1. Federal Acquisition Service U.S. General Services Administration Changes Affecting the GSA SmartPay® 2 Purchase Card Program David J. Shea, CPCM, PMP Director, Office of Charge Card Management (OCCM) Federal Acquisition Service June 2009

2. Federal Acquisition Service 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

3. Federal Acquisition Service 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

4. Federal Acquisition Service 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

5. Federal Acquisition Service 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

6. Federal Acquisition Service 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

7. Federal Acquisition Service 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

8. Federal Acquisition Service Program Overview: Purchase FY08 - $19.8 billion in spend; 25.5 million transactions; 276 thousand cardholders 8

9. Federal Acquisition Service 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

10. Federal Acquisition Service 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

11. Federal Acquisition Service 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

12. Federal Acquisition Service 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

13. Federal Acquisition Service 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

14. Federal Acquisition Service Legislative Update American Recovery and Investment Act of 2009 SectionReporting RequirementPeriod 2.2Major communicationsImmediate 2.3Formula block grant allocation reportsImmediate 2.4Initial weekly reports to help populate early phases of Recovery.gov 3/3/09 – 5/12/09 2.5Monthly financial reportsStarting 5/8/09 2.6Award-level reporting consistent with what is currently required for USAspending.gov Starting 5/5/09 2.7Agency-wide Recovery Act plansNLT 5/1/09 2.8Program-specific Recovery Act plansNLT 5/1/09 2.9Recipient reportingStarting 7/10/09 14

15. Federal Acquisition Service 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

16. Federal Acquisition Service 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

17. Federal Acquisition Service 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

18. Federal Acquisition Service 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

19. Federal Acquisition Service 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

20. Federal Acquisition Service 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

21. Federal Acquisition Service 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

22. Federal Acquisition Service 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

23. Federal Acquisition Service Questions? David J. Shea, CPCM, PMP david.shea@gsa.gov (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