OMB_Circular_A-123_Appendix_B_2009.pdf

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D .C . 20503

T H E D I R E C T O R

January 15, 2009

CIRCULAR NO. A-123, Appendix B Revised

TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS

SUBJECT: Improving the Management of Government Charge Card Programs

Appendix B of OMB Circular A-123 prescribes policies and procedures to agencies regarding how to maintain internal controls that reduce the risk of fraud, waste, and error in government charge card programs. This revision responds to recommendations made by the Government Accountability Office (GAO) regarding the Federal purchase card program as well as agency comments and suggestions made by Agency/Organization Program Coordinators.

These revisions replace and rescind all previously issued OMB Circular A-123 Appendix B policy dated February 2006 and August 2005. Significant updates to Appendix B are as follows:

• Updated the micropurchase threshold to reflect the current $3,000 threshold (Section

5.3);

• Expanded descriptions for erroneous and improper purchases including practices for minimizing such purchases (Sections 4.6 through 4.8);

• 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 (Section 4.8);

• Incorporated guidance on disciplinary actions for fraud and other egregious abuse of a government charge card (Section 4.9);

• Updated performance metrics (Section 5.5);

• Added a chapter on internal controls for convenience checks (Chapter 12); and

• Added a chapter on controls related to property acquired with government charge cards

(Chapter 13).

This revision is effective as of the date of this memorandum. A revised version of the entire Appendix B to OMB Circular A-123 is available on the OMB web site. All questions or inquiries concerning Appendix B should be addressed to the Office of Federal Financial Management, Financial Analysis and Systems Branch, (202) 395-3993.

Jim Nussle Director

Appendix B OMB Circular A-123

(Revised January 2009)

APPENDIX B

Improving the Management of Government Charge Card Programs

Improving the Management of Government Charge Card Programs

Table of Contents

Topic Page

Chapter 1 – General Information Chapter 2 – Charge Card Management Plan Chapter 3 – Training Chapter 4 – Risk Management Chapter 5 – Performance Metrics and Data Requirements Chapter 6 – Credit Worthiness Chapter 7 – Refund Management Chapter 8 – Strategic Sourcing Chapter 9 – Requirements for Micro Purchases under Section 508 of the Rehabilitation Act.. 29 Chapter 10 – Environmental Requirements Chapter 11 – State and Local Tax Recovery Chapter 12 – Convenience Checks……………………………………………………………..35 Chapter 13 – Management of Property Acquired by a Purchase Card…………………………39

Attachment 1 – Glossary Attachment 2 – Acronyms Attachment 3 – Fleet, AIR, and SEA Cards: Frequently Asked Questions Attachment 4 – Sample Due Process Notice for Salary Offset Procedures Attachment 5 – Best Practices in Managing Government Charge Card Programs Attachment 6 – Internet Web Site References

OMB Circular A-123

Chapter 1 – General Information

Questions Page

1.1 What is the purpose of this Guidance?

1.2 What is the goal of this Guidance?

1.3 Under what authority is this Guidance being issued?

1.4 To which agencies does this Guidance apply?

1.5 What is a government charge card?

1.6 What are the different types of government charge cards?

1.7 How will the requirements in this Guidance be implemented?

1.1 What is the purpose of this Guidance?

The purpose of this Guidance is to:

• Consolidate and update current government-wide charge card program requirements and guidance issued by Office of Management and Budget (OMB), General Services Administration (GSA), Department of the Treasury (Treasury), and other Federal agencies, as well as provide a single source document to incorporate updates, new guidance, or amendments to existing guidance; and

• Establish standard minimum requirements and suggested best practices for government charge card programs that may be supplemented by individual agency policy and procedures.

1.2 What is the goal of this Guidance?

The goal of this Guidance is to maximize benefits to the Federal Government when using government charge cards to pay for goods and services in support of official Federal missions.

The benefits of this approach include, but are not limited to:

• Reducing administrative costs and time for purchasing and paying for goods and services;

• Ensuring the most effective controls are in place to mitigate the risk of fraud, misuse, and delinquency;

• Improving financial, administrative, as well as other benefits offered to the government by government charge card providers and other entities, including maximizing refunds where appropriate;

• Using government charge card data to monitor policy compliance and inform management decision-making to drive a more cost effective card program; and

• Assuring recovery of state and local taxes paid on fleet cards.

1.3 Under what authority is this Guidance being issued?

This Guidance is issued under the authority of 31 U.S.C. 1111; Reorganization Plan No. 2 of 1970; Executive Order 11541; the Chief Financial Officers Act of 1990 (P.L. 101-576); and the Office of Federal Procurement Policy Act (41 U.S.C. Chap. 7.)

1.4 To which agencies does this Guidance apply?

The provisions of this Guidance apply to all Executive Branch departments and agencies.

