Purchase Cards

1. Purchase Cards Government Services Group Presented by Miro Dabek, Manager Procure to Pay Reform

2. Topics Agenda • Welcome • Background – Payment of Accounts Review • Current State • Market Research • Organisational Objectives • High Level Business Requirements • Policy Framework • Future State • Project Timeframes • Questions 2

3. Payment of Accounts Review -Recommendation 20 3

4. Current State – Purchase Card Policies, Procedures and Management Systems In the absence of a mandated policy structure, Agencies have, over time: • Interpreted TI12 differently and developed their own policies and procedures • Applied varying policy positions in their level of detail and definition of transaction classifications both recommended and/or prohibited for purchase using a purchase card - linked to factors such as each Agencies’ “risk appetite”, public/media perception and control issues raised during Agency audit processes • Implemented a range of different PCMSs with varying levels of functionality and sophistication, ranging from high end PCMSs down to manual based processes for purchase card management and acquittal 4

5. Current State – Purchase Card Distribution • Analysis of in scope Agencies’ current purchase card programs has identified significant variance exists in the ratio of cards issued per FTE for each Agency • The relative size (total number of FTE), physical location/disbursement and operational requirements for each in scope Agency needs to be considered when comparing this ratio, however, the bandwidth for purchase card distribution is: • As high as 1 card per 2 FTE • As low as 1 card per 36 FTE • This ratio is generally higher, i.e. a higher percentage of FTEs issued with purchase cards, for Agencies who have deployed an automated purchase card acquittal process (for example, Expense Manager or e-Crow) 5

6. Current State – Service Design • The current purchase card “service” provided by Shared Services SA (including Accounts Payable and Financial Services), and associated Service Design documentation, varies significantly across Agencies, primarily due to the: • various purchase card policies, procedures and processes • PCMS in use • Whilst the majority of purchase card administration tasks are currently undertaken by Shared Services SA, some Agencies have retained this role • The current purchase card team structure consists of 7.6 FTE, managing a total of 5,141 purchase cards 6

7. Market Research • Market research and analysis has shown that there are significant potential productivity gains that can be achieved through the wider use of credit cards, including: • Benefits to small business through timelier invoice payment • Significant cost reductions for government, due to the cost associated with processing a purchase card transaction being significantly less than the cost of processing a manual invoice through the normal Accounts Payable process • Government and corporate bodies who have successfully implemented policies to mandate or increase the use of purchase cards for low value transactions, have done so in parallel to the deployment of an appropriate PCMS • Without a PCMS, there are considered to be serious risks and exposures that would be created for the government in terms of inappropriate purchase card use and a loss of procurement expenditure visibility 7

8. Organisational Objectives • Increase Agency usage of purchase cards across government (as per the “Payment of Accounts Review” recommendation) • Increase visibility and controls of purchase card-related transactions • Decrease the number of low-value manual invoice transactions being processed via Accounts Payable and realise savings through the associated reduction in FTE effort • Contribute to the standardisation of purchase card policies and procedures and consolidation of the systems environment across government • Enable standardisation of purchase card services to client Agencies • Assist in improving vendor payment performance timeframes 8

9. High Level Business Requirements • The project team met with representatives from each of the in scope Agencies*, Financial Services and Accounts Payable Service Delivery areas within Shared Services SA, and the Government Accounting Reporting and Procurement Business Unit of DTF • The sessions allowed participants to discuss strengths and weaknesses of existing purchase card programs as well as identify a set of high level business requirements for a PCMS moving forward • The core business requirements have been grouped into four categories, as shown in the following slides 9

10. High Level Business Requirements - Admin 10

11. High Level Business Requirements - Data 11

12. High Level Business Requirements – Reporting, Security and Support 12

13. Policy Framework • Analysis was undertaken of existing low value transactions for Health and non-Health Agencies, to identify categories of appropriate goods and services for transfer to purchase card • The criteria used to identify categories of appropriate goods and services, was derived from a number of sources, including: • Existing Agency purchase card policy and procedural documentation • Interstate governments’ purchase card policies and procedural documentation 13

14. Policy Framework It is important to note there are a range of transactions types where the use of purchase cards may not be appropriate, such as: • Services where the costs are not known at the point of purchase (e.g. time and materials-based arrangements such as temporary staff). In theory, a purchase card could be used to pay for these transactions on the receipt of the invoice, however, this is unlikely to be very efficient • Goods where there is the potential for items to be placed on back order or be returned (i.e. on the basis that payment has already been made and it would be necessary to pursue the recovery of funds) • Goods procured and managed via Agency inventory systems The analysis conducted above resulted in the identification of approximately 250,000 manual invoices for transfer to purchase card payment 14

15. Future State Mandated Policy Framework with a centrally-administered PCMS • Implement a Policy Framework for all in scope Agencies to use as a basis for their internal policies, in conjunction with TI12 • Implement an across-government PCMS • Create a new purchase card team within Shared Services SA, with centralised administration of the purchase card service and system support for all in scope Agencies 15

16. Future State Mandated Policy Framework with a centrally-administered PCMS, is the objective as it: • Addresses, in full, all the organisational objectives • Has the highest functional fit with the identified business requirements • Provides the highest levels of ongoing net benefits • Provides a consistent and standard across-government PCMS and policy, and provides the best return on investment after five years 16

17. Project time frames Key MilestonesTarget Dates Project Approval July 2013 Finalise Project Team September 2013 Commence Acquisition phase Sept/Oct 2013 Commence Implementation phase January 2014 Complete Implementation phaseJune 2015 17

18. Purchase Cards Questions? 18