ACQUISITION CARDS PROGRAM
BEST PRACTICES GUIDE
(VERSION 1)
Treasury Board Secretariat
– Deputy Comptroller General Branch
Introduction
Objective and Scope
The purpose of this guide is to
provide information that will help federal departments
administer and control the acquisition card program. The
guide will assist responsibility centre managers, individuals
doing purchases on their behalf, procurement managers and
financial managers by providing them with control standards
to achieve a higher and more consistent standard of control.
This guide is complementary to the Acquisition Card Policy
issued by Treasury Board and should be used along with the
policy.
Background
Acquisition cards were approved for
use in government departments and agencies in late 1991. The
cards were made available government-wide through contracts
established with acquisition cards providers. Post
implementation evaluations were carried out in 1993 and again
in 1996. As a result, an updated policy and procedural
guidelines were issued by the Treasury Board Secretariat in
1996. In 1997, new contracts were again issued following a
formal competitive bidding process.
The acquisition card has been in the
forefront of most procurement and payment process
improvements in departments. As at October 1997, more than
23,000 cards were in use and the monthly purchasing volume
exceeded $20 million. The increasing use of acquisition cards
has had an impact on the traditional paper based control
framework. As a result, there are concerns about increased
risk of error or abuse that might go undetected.
In 1997, the Office of the Auditor
General conducted a government-wide review of acquisition
card usage. Although it concluded that no serious losses
could be found at this time, the report stressed the need for
better controls and better monitoring by departments.
In response to concerns over the
potential risk, the Treasury Board Secretariat initiated a
project to identify an appropriate control framework that
would help further minimize the potential risks and thereby
improve the comfort level of government managers without
jeopardizing the benefits of increased card use.
Acquisition Card
Control Framework
The Acquisition Card
Program includes several processes and involves, even in
departments where a limited number of cards are in use, a
large number of individuals. A sound control framework should
address all of the potential exposures to risk throughout
each step of the process. The control framework is designed
to create an environment of control where the confidence in
any of the different processes will be increased by the
presence of additional and complementary controls in all the
other steps or processes involved.
The administration of the
acquisition card program can be divided in six areas where
controls should be in place which are:
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Overall Management of
the Program
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Issuance and Control of
Cards
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Using the card
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Information and
Monitoring
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Accounting and
Payment
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Ongoing review
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Overall Management of the
Program
In many departments, the
use of acquisition cards as a procurement and payment
method has now reached the point where purchases of
several million dollars are effected every month.
Government-wide, over 75,000 transactions are now made
every month. The acquisition card program deserves
increasing recognition on the part of senior departmental
officials for two reasons, 1) all the benefits and
cost-efficiencies that the use of acquisition cards bring
to departmental management, and 2) the risks which are
introduced by the adoption of a new innovative payment
method.
Departmental
Senior Management
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A national
departmental acquisition card co-ordinator is to be
appointed to be responsible for the overall management
of the program. The national co-ordinator would be
responsible for liaising with the acquisition card
issuers and for carrying out all the various tasks
assigned to that person by the Acquisition Cards Policy
issued by Treasury Board.
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Departmental senior
management must ensure that the internal policies and
procedures developed for the use of the cards are
complete and accompanied with an appropriate training
plan to ensure that all those involved in the use and
processing of the acquisition cards are fully aware of
their roles, responsibilities and obligations. Training
should address both cardholders and managers needs and
cover areas such as responsibilities and obligations,
protection of the card, procurement activities with an
acquisition card, the payment process, reconciliation
and accounting requirements.
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Departmental senior
management must ensure that the requirements of the
Treasury Board policies, concerning acquisition cards,
procurement and contracting processes, are fully
respected.
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For larger
departments, consideration should be given to the
appointment of regional, functional or branch
co-ordinators that would assist the national
coordinator in the administration of the program and
ensure its effectiveness. In such a case, the
departmental co-ordinator would be responsible for
ensuring that regional, functional or branch
co-ordinators are provided with adequate information
and training.