1.5 What is a government charge card?

A government charge card is an account established by a commercial financial institution (hereinafter, “charge card vendor”) on behalf of agencies or individual agency employees to which the cost of purchasing goods and services may be charged. Although actual plastic cards are associated with most of these accounts, this term may also be applied to certain accounts established by these same commercial companies that are billed directly to agencies, and therefore, are “cardless” accounts. For the purposes of this Guidance, the term “charge card” or “card” will mean “government charge card” as defined herein.

1.6 What are the different types of government charge cards?

There are several types of government charge cards, including: purchase, travel, fleet, AIR, SEA, and integrated cards. Travel charge cards are issued as either individually billed accounts with individual liability, or as centrally-billed accounts, wherein the government is liable for all purchases, including those that are the result of misuse or abuse; however, the vendor banks retain financial liability for fraudulent transactions. Specific definitions are contained in the Glossary, Attachment 1. The requirements provided throughout this Guidance apply to all charge card types, unless specifically noted as applicable to only a particular type of card.

1.7 How will the requirements in this Guidance be implemented?

The requirements in this Guidance pertain to the use of charge card programs by agencies and their employees and must be included in internal agency regulations, procedures, and training materials. The requirements in this Guidance further pertain to characteristics of the card programs used by the Federal Government and must be included in any contracts for charge card services.

Consistent with the general principles outlined in the body of Circular A-123 and Appendix A, agencies have an ongoing requirement to evaluate the effectiveness of the actions taken to comply with the requirements of this Guidance. For example, agencies must periodically evaluate the effectiveness of the controls put in place to mitigate the risks of payment delinquencies and charge card misuse (see Chapter 4).

Chapter 2 – Charge Card Management Plan

2.1 Are agencies required to develop and maintain a charge card management plan?

2.2 Why is maintaining a charge card management plan important?

2.3 What are the required elements of an agency’s charge card management plan?

2.1 Are agencies required to develop and maintain a charge card management plan?

Yes, each agency must develop and maintain written policies and procedures for the appropriate use of charge cards consistent with the requirements of this Guidance. The plan should be updated annually, or more frequently, if necessary to remain current. Agencies shall submit a copy of their plan to OMB, Office of Federal Financial Management, on an annual basis, not later than January 31 of each calendar year.

2.2 Why is maintaining a charge card management plan important?

Maintaining a charge card management plan is important because the establishment of written, formal policies and procedures are critical to assure that a system of internal controls is followed, and to minimize the potential for fraud, misuse, and delinquency.

2.3 What are the required elements of an agency’s charge card management plan?

The elements required in the charge card management plan are:

• Identification of key management officials and their responsibilities for each charge card program. These officials will include, but are not limited to, Agency/Organization Program Coordinator (A/OPC), Approving Officials or other equivalent officials, and other accountable/billing officials;

• Establishment of a process for formal appointment of cardholders and approving officials, where applicable;

• Implementation of a process to ensure the credit worthiness of new charge card applicants consistent with Chapter 6 of this Guidance;

• Description of agency training requirements;

• Management controls, policies, and practices for ensuring appropriate charge card and convenience check usage and oversight of payment delinquencies, fraud, misuse, or abuse;

• Establishment of appropriate authorization controls;

• Implementation of policies and practices to ensure strategic sourcing consistent with Chapter

8 of this Guidance;

Appendix B

• Explanation of how available reports and data are used for monitoring delinquency, misuse, performance metrics, spend analysis, and other relevant transactions and program management issues;

• Documentation and record retention requirements;

• Recovery of charge cards and other documentation when employees terminate employment, and if applicable, when an employee moves to a different organization; and

• Description of how the agency will ensure the ongoing effectiveness of the actions taken pursuant to this Guidance, including, but not limited to, evaluating the effectiveness of training (Chapter 3), risk management controls (Chapters 4 and 6), refund management controls (Chapter 7), strategic sourcing policies (Chapter 8), and tax recovery efforts (Chapter 11).

Chapter 3 – Training

3.1 Are agencies required to provide training on charge card management?

3.2 Why is training on charge card management important?

3.3 Who is required to take charge card management training?

3.4 What are the general training requirements for all charge card programs?

3.5 What are the specific training requirements for each type of charge card program?

3.5.1 Purchase Card Program Training

3.5.2 Travel Charge Card Program Training

3.5.3 Fleet Card Travel Training

3.5.4 AIR Card Program Training…………………...……………………………………………………………………….8

3.5.5 Integrated Card Program Training

3.1 Are agencies required to provide training on charge card management?

Yes, each agency must provide training on charge card management consistent with the requirements of this Chapter.

3.2 Why is training on charge card management important?

Training is important because it is vital that charge card managers and cardholders understand their roles and responsibilities in order for charge card programs to be effectively implemented.

Further, training should ensure charge card holders are informed of any changes or updates to the charge card program.

3.3 Who is required to take charge card management training?

All program participants, including cardholders and charge card managers (including Agency/Organization Program Coordinator (A/OPC), Approving Officials (AO), and other accountable/billing officials), must be trained in charge card management.

