Lower Costs and Reduce Bureaucracy in Small Purchases Through the Use of Purchase Cards Background In most federal agencies, employees have two ways to obtain needed goods and services. They can either submit a procurement request to a contracting officer or go to a central stockroom. Managers are frustrated because the cost of paperwork to obtain the items often exceeds the cost of the item, the process is very timeconsuming, and they must go through procurement personnel to buy even simple, smalldollar items. A more efficient method is the use of a commercial purchase card service available through a General Services Administration (GSA) contract.1 The use of the purchase card is particularly effective for acquiring small amounts of supplies or services. For example, a manager or a procurement official can quickly acquire a single, fully equipped personal computer, software, and related supplies using the purchase card. Currently, federal agencies may choose to participate in the purchase card program. Under the program, authorized federal employees (including line managers) may use a commercial purchase card to pay for goods and services bought on behalf of the federal government. The card, called IMPAC (International Merchant Purchase Authorization Card), is recognized internationally and is accepted wherever the Visa card is accepted. Within the government, GSA is now the only supply source that accepts IMPAC. The card is used for purchases or for payments to settle outstanding contracts. The latter use is a less expensive alternative to traditional invoicing procedures. A very effective system exists to ensure accountability in the use of the card. The card is restricted to purchases and payments of less than $25,000, which by law are treated as small purchases. IMPAC may not be used to obtain cash advances. Average total purchases under the IMPAC program are $1.7 million per day. However, IMPAC can handle significantly larger volumes. The average individual purchase is $271. A fraction of a percent of all invoice amounts is currently charged to the government under the IMPAC contract. However, GSA is looking to reduce these costs by recompeting the contract with a provision for the successful contractor to provide the government with a rebate based on the total amount of purchases made on the card. IMPAC payments are processed using the same procedures established for holders of standard Visa cards. The employee signs the sales draft and receives a copy. Merchants receive prompt payment through Visa's international settlement system. Various daily, monthly, and quarterly reports are available to the government so that use of the cards can be monitored and controlled. Card holders receive monthly statements to verify billings. After the billings on a particular statement are verified by the cardholding employee, the statement is independently reviewed for approval before being sent to the agency's finance office for payment. Many agencies do not permit the use of IMPAC or heavily restrict its use, thereby making it impossible for most managers to use the card. Agencies that do use IMPAC determine the employees who get the cards and set limits on the types and amounts of small purchases that can be made by each employee. In some cases, agencies place spending limits directly on their IMPAC accounts. Need for Change The reasons to expand the use of IMPAC are significant. First, nearly all managers complain about the inability to get basic office tools on a timely basis. For example, if a manager has a need for commercially available personal computers and software for a special project or for a new employee, the manager should be able to get it quickly to satisfy the need. The use of the purchase card would be especially helpful here. Second, using IMPAC will result in major cost savings to the government and the taxpayers. Its use should virtually eliminate the paperwork normally required in preparing a purchase order and processing a government invoice. This is significant when applied to the 11 million purchases the government makes annually under the simplified acquisition procedures. If only 50 percent of all small purchase transactions made annually are done using the purchase card, a conservative estimate is that $180 million can be saved annually in federal administrative costs. Moreover, IMPAC costs less than traditional methods of making small purchases. The General Accounting Office estimates that using the purchase card instead of a purchase order saves between $29 and $227 per transaction.2 These savings are significant and achievable. Third, use of IMPAC enables managers to better manage cash, control funds, and reduce the cost of keeping imprest (petty cash) funds on hand. The reports of IMPAC activity permit careful tracking of the amount, type, and timing of small purchases. All transactions under IMPAC are more readily verified through a consolidated review, approval, and payment process. This permits managers to carefully and efficiently verify the transaction, receipt, and dollar value of every small purchase while eliminating the paperwork burdens and controls that imprest funds require. Cross References to Other NPR Accompanying Reports Reengineering Through Information Technology, IT11: Improve Methods of Information Technology Acquisition. Improving Financial Management, FM08: Reduce Financial Regulations and Requirements. Endnotes 1. GSA Schedule Number IG 615, Governmentwide Commercial Credit Card Service, July 28, 1992. 2. U.S. General Accounting Office, Cash Management, Benefits, and Limitations of the Small Credit Card Program, AFMD9089BR (Washington, D.C.: U.S. General Accounting Office, September 1990), p. 28.
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