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Establishing and Managing an Effective Purchasing Card Program

CPAs & Advisors

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A purchasing card (p-card) program can be a flexible and timesaving tool in the school district’s purchasing process. This specialized credit card allows authorized school district employees to purchase certain goods and services through any merchant that accepts such payments, including those purchases through the internet. The program can greatly streamline the purchasing process and possibly provide valuable rebates. It can reduce the administrative burden and costs related to check writing, provide faster payment to vendors, and reduce the paperwork typically associated with the traditional procurement process. To run an effective card purchasing program, the school district must establish appropriate policies and procedures from the onset.

Policy and Guidelines

The school district should create a board-approved policy outlining the basic governance of the p-card program. At a minimum, the policy should contain the following elements:

  • Issuance procedures – Include who is responsible for the issuance and monitoring of the credit card(s) and the groups of employees who are eligible to receive a card. Also, document that an employee is to return the card upon the termination of employment. A cardholder agreement should be obtained upon issuance of a p-card to a district employee. The agreement should include the elements of the policy and guidelines noted below and establish that the card is to be used for school business expenditures only. This agreement must be signed by the employee and maintained throughout the program.
  • Documentation – A detailed receipt of goods or services purchased, which includes an itemized list of costs, the date of purchase, and the purpose of the purchase must be provided for each transaction.
  • Payment – Include who will be an appropriate approver of payment and how that payment will be made.
  • Misuse and/or Unauthorized Use – Violations of the policy will include disciplinary action.

In addition to the above policy, the school district should establish more specific administrative guidelines related to the program. These guidelines should include the following:

  • Transaction limits – Establish both the formal credit card limits, as well as internal purchase thresholds. These limits should be appropriate to their position and likely spending. These limits should be reviewed annually.
  • Eligible goods and services – This will vary based on the needs and comfort of your school district. Typical allowable transactions include travel (conference registrations, hotels, transportation, meal expenses) and small supply purchases. Employees should be conscious of the school district’s tax-exempt status and provide the proper forms to the merchant to ensure no such tax is paid.
  • Lack of documentation – Consequences should be established for lack of documentation. Typically, reimbursement from the employee must be made, or a payroll reduction will be enforced.
  • Reconciliation – A standard reconciliation form should be established by the school district to ensure consistency among cardholders. Employees should be responsible for reconciling their account statements and providing appropriate documentation. Timelines should be established to ensure the timely payment of the balance.
    The school district must maintain appropriate controls, following their purchasing policy, to ensure the success of the p-card program. They should provide ongoing training for both cardholders and supervisor and the above guidelines should be modified as the needs of the program change.


Internal audits should be performed regularly, and employees must be held accountable for failure to follow the established guidelines. Audits should be strategic and include a closer look at transactions near limits (look for split transactions), with unusual vendors, or those that contain key words that could contain a prohibited purchase. Other things to watch for include, is the employee providing reconciliations on a timely basis? Were transactions properly approved? Are any purchases for personal gain?

Reporting Requirements

As part of the annual budget/transparency reporting, MCL 388.1618 of the State School Aid Act requires all public schools to provide the type, credit limit, authorized individual(s), and authorized dollar limit(s) of all credit cards maintained by the school district. This report should be updated within 30 days of any changes made to a district credit card. If you have no credit cards, you must provide a line stating such.
A purchasing card program provides numerous benefits. With the proper internal controls, the program can provide valuable time and cost savings for a school district.

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