3.4 What are the general training requirements for all charge card programs?

The general training requirements for all charge card programs are:

• All program participants must be trained prior to appointment;

• All program participants must take refresher training, at a minimum, every 3 years;

• All program participants must certify that they have received the training, understand the regulations and procedures, and know the consequences of inappropriate actions. Agencies will determine the method of certification; and

• Copies of all training certificates must be maintained pursuant to U.S. National Archives and Records Administration (NARA) requirements, General Records Schedule 1. Item 10a.

3.5 What are the specific training requirements for each type of charge card program?

The specific training requirements for each type of charge card are:

3.5.1 Purchase Card Program Training

• Cardholder Training for purchase cardholders must provide general information on card use. It must familiarize cardholders with Federal procurement and property laws and regulations, agency procurement and property and other card-related policies, convenience check usage, and other applicable proper card use guidelines. Training requirements shall be consistent with the cardholder’s level of responsibility or spending authority.

• AOs or Certifying Officials Training in Federal acquisition, applicable financial policies and regulations, and AO responsibilities are required prior to assuming the AO responsibilities. AOs must also receive the same training as the cardholders.

Agency managers are responsible for ensuring that cardholders follow the mandatory source requirements established in Part 8 of the Federal Acquisition Regulation (FAR) (Required Sources of Supplies and Services.) For example, the Javits-Wagner-O’Day (AbilityOne) Act requires the Government to purchase certain supplies or services from AbilityOne participating non-profit agencies, if they are available within the period required. For supplies and services that are required to be purchased from this mandatory source, please see www.AbilityOne.gov/procurementlist. Cardholder training and oversight activities should focus on ensuring that cardholders meet the requirements established in FAR 8.704. The list of priorities is as follows: Supplies – (1) Federal Prison Industries, Inc. (41 U.S.C. 48), (2) AbilityOne participating non-profit agencies, and (3) Commercial sources; for Services – (1) AbilityOne participating non-profit agencies and (2) Federal Prison Industries, Inc., or commercial sources.

• A/OPCs Training must familiarize A/OPCs with cardholder and AO responsibilities, as well as proper management, control and oversight tools and techniques. The A/OPCs must also receive training by the charge card vendor on using their Electronic Access System (EAS) (or applicable system) to manage the program.

3.5.2 Travel Charge Card Program Training

• Cardholder Training for travel charge cardholders of the must provide general information on traveling for the government and review how to use a travel charge card, including http://www.jwod.gov/procurementlist agency travel charge card policy and procedures, and proper card use. It must also familiarize cardholders with the Federal Travel Regulation (FTR), specifically Part 301- 51 - Paying Travel Expenses and Parts 301-54 and 301-76 - Collection of Undisputed Delinquent Amounts Owed to the Contractor Issuing the Individually Billed Travel Charge Card. Even if the approving official is not a travel charge cardholder, this individual is required to take the same training as travel charge cardholders.

• A/OPC

Training on the roles and responsibilities of the A/OPC is required prior to appointment, including proper management, control and oversight tools and techniques, and the FTR Part 301-70 - Internal Policy and Procedures Requirements, Subpart H - Policies and Procedures Relating to Mandatory Use of the Government Contractor-Issued Travel Charge Card for Official Travel Section 301-70.700 through 708. The A/OPC must also receive the same training as the cardholders.

3.5.3 Fleet Card Program Training

• Cardholder Training for cardholders of the fleet card must provide general information on how to use a fleet card, applicable regulations, proper use, and agency policy and procedures related to use of the fleet card.

Note: Fleet cards can be issued to organizations, drivers or vehicles. It is recommended that brochures and card sleeves be used to provide general information on how to properly use a government fleet card.

• A/OPC

Training that covers the additional roles and responsibilities of the A/OPC, including proper management, control and oversight tools and techniques, is required prior to appointment. The A/OPC will also receive the same training as the cardholders.

3.5.4 AIR Card Program Training

• Card User Training for AIR card users shall provide general information on how to use a government AIR card, including applicable regulations, proper use, and agency policy and procedures related to the use of the AIR card

Note: The AIR card is issued to an aircraft and not to an individual cardholder; therefore, it is strongly recommended that brochures and card sleeves be placed in the aircraft to be used to provide general information on proper card usage.

• AOs or Certifying Officials AOs must, at a minimum, receive training similar to card users for the AIR card program.

Additionally, they shall complete training required by the Financial Management

Regulation and/or applicable financial policies. In addition, AOs must also complete specific AO training developed by the Defense Energy Supply Center (DESC) Program Management Office and/or their Component Manager.

• A/OPCs

The A/OPC shall, at a minimum, receive the same training as the card users. Training that covers the additional roles and responsibilities of an A/OPC, including proper management, control and oversight tools and techniques, is strongly recommended prior to appointment.

3.5.5 Integrated Card Program Training

To receive purchase, travel, and/or fleet authority employees must first be trained on the business lines they will receive authority for and the participant role as described above.

Note: Web links to available training resources are contained in References, Attachment 6.

Chapter 4 – Risk Management

4.1 Are agencies required to implement risk management controls, policies, and practices in implementing charge card management programs?

