used by Central San, a P-Card program under the state-wide Cal-card
program umbrella was implemented. As stated in the P-Card User Manual maintained by the Purchasing
& Materials Division, the program enables Central San to streamline the traditionally labor-intensive
procurement and accounting processes for these small dollar purchases. Cal-card is the registered name
of the State of California's Purchase Card Program, and is a VISA purchase card program offered to
participating state and local government agencies. Currently, and for many years, the bank financing the
Cal-card program has been US Bank.
Central San's Purchasing & Materials Division is responsible for administering the P-Card program, which
includes: establishing and periodically amending Central San's P-Card User Manual, issuing cards to
cardholders, setting and amending credit limits, and enforcing the program's rules and initiating disciplinary
action when necessary. While the Finance Division does not hold primary responsibility for the program, it
does have an important administrative role. The Finance Division is responsible for collecting, reviewing,
and processing P-Card expense reports; ensuring P-Card expense reports are approved by cardholder's
supervisors, recording P-Card expenses in a timely and accurate manner; preparing and presenting P-
Card reports for Finance Committee review; notifying the Purchasing & Materials Division when there are
policy violations, and overseeing payments to the bank.
Generally, P-Card statements are released by the US Bank on or around the 22nd of each month. Shortly
thereafter, the Finance Division uploads transactions into Oracle via an interface with US Bank's online
portal. Thereafter, an email notification is released to all cardholders communicating that P-Card charges
associated with that specific month are available for cardholders to complete and submit monthly P-Card
expense reports. This email notification includes important reminders on guidelines for cardholders such
July 26, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 104 of 117
Page 2 of 5
as the expense report due date, submission instructions, expense coding pointers, etc. Depending on
divisional and individual needs, cardholders have the option in Oracle to delegate the expense report
compilation and submission process to their division's assigned administrative support team member.
Pursuant to the P-Card program, each cardholder is responsible for submitting their P-Card expense
report in Oracle by the 10th day of the month following the statement closing date. Furthermore,
cardholders are responsible for self-reporting any accidental personal charges as well as contacting US
Bank to report and resolve any fraudulent disputed charges.
Improvements and Challenges in New System
Compared to the legacy system (Sungard/HTE), the new Oracle method for collecting, recording, and
reporting P-Card expenditures is significantly improved, with the benefits outweighing any new difficulties.
One of the primary benefits, is the automated organizational chart driven approval workflows. Finance staff
now no longer need to manually audit wet signatures to ensure each P-Card expense report is
accompanied by an appropriate supervisor approval prior to posting expenses. The system has been
configured to automatically route cardholder-submitted P-Card expense reports to their supervisor for
approval, and will not allow Finance to audit and post expenses until appropriate approval has been
achieved. The supervisor approving the report sees a listing of the charges with supporting documentation
(invoices, etc.)for each expense report line item in an email, that they approve or reject. Additionally,
transparency is significantly improved in the new system, which tracks various processing statuses P-Card
expense reports. Helpful expense report statuses tracked in the system include: awaiting receipts,
pending individual (cardholder) approval, pending manager approval, ready for payment, and paid. This
contrasts to the legacy system, where processing was entirely manual, with no way to automatically monitor
the status of P-Card expense reports.
Despite these benefits, all of these improved controls and efficiencies come with a higher degree of
complexity, which lends itself to other complications. For instance, in addition to being used to track P-
Card charges, which comprise the vast majority of transactions, the Oracle Expenses module must also
used to track other employee-driven expenses such as travel reimbursements, miscellaneous out-of-
pocket expenses, tuition and professional expense reimbursements, and employee computer loans. The
system currently offers no mechanism to easily distinguish between these expense report types, therefore
technical skill and judgment by Finance staff must be applied during the P-Card review process. The
system also offers no method to associate P-Card charges to a specific statement period, necessitating
manual efforts by Finance staff each month to assess the completeness of P-Card submissions for each
monthly billing cycle. Any differences are reported in a P-Card reconciliation report that is part of the
expense and P-Card reported to the Finance Committee and Board monthly. Lastly, given the
sophisticated method by which P-Card expenses are posted under the full-accrual method, there are
inevitable timing differences between the recording of an expense and the underlying payment to US
Bank. For example, while the bank must be paid on time each month (in order to avoid late charges, and to
capture discounts provided for timeline payment), Finance cannot audit and post P-Card expenses to the
general ledger until the underlying expense report is submitted by the cardholder and reviewed/approved
by a supervisor. As mentioned above, these differences are summarized in a monthly reconciliation report
which Finance produces to accompany the monthly check run report and can include the following:
unsubmitted expense reports, unapproved expense reports, holds for contested and/or accidental
personal charges.
Since January 2022, Finance staff has been having recurring meetings with Central San's ongoing Oracle
support consultant (ClearCare, provided by Emtec)to better understand these issues and try to design
and implement solutions. Modifications were recently made to the custom Finance Committee P-Card
reports which eliminated reconciling items previously caused by timing issues between the "post date" and
transaction date" of P-Card charges. Other solutions being worked on with the consultant include the
following:
July 26, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 105 of 117
Page 3 of 5
• Custom reports to more easily distinguish P-Card expense reports from other transactions tracked in
the Oracle Expenses module,
• Implementing a new expense report status to track personal charges and their reimbursement status,
generating targeted emails so only cardholders with charges receive email notifications each month
(currently all cardholders must receive an email, regardless of whether or not there were charges),
• Creating a view-only role (for Program Manager and other select individuals),
• Development of a customized user guide for Central San's Finance staff employing day-to-day
system administration best practices.