2. Issuance
and renewal of cards
The issuance and renewal
process is a key step in the acquisition cards’
administration program because it brings together the
departmental co-ordinator, the responsibility centre
manager and the cardholder. It is at this stage that
training and dissemination of information should take
place to ensure adequate communication of policies,
procedures, need for control, potential risks, and
understanding of the role and responsibilities of the
various people involved in this process, i.e., cardholder,
manager, co-ordinator, etc.
Departmental
Co-ordinator (DC)
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In large departments,
the following guidelines are applicable to all levels
of coordinators, national, regional, functional or
branch.
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The departmental
co-ordinator must take the necessary steps to ensure
that cardholders are properly informed and trained in
the use of acquisition cards before received their
cards. This can be partially achieved by using the
information packages made available by the card issuers
but it is essential that department specific
information be provided to each cardholder.
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Both the
responsibility centre manager (RCM) and the applicant
must sign the card application (including renewal
application). When appropriate, the DC may wish to
confirm the delegated financial authorities of the RCM
and the employee status of the applicant.
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Before remitting the
card to the employee, the DC must ensure that:
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the cardholder is an employee
and is under direct or indirect budget
authority.
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the card limits are within the
RCM’s authority.
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the card limits and
restrictions are in accordance with Treasury Board
policy.
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the cardholder acknowledgement
form is signed by the cardholder and the RCM before the
card is given to the applicant.
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the applicant has been duly
instructed to sign the card.
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The DC must implement
secure processing and archiving procedures to ensure
the protection of the information received from the
employee/applicant and the RCM.
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The DC must also
implement secure procedures when communicating with the
card issuing company. Cards received from the card
issuing company must be protected, i.e., kept under
lock, until given to the cardholder. Upon receipt of
the card from the card issuing company, the DC must
verify the card specifications against the original
request.
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When an application
for renewal is received from a cardholder, the DC must
verify the current card usage and discuss with the
cardholder and the RCM any appropriate change in either
the limits or the need for the card itself.
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The DC should ensure
that expired card are destroyed.
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The RCM is responsible for determining the requirement
for an acquisition card and to decide who in the
organization requires it.
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The RCM must establish the credit limit and
restrictions for each card. The credit limit should be
in line with the financial and procurement authorities
delegated to the RCM. The following are limitations
that could be imposed on an acquisition card:
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Maximum outstanding credit limit
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Maximum monthly charges
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Per transaction limit
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Excluded «item» codes or «merchant
category» codes
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Geographic restrictions
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Upon receipt of the card and «employee
acknowledgement form» from the departmental
co-ordinator, the RCM should review with the employee
the conditions on the employee acknowledgement form,
have the employee sign both the form and the card and
then return the employee acknowledgement form to the
DC.
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The RCM should ensure that the card is returned to the
DC upon change in status of the cardholder such as
transfer, change in duties (no longer required) or
termination.
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Each employee should insist on receiving proper
training and documentation before accepting the
responsibility of using an acquisition card. The
cardholder is responsible for reviewing available
information packages on using an acquisition card and
for seeking clarification when necessary.
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Each employee must complete and sign the card
application and, before receiving the card, must
carefully read the terms and conditions under which the
card should be used and sign the acknowledgement form.
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When a cardholder receives a renewal card from the card
issuing company, the cardholder must advise the RCM and
the departmental co-ordinator.
This section discusses
the responsibilities regarding the payment aspects of card
usage but does not cover the procurement aspects (these
will be addressed in a later version of the Guide). It
should be noted however that Treasury Board policies and
regulations on procurement and contracting must be adhered
to at all times. The following controls should support
regular and ongoing use of cards:
Responsibility
Centre Manager
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Prior to signing the
statement under section 34 of the FAA, the RCM must
review the validity of charges that appear on the
monthly statement that identifies all purchases that
have been charged to his or her responsibility
centre.
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Any questionable
purchases must be followed-up with the
cardholder.
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The RCM is
responsible for ensuring that the cardholders maintain
adequate documentation and that disputed items are
resolved in a timely manner and credits received
accordingly.