4.2 Why is risk management important in the context of charge card programs?

4.3 What are the general responsibilities of charge card managers in implementing risk management controls, policies, and practices?

4.4 What specific risk management controls, policies, and practices are required for addressing payment delinquencies?

4.4.1 Split Disbursement

4.4.2 Salary Offset

4.4.3 Split Disbursement and Salary Offset Procedures

4.4.4 Due Process Requirements Prior to Salary Offset

4.5 What administrative and/or disciplinary actions can be imposed on delinquent travel charge cardholders?…………………………………………………………………………………………………...13

4.6 What is an erroneous or improper purchase?...................................................................................…………...13

4.7 What documentation should be maintained to minimize erroneous and improper purchases?

4.8 What specific risk management controls, policies, and practices are required for addressing charge card misuse?

4.9 What administrative and/or disciplinary actions may be imposed for charge card misuse?

4.1 Are agencies required to implement risk management controls, policies, and practices in implementing charge card management programs?

Yes, each agency must implement risk management controls, policies, and practices consistent with the requirements of this Chapter.

4.2 Why is risk management important in the context of charge card programs?

Risk management controls, policies, and practices are a critical tool for ensuring the efficiency and integrity of charge card programs by eliminating payment delinquencies, charge card misuse, fraud, and other forms of waste and abuse.

4.3 What are the general responsibilities of charge card managers in implementing risk management controls, policies, and practices?

The general responsibilities of charge card managers in implementing risk management controls, policies and practices are:

• Implementing the appropriate controls to ensure compliance with Federal laws, Federal and agency regulations, and for monitoring program effectiveness;

• Ensuring that any risk management policies and practices established in the agency’s charge card management plan are carried out effectively and that the charge card management plan is updated with enhanced risk management policies and practices, as applicable;

Appendix B

• Ensuring that cardholder statements of account and supporting documentation are reviewed and utilized to monitor delinquency, misuse, and other transaction activities;

• Ensuring separation of duties among key functions such as making purchases, authorizing purchases and payments, certifying funding, and reviewing and auditing;

• Overseeing the establishment and maintenance of master file/official cardholder records, including training, appointment, single and monthly purchase limits, and related records;

• Reviewing available data (including the use of data mining if available) to detect instances of delinquency, fraud, and misuse and identify trends and outliers in relevant indicators of charge card program performance;

• Maintaining a policy that ensures that administrative and/or disciplinary actions are initiated in the event cardholders or other program participants fail to meet their responsibilities with respect to appropriate use and timely payment of the charge card; and

• Communicating the agency’s policy with respect to administrative and/or disciplinary actions to cardholders, and other program participants, including when referral to an agency Office of Inspector General is appropriate and/or required.

• Ensuring that cardholders and those receiving property comply with agency prescribed management controls over property;

• Ensuring that property acquisitions take place only after the requisitioner considers the agency’s existing property inventory and available Federal excess property;

• Ensuring that agency prescribed records have been updated for any accountable and/or sensitive property acquired with purchase cards (See Glossary for the definition of “sensitive” and “accountable” property); and

• Ensuring proper internal controls exist for all purchases, including purchases under the micropurchase threshold.

4.4 What specific risk management controls, policies, and practices are required for addressing payment delinquencies?

Charge card managers are responsible for ensuring that payment obligations are paid on time and that all relevant Prompt Payment Act requirements are met.

Where the agency is responsible for making payments to the charge card vendor, charge card managers are required to:

• Establish a process, with strict internal controls, to ensure that all charges and payments are timely, accurate, and appropriate;

• Closely monitor delinquency reports from charge card vendors;

• Contact appropriate personnel (including Agency/Organization Program Coordinator, Approving Officials, or other accountable/billing officials) to ensure that delinquent payments are addressed and corrective actions are taken to prevent further occurrence; and

• Incorporate all controls, practices and procedures related to centrally billed account delinquencies into the agency’s charge card management plan, consistent with Section 2.3 of this Guidance;

Where individual cardholders are responsible for making payments to the charge card vendor, charge card managers are required to:

• Closely monitor delinquency reports from charge card vendors;

• Contact the delinquent cardholder promptly to ensure payment is made or to obtain a remediation plan;

• Formally notify the cardholder that delinquency in payment may result in disciplinary action;

• Incorporate all controls, practices and procedures related to individually billed account delinquencies into the agency’s charge card management plan, consistent with Section 2.3 of this Guidance; and

• Implement split disbursement and salary offset procedures for travel charge card programs consistent with the sections below.

4.4.1 Split Disbursement

Split disbursement is the process of dividing a travel voucher reimbursement between the charge card vendor and traveler. The balance owed to each is sent directly to the applicable party.

Note: On April 21, 2005, the Department of Treasury formally waived requirements of 31 CFR 208.6 and 210.5. This waiver will, “allow Federal agencies to issue part or all of an employee’s travel reimbursement to the travel charge card issuing bank for crediting to the employee’s travel charge card account.” To view the document in its entirety, go to: http://www.fms.treas.gov/news/split_travel_disbursement_waiver.pdf.