How Reconciling Items are Monitored and Resolved by Finance
Generally speaking, monthly reconciling items that Finance must track and resolve can be broken down
into three categories: (1) Unsubmitted/Unapproved Expense Reports, (2) Expense Reports with
Accidental Personal Charges, and (3) Expense Reports with Contested Fraudulent Charges. Each of the
three aforementioned reconciling issues requires a slightly different approach to ensure the issue is
eventually resolved and recorded appropriately into Oracle.
• Unsubmitted/Unapproved Expense Reports
While the process to categorize unsubmitted/unapproved reports for the monthly Finance
Committee reconciliation still requires timely manual analysis (absent a custom report which is under
development), once they are categorized and appear on the monthly reconciliation the tracking is
fairly simple. On a monthly basis, Finance staff re-runs P-Card detail expenditure reports for past
statement periods. Any previously delinquent P-Card expense reports that have since been
submitted, approved and audited/posted will appear on the P-Card detail expense report and are no
longer outstanding reconciling items. Any unresolved items from past P-Card statement months are
communicated to the cardholder, assigned divisional administrative support staff, and division
manager by Finance for further investigation and action.
• Accidental Personal Charges
Unlike unsubmitted/unapproved expense reports, which are eventually resolved as reconciling items,
personal charges, even when resolved, remain permanent reconciling items. They are considered
permanent reconciling items because while they must be paid to US Bank they are not valid business
expenses of Central San, and therefore do not appear on the P-Card expenditures reports. Once
identified by cardholders and/or their supervisors, or through other control-checks (including the
Purchasing card administrator, or Accounting staff)the personal charges are monitored by Finance
division staff by placing a hold on the personal charge in the Payables module. Once the cardholder
reimburses Central San, the hold is lifted and no longer tracked as an unresolved/outstanding issue.
• Contested Fraudulent Charges
As described previously, periodically through no fault of their own, cardholders may identify
fraudulent charges appearing on their P-Card statements. Unlike personal charges, these are not
paid to the bank and must be reported to and contested with the bank directly by the cardholder
pursuant to the P-Card User Manual. Similar to personal charges, contested fraudulent charges
communicated by cardholders to Finance are placed on "hold" in the Payables module. Once a
credit is provided by the bank(generally on the following month's statement), the "hold" is released
and the transaction no longer appears as a reconciling item as the amount paid to the bank will agree
to the reported expenses spanning over two or more statement cycles as applicable.
July 26, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 106 of 117
Page 4 of 5
Current Status of Reconciling Items
Despite prior concerns of reconciling items, which were largely caused by cardholders and Finance staff
learning the new system and initial difficulties with the custom Oracle P-Card reports, Management is now
confident these issues are being monitored and addressed in a reasonably timely manner and represent a
small fraction of the total volume of P-Card transactions being processed. To demonstrate the relatively
small number of outstanding reconciling items in the system, and to facilitate a clean year-end close
process for the upcoming Fiscal Year(FY) 2021-22 audit, staff conducted an analysis of P-Card charges
from the July 2021 statement through the May 2022 statement (the June 2022 statement was not yet
finalized as of the date of this memo). Over this span of eleven months in FY 2021-22, out of$1,896,287
in P-Card statement charges paid, $1,893,676 (99.9%) has been submitted, approved and charged as an
expense in the general ledger. Of the $2,611 in residual reconciling issues (0.14% of total charges), over
half of this (57.8%) pertained to three P-Card expense reports that have yet to be submitted and
approved. The remaining 45.2% pertained to eleven personal charges, ten of which have already been
repaid to the District, leaving one outstanding charge of$197.39. The only outstanding personal charges
as of the date of this report pertain to a confidential personnel matter that has already been investigated
and dealt with by management. Refer to Attachment 1 for additional details of this analysis. I n addition to
the one outstanding personal charge noted above from FY 2021-22, that item was part of an investigation
that also found two personal charges (totaling $1,682.19)from FY 2020-21 which are also pending
reimbursement.
ATTACHMENTS:
1. P-Card Reconciling Issues Analysis - FY 2021-22 (as of July 1, 2022)
July 26, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 107 of 117
Analysis of Reconciling P-card Items
For:July 26, 2022 Finance Committee
Timeframe: P-card Statements Spanning July 2021 through May 2022
Date Completed:July 1, 2022
US Bank Statement P-card Expenditures Total US Bank
Date Processed Statement Difference Comments
7/22/2021 $ 145,646.42 $ 145,785.82 $ 139.40 2 personal charges (both repaid)
8/22/2021 192,495.43 192,532.41 36.98 2 personal charges (both repaid)
2 personal charges (both repaid) and 1
9/22/2021 137,594.36 137,684.87 90.51 missing report
1 personal charge (repaid) and 1 missing
10/22/2021 166,294.30 166,399.08 104.78 report
11/22/2021 135,774.83 135,972.22 197.39 1 personal charge (unpaid)
12/22/2021 124,908.02 124,908.02 - 1 missing expense report
1/24/2022 187,229.80 187,560.28 330.48 1 personal charge (repaid)
2/22/2022 174,093.04 174,093.04 -
3/22/2022 222,339.79 222,464.16 124.37 1 personal charge (repaid)
4/22/2022 286,044.21 286,044.21 -
1 missing expense report and 1 personal
5/22/2022 121,255.41 122,842.95 1,587.54 charge (repaid)
6/22/2022
Total $ 1,893,675.61 $ 1,896,287.06 $ 2,611.45
*Information not yet available as of this report date as p-card expense reports are not due by cardholders until July 10, 2022.
July 26, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 108 of 117