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The RCM should assess
periodically the need for the card and the
appropriateness of the existing limits and
restrictions. When an acquisition card is no longer
required because of changing operating requirements,
changing responsibilities of cardholder or the
departure of the cardholder, the RCM must take
appropriate action to cancel the card through the card
co-ordinator.
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The RCM is
responsible for ensuring that
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Purchases of training
and/or items meeting the requirements for recording in
inventory are recorded in accordance with departmental
policy.
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Cards are not used
for those items restricted by Treasury Board policy
including:
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Travel related
expenses
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Vehicle operating and
maintenance expense
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Cash advances
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Personal
expenses
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Purchases from other
government departments
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All Treasury Board
and departmental contracting regulations, policies and
procedures are followed.
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All purchases are
supported with documentation as required by the account
verification process.
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The cardholder must
take appropriate measure to protect the acquisition
card. For example, the card number should not be
written down or made accessible to others; the card
must be maintained in a secured location with
controlled access when not in use; purchases must not
be made using the Internet quoting the acquisition card
number (until such time as a secure method is found
– Treasury Board is currently conducting a pilot
project on this issue).
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In the case of the
loss of a card, and notwithstanding the reason, the
cardholder must inform immediately the card issuing
company by using the toll free telephone number
provided by the company. The departmental co-ordinator
or regional co-ordinator must also be advised as soon
as possible.
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The cardholder must
also remember to inform the departmental co-ordinator
of changes in business address or telephone number and
to return the card to the co-ordinator upon change in
duties or expiry of the card.
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The cardholder makes
only official government purchases at the request of
individuals with delegation. While doing so, he or she
observes all Treasury Board and departmental
contracting regulations, policies and procedures
seeking advice and/or clarification as required prior
to ordering.
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When making
purchases, the cardholder must make every effort to
ensure that no provincial sales tax is charged to the
government. It may be necessary to quote the exemption
number for the particular province.
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Prior to making a
purchase, the cardholder should ensure that he or she
is authorized to make such a purchase and must retain
proof of purchase (receipt or customer copy of charge
slip) when available and record name of
requester.
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Whether maintained
electronically or manually, the cardholder should keep
a detailed log of all purchases, indicating the
purchase date, a control number, a description of items
purchased or services provided, the name of the
supplier, the price, the shipping cost if applicable,
the amount of GST or HST, and the name of requester.
The cardholder should also record the receipt date of
the goods or services and the appropriate financial
coding.
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If departmental
policy dictates that purchases with acquisition cards
are subject to commitments and decommitments
(particularly in departments where purchases of million
of dollars are made every month), the cardholder must
process the required transactions in the departmental
financial system.
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Upon receipt of the
monthly statement, the cardholder should reconcile to
the purchase log and records and indicate accordingly.
If the cardholder is not the person receiving the goods
or services, he or she should verify that these have
been received.
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Upon reconciling the
statement and the purchase, the cardholder attaches
proof of purchase, the purchase log and other
supporting documentation to the monthly statement and
forwards it to manager for signature under Section 34
of the FAA.
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During the
reconciliation, should there be discrepancies in the
information provided on the statement (i.e., difference
in the amount charged and the amount on the sales slip,
purchases not effected by cardholder, purchases posted
twice, interest charged on a disputed item, etc.) the
cardholder should immediately contact the card supplier
to report a disputed item and resolve the issue as soon
as possible.
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When, upon receipt of
goods or services (and particularly when the purchase
was effected over the phone) there is a discrepancy
between what was ordered and what is being received
(i.e., wrong or inappropriate items, lesser quality,
missing elements, inclusion of provincial sales tax,
partial shipment, etc.) the cardholder should contact
immediately the supplier to resolve the issue. The card
issuing company should not be involved in resolving
this kind of issue.
Information on
transactions is received by departmental coordinators from
the card issuing companies on a regular basis. Starting
with the new contracts in January 1998, and once the
transition is completed, departmental coordinators will
have access to electronic card information on a frequent
basis (i.e., daily, weekly and monthly). In departments
where electronic processing is not yet implemented, hard
copy reports and invoices are available.