4.4.2 Salary Offset

Salary offset is the collection of an undisputed, delinquent charge card amount via direct deduction from an employee’s payroll disbursement or retirement annuity on behalf of the charge card vendor. Salary offset applies to individually billed accounts only. See Attachment 4 for a sample due process notice for a salary offset.

4.4.3 Split Disbursement and Salary Offset Waiver Procedures

Split disbursement and salary offset are mandatory; however, agencies may waive or provide for an exemption when they determine that the cost of implementing split-disbursement and/or salary offset exceeds the benefits of implementation. The agency head must request such a waiver from the Director of the Office of Management and http://www.fms.treas.gov/news/split_travel_disbursement_waiver.pdf

Budget (OMB) in writing, and provide the reasons therein. The Director of OMB, in consultation with the Administrator of the General Services Administration (GSA), will respond no later than 30 days after receiving the request for waiver or exemption.

4.4.4 Due Process Requirements Prior to Salary Offset

Due process must be granted that is substantially equivalent to that under 31 U.S.C. 3716, Administrative offset. In accordance with this Section’s implementing regulations at 31 CFR Parts 900-904 (The Federal Claims Collection Standards), the due process requirements that must be implemented prior to salary offset are:

• Provide the employee with written notice of the type and amount of the claim, the intention to collect the claim by deduction from the employee’s disposable pay, and an explanation of the employee’s rights as a debtor (a sample due process notice is contained in Attachment 4);

• Provide the employee the opportunity to inspect and copy the records related to the claim;

• Provide the employee an opportunity to review the agency decision related to the claim; and

• Provide the employee an opportunity to make a written agreement with the charge card vendor to repay the delinquent amount.

4.5 What administrative and/or disciplinary actions may be imposed on delinquent travel cardholders?

Payment delinquency associated with a Government travel charge card is prohibited. The agency may impose, but is not limited to, the following administrative and/or disciplinary actions on delinquent travel cardholders:

• Suspend employee accounts once they reach 61 days past the statement date;

• Instruct that the charge card vendor cancel cards, withhold account reinstatement, initiate collection efforts, notify credit bureaus, and assess late fees; and

• Impose disciplinary action deemed appropriate by the agency.

4.6 What is an erroneous or improper purchase? (The terms “erroneous purchase” and “improper purchase” have the same meaning in this Guidance)

An improper purchase is any purchase that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts include overcharges and undercharges. An improper purchase can be one of two types: 1) unauthorized or 2) incorrect, and may include any of the following:

• A purchase that was made for an ineligible recipient or for an ineligible service;

• A fraudulent purchase;

• A duplicate purchase;

• A purchase for services not received;

• A purchase for the incorrect amount;

• A purchase made in the absence of available funding; and

• A purchase made on the same day from the same vendor to circumvent cardholder single transaction limits.

As mentioned, there are two types of improper purchases: unauthorized and incorrect.

• Unauthorized purchases consist of items that are intentionally purchased and are outside of the cardholder’s purchasing authority. For instance, using a government charge card to purchase a tennis racket is an unauthorized purchase.

• Incorrect purchases are mistakes that are the result of an unintentional error during the purchase process. For example, when a purchase cardholder is asked to buy one filing cabinet but purchases three cabinets, this is an incorrect purchase. A series of seemingly incorrect purchases may require investigation to determine whether these purchases are actually unauthorized purchases.

Fraudulent purchases include those made by cardholders that were unauthorized and intended for personal use, purchases made using government charge cards or account numbers that had been stolen or compromised, and purchases correctly charged to the charge card but that involve potentially fraudulent activity that went undetected.

4.8 What documentation should be maintained to minimize erroneous and improper purchases?

To the maximum extent possible, agency personnel requesting a cardholder to acquire an item(s) with a purchase card should provide written requests to the purchase cardholder for the items. If it is not possible for the requester to make the request in writing, the purchase cardholder should document in their file the requester’s name, item description, quantity, estimated cost, and date of request. The purchase cardholder should also document availability of funds at the time of each purchase and obtain prior approval before making self-generated purchases.

Travel and fleet cardholders should continuously monitor the billing statements associated with each charge card to minimize improper and/or erroneous purchases.

4.8 What specific risk management controls, policies, and practices are required for addressing charge card misuse?

Charge card managers are responsible for ensuring that charge cards are used for authorized purchases or expenses only.

In carrying out these activities, charge card managers are required to:

• Identify specific risks associated with charge card programs, and implement strict internal controls to mitigate these risks to the greatest possible extent;

• Develop policies and procedures to mitigate risks associated with charge card programs;

• Ensure that the agency has policies in place that require managers to review charge card reports, as necessary;

• Develop and impose disciplinary action deemed appropriate by the agency in cases of charge card misuse;

• Implement proper training for cardholders, approving officials, and all other staff involved in using charge cards consistent with Chapter 3 of this Guidance;

• Review charge card statements and account activity reports to identify questionable or suspicious transactions;

• Review ATM cash withdrawals for reasonableness and association with official travel;

• Contact employees to inquire about questionable or suspicious transactions;

• Confirm that the correct appropriation/line of accounting is cited for the purchase card transaction;

• Require charge card statement reconciliation or transaction reconciliation in a timely manner;

• Initiate administrative and/or disciplinary actions for each occurrence of charge card misuse;

and

• Incorporate all controls, practices and procedures related to charge card misuse into the agency’s charge card management plan, consistent with Section 2.3 of this Guidance.

In cases where a cardholder fails to resolve and/or timely dispute (if necessary) an erroneous charge, the cardholder, consistent with agency policy, shall reimburse the government for the cost of that transaction. When a cardholder makes an improper purchase, the cardholder, in accordance with agency policy, shall: (a) reimburse the government for the cost of the purchase and (b) be subject to disciplinary action.

In instance where an official directs an erroneous purchase to be made by a cardholder or directs a cardholder to purchase items or services that are subsequently determined to be improper, the official who directed the purchase shall, in accordance with agency policy: (a) reimburse the government and (b) be subject to disciplinary action.

4.9 What administrative and/or disciplinary actions may be imposed for charge card misuse?

Improper, fraudulent, abusive, or negligent use of any Government charge card is prohibited.

The agency may impose disciplinary action for charge card infractions, including removal for serious or repeated infractions. Appropriate agency personnel may impose, but are not limited to, the following administrative and/or disciplinary actions for negligence, misuse, abuse, or fraud:

• Verbally counsel and issue a letter of counseling/reprimand to the employee;

• Deactivate, suspend, or cancel employee accounts; and

• Impose additional disciplinary actions deemed appropriate by the agency.

Circumstances surrounding each case should be considered when determining the proper type of corrective or disciplinary/adverse action, if any, which may be imposed. Generally, a progression of increasingly severe penalties is suitable. In some instances, the infraction may warrant the most severe penalty for a first offense.

Egregious purchases are most severe when they result in an intentional private gain for a cardholder/purchaser with little if any benefit to the agency. Agencies must comply with all applicable law and regulatory guidance in determining whether to impose disciplinary or adverse action in any specific case.

In cases of suspected fraud, charge card managers must refer these instances to independent investigatory agencies (e.g., the agency’s Office of Inspector General or the Department of Justice) for investigation.

See Best Practices in Managing Government Charge Card Programs, Attachment 5, for additional strategies that charge card managers may consider employing to mitigate the risk of, and otherwise addressing, charge card delinquency and misuse.

Chapter 5 - Performance Metrics and Data Requirements

5.1 Are agencies required to maintain and report data and performance metrics related to charge card management programs?

5.2 Why is data reporting important in the context of charge card programs?

5.3 What data are agencies required to report?

5.3.1 Statistical Reporting

5.3.2 Narrative Reporting

5.4 Why are performance metrics important in the context of charge card programs?

5.5 What performance metrics are agencies required to report?

5.1 Are agencies required to maintain and report data and performance metrics related to charge card management programs?

Yes, each agency must maintain and report data and performance metrics consistent with the requirements of this Chapter.

5.2 Why is data reporting important in the context of charge card programs?

Data reporting is a critical tool for improving charge card management. Charge card managers and other stakeholders need timely and accurate data to assess:

• Compliance with legislative and administrative requirements;

• The effectiveness of efforts to mitigate risks of fraud, waste, and abuse; and

• Performance trends in managing costs and other relevant indicators of program success.

5.3 What data are agencies required to report?

Agencies are required to report to the Office of Management and Budget, Office of Federal Financial Management, and maintain for their own use, statistical and narrative information related to each charge card program.

5.3.1 Statistical Reporting

Agencies listed in the original Chief Financial Officers Act of 1990 and the Department of Homeland Security are required to report the following data as specified below on a quarterly basis. All other agencies are also required to report these items on an annual basis:

Travel and purchase cards:

• Number of cards;

• Number of active accounts;

Appendix B

• Percentage of employees that are cardholders;

• Net number of new accounts (new less cancelled);

• Charge card dollars spent; total refunds earned; percentage of potential refunds earned;

• Number of cases reported to the agency Office of Inspector General or agency/organization program coordinator for possible card misuse and/or abuse;

• Number of administrative and/or disciplinary actions taken for card misuse, including delinquency (if known); and

• Number of administrative and/or disciplinary actions taken for convenience check misuse.

Travel charge cards only:

• Number and percentage of travel charge cards with monthly and/or transaction limits

($0 - $3,000; $3,001 - $5,000; $5,001 - $7,500; $7,501 – above.);

• Number and percentage of travel charge cards with ATM withdrawal limits ($0 -

$3,000; $3,001 - $5,000; $5,001 - $7,500; $7,501 – above.);

• Percentage of travel cardholders who, as defined by the agency, are infrequent travelers;

Purchase cards only:

• Ratio of approving officials to purchase cardholders (span of control);

• Average number of monthly purchase card transactions reviewed per approving official;

• Number of purchase cardholders with contracting warrants above $3,000;

• Number of purchase cardholders with transaction limits of $3,000 or more that do not hold contracting warrants;

Convenience checks only:

• Total number of individuals authorized to write convenience checks;

• Total number of convenience checks written;

• Number of checks written over $3,000; and

• Number of checks written under $3,000.

Note: GSA shall (1) take action to automate the provision of this data from the contractor banks to the maximum extent possible, with appropriate data oversight by agencies, and

(2) coordinate the provision of appropriate data to OMB. Agencies shall report manually in the interim until an automated process is implemented.

5.3.2 Narrative Reporting

Homeland Security are required to report on the following narrative information on an annual basis at the same time the first quarter statistical reports are submitted. All other agencies are required to report on these items on a bi-annual basis:

• The date(s) of most recent and next scheduled independent review (e.g., Office of the

Inspector General) for all agency charge card programs;

• A description of the current process for monitoring delinquency, including what reports the agency reviews and what actions are taken when a problem is discovered;

• A description of the steps the agency takes to address turnaround time (> than 15 working days) following voucher submission for travel voucher reimbursement, if applicable;

• A description of the method the agency utilizes to identify and detect possible card misuse, including the use of any specialized information technology solutions as well as any requests to charge card vendors for data reports;

• Agency future plans (within the next 12 months) to enhance charge card systems by automating reviews to detect instances of abuse, misuse, and fraud;

• A description of any best practices the agency employs in charge card management;

and

• Any additional useful information regarding charge card programs.

In regard to strategic sourcing reporting, agencies are required to report to the Office of Management and Budget, Office of Federal Procurement Policy, as set forth in the May 20, 2005, memorandum from OMB’s Deputy Director for Management. Charge card strategies are to be included as part of this agency-wide acquisition reporting. (To view the memorandum, go to www.whitehouse.gov/omb/procurement/comp_src/implementing_strategic_sourcing.pdf.)

5.4 Why are performance metrics important in the context of charge card programs?

Performance metrics are a critical tool for improving charge card management. Tracking performance on key indicators of program success is necessary for charge card managers and other stakeholders to:

• Assess the effectiveness of management controls, policies, and practices; and

• Identify areas where increased management attention is needed

5.5 What performance metrics are agencies required to report?

Homeland Security are required to report to the Office of Management and Budget via the Metric Tracking System (MTS) the following performance metrics on a monthly basis:

• Travel charge card Delinquency Rates, Individually Billed Accounts (IBA) – The balance outstanding over 60 days from the statement date for IBAs divided by the average net charge volume (NCV) for IBAs for the period 2 months to 5 months prior to the period being reported1.

• Travel charge card Delinquency Rates, Centrally Billed Accounts (CBA) – The balance outstanding over 60 days from the statement date for CBAs divided by the average net charge volume (NCV) for CBAs for the period 2 months to 5 months prior to the period being reported2.

• Purchase Card Delinquency Rates – The balance outstanding over 60 days from the statement date for Purchase cards divided by the average net charge volume (NCV) for Purchase cards for the period 2 months to 5 months prior to the period being reported3.

Information regarding these metrics and MTS can be accessed at http://www.fido.gov/mts/ cfo/public.

Additional metrics related to Federal charge card managements are currently under development by the Chief Financial Officer’s Council Committee on Performance Measurement. This Guidance will be updated as additional charge card metrics are finalized and implemented.

Agencies are encouraged to develop additional charge card performance metrics deemed most appropriate and useful to improve charge card management.

1 For example, the January metric would be the balance outstanding more than 60 days as of the January cycle date divided by the average NCV for months November, October, September, and August. In this example: Jan Delinquency = Jan 61+ / (NCV Nov + NCV Oct + NCV Sept + NCV Aug) / 4 2 For example, the January metric would be the balance outstanding more than 60 days as of the January cycle date divided by the average NCV for months November, October, September, and August. In this example: Jan Delinquency = Jan 61+ / (NCV Nov + NCV Oct + NCV Sept + NCV Aug) / 4 3 For example, the January metric would be the balance outstanding more than 60 days as of the January cycle date divided by the average NCV for months November, October, September, and August. In this example: Jan Delinquency = Jan 61+ / (NCV Nov + NCV Oct + NCV Sept + NCV Aug) / 4 http://www.fido.gov/mts/cfo/public http://www.fido.gov/mts/cfo/public

Chapter 6 - Credit Worthiness

6.1 Are agencies required to assess the credit worthiness of all new travel charge card applicants prior to issuing a card?

6.2 Why is it important to assess the credit worthiness of a new travel charge card applicant?

6.3 What steps are required before issuing a travel charge card to a first-time applicant?

6.3.1 Obtain credit score

6.3.2 First time travel charge card applicants with a credit score less than 660

6.4 What process is required if obtaining a credit score is not possible?

6.5 Are credit worthiness assessments required for new centrally-billed travel account applicants?

6.6 May agencies issue individually-billed travel charge cards to foreign nationals?

6.7 When are re-evaluations of credit worthiness required?

6.8 What options do agencies have to offer applicants denied a charge card due to the outcome of their credit worthiness evaluation?

6.9 What are the relevant recordkeeping requirements for the credit worthiness evaluation process?

6.10 Is there any circumstance in which credit worthiness restrictions may be temporarily lifted?

6.11 Is there a Federal source for obtaining charge card applicant credit scores?

6.12 May an agency contract with their respective bank card issuer to manage the credit worthiness assessments on its behalf?

6.1 Are agencies required to assess the credit worthiness of all new travel charge card applicants prior to issuing a card?

Yes, pursuant to Section 846 of the Consolidated Appropriations Act, 2008 (P.L. 110-161, Title VII, section 743), each agency must assess the credit worthiness of all new travel charge card applicants prior to issuing a card. Credit worthiness assessments are an important internal control in Federal travel charge card programs. Current cardholders are not subject to the requirements of this chapter.

Credit worthiness evaluations for new purchase card applicants are no longer legislatively mandated due to the passage of the 2006 Consolidated Appropriations Act. However, agency officials and charge card managers may continue to require these evaluations at their discretion.

At a minimum, they must remain mindful of the risks involved with charge card issuance, and continue to consider pertinent factors before issuing new purchase cards.

Further, a current cardholder who leaves government service and then returns would be considered a new applicant for the purposes of credit worthiness requirements. However, a hiring agency may, but is not required to, assess the credit worthiness of a current cardholder who transfers from another agency.

6.2 Why is it important to assess the credit worthiness of a travel charge card applicant?

Credit worthiness assessments are an important internal control to ensure that charge cardholders are financially responsible.

6.3 What steps are required before issuing a travel charge card to a first-time applicant?

Consistent with the requirements of this Chapter, all agencies must perform a credit worthiness evaluation prior to issuing a travel charge card to first time applicants.

6.3.1 Obtain credit score.

In order for a first time applicant to receive a card to which standard agency restrictions apply, a credit score must be obtained for that employee. The credit score obtained must be 660 or higher. (Examples of credits scores acceptable are FICO, an acronym for Fair Isaac Corporation, a Beacon score, etc.) The numerical score indicates the credit risk level associated with a specific credit applicant. Credit scores obtained during any other process of background clearance that are less than 12 months old may also be used.

6.3.2 First time travel charge card applicants with a credit score less than 660.

For first time travel charge card applicants with a credit score of less than 660, the agency may issue a card, but more stringent restrictions will apply. In implementing such additional restrictions, the agency will take one or more of the following actions:

• Reduce the overall dollar limit for the card;

• Reduce the limit on individual transaction amounts;

• Limit (or further limit, if applicable) the types of transactions allowed;

• Issue a pre-paid card that automatically restricts dollar amount and transaction types;

• Limit (or further limit, if applicable) the dollar amount of transactions that can be applied to the card within a particular time period;

• Limit (or further limit, if applicable) the length of time a card remains active, such as for the length of time in travel status only; and/or

• Restrict (or further restrict, if applicable) use at ATMs.

6.4 What process is required if obtaining a credit score is not possible?

If obtaining a credit score is not possible (e.g., the applicant refuses to provide consent or does not have a credit history), an agency may still issue a "restricted" (as defined in Section 6.3.2 above) travel charge card to a first time applicant, but the agency must conduct an alternative credit worthiness assessment to determine whether the individual possesses a satisfactory credit history. Specifically, the agency must review the proposed applicant’s most recent Standard Form (SF) 85P, Section 22, Questionnaire for Public Trust Positions, or SF 86, Section 27, or use a similar vehicle containing the same type of questions as in the forms and sections noted and use the information provided to assess credit worthiness. In either case the vehicle used must not be older than one year.

6.5. May agencies issue individually-billed travel charge cards to foreign nationals?

No, foreign nationals are not eligible to hold individually-billed travel charge cards issued by Federal agencies, as they are not Federal employees. However, centrally-billed travel accounts may be used to pay for their travel expenses when required by and approved by the agency.

6.6 Are credit worthiness assessments required for new centrally-billed travel account applicants?

No. Because centrally-billed travel accounts and purchase card accounts share common characteristics in terms of structure, purpose and risk, credit worthiness assessments are not required for centrally-billed travel accounts, and are to be treated in the same manner as purchase card accounts for the purpose of this Chapter of the Guidance.

6.7 When are re-evaluations of credit worthiness required?

A credit worthiness assessment must be conducted for restricted cardholders before the cardholder is issued a renewed card. The re-evaluation of credit worthiness may be conducted by obtaining a credit score as described in Sections 6.3 of this Chapter, or at the agency's discretion, may be conducted by reviewing the restricted cardholder’s card usage during the initial period of card issuance.

6.8 What options do agencies have to offer applicants denied a charge card due to the outcome of their credit worthiness evaluation?

Applicants who were denied a charge card due to the outcome of their creditworthiness evaluations can be re-evaluated at a time deemed most appropriate by the agency.