The analysis and
monitoring of the data are fundamental parts of the
control framework. Given that electronic data can be used
and analyzed much more easily that paper reports,
departments should take immediate action to implement
electronic processing of card information. To that end,
both National Bank MasterCard and Citibank Visa will be
providing software during the implementation phase.
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The DC should take
action to promote and implement the desktop reporting
tools available from card issuers. The DC should
discuss implementation with departmental informatic and
security officials to ensure that acquisition card data
will be protected as required.
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The transaction
database resulting from acquisition card purchases
should be maintained on a regular basis (daily, weekly)
as required.
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The DC should provide
functional managers (procurement / finance) with
information as required. (In larger departments
functional managers could receive a copy of software
and maintain their own database as required).
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The DC should ensure
that monitoring is carried out on a regular basis to
ensure that:
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Cards not used for 90
consecutive days have not been misplaced or stolen and
that the cardholder and the manager are asked to
confirm their continuing requirement.
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Renewals are made in
advance of due date and in light of spending
patterns.
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Cases of misuse or
abuse of the acquisition cards are identified in a
timely manner. For example, DC should look for unusual
spending patterns, accounts where interest charges must
be paid on a regular basis, expenses in sensitive
categories (e.g., florists, health club, etc.), cards
that are under utilized ( i.e., way below credit
limit), cards that are consistently close to their
credit limit, etc.
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The DC should create
the reports necessary to review transactions on a
regular basis for possible contravention of policy or
regulation and follow-up as required.
One key advantage of
using acquisition cards is that all transaction detail is
captured electronically by the card issuer. Departments
should implement and use the electronic interfaces with
the card issuing companies. This would allow consolidated
billing and payment while allowing electronic distribution
of information throughout the department. The payment of
the card issuer is considered low risk and, therefore, one
consolidated payment should be made to each card supplier
within the time frame required to maximize the discounts
offered by the card issuing companies. Verification should
be carried out on a post-payment basis.
Transactions effected by
acquisition cards must be subject to the account
verification process, whether verification is done on
statistical or on a 100% basis. Normal risk factors should
be used, however, it is recommended that additional rigor
be given to transactions resulting from purchases by new
cardholders and to responsibility centres where problems
are detected on a continuous basis.
Commitments for each
transaction may or may not be made at time of purchase for
acquisition card purchases and should be recorded in
accordance with departmental policy. Most departments have
a commitment threshold that would exclude many of these
purchases. The same is applicable to items that will be
inventoried.
Acquisition cards reduce
errors in the application of charges to a specific
account. Using acquisition card numbers to assign costs to
a specific budget or account is less error-prone than
manually assigned account numbers from purchase
orders.
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In departments where
a consolidated electronic invoice is received from the
card issuer, Financial Services should verify the
invoice and pay in accordance with the payment option
chosen by the department.
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Financial Services
should distribute detailed invoice information to each
cardholder and obtain Section 34 certification from the
appropriate manager. The process should ensure that
outstanding items and disputes are monitored for
timeliness and completeness.
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Financial Services
will also ensure that once detailed financial coding is
received, departmental accounts are updated and
responsibility centre budgets charged
appropriately.
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In departments where
no consolidated billing is received, Financial Services
will issue one or multiple payments to the card issuer
based on the information received from the cardholders
and where Section 34 account verification has been
properly carried out.
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Financial services
must ensure that all transactions resulting from
acquisition card purchases are recorded properly and
that records for inventory and other items as defined
by departmental policy are completed.
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Considerations for
ongoing review and internal audit
Another integral
component of control is the normal ongoing review that
should be carried out from time to time by the
departmental internal audit/review function. These reviews
are carried out to assess controls that are in place for
the use of acquisition cards and to ensure compliance with
Treasury Board and departmental policy. Initially, due to
the significance of change brought about with the
implementation of acquisition cards, a post implementation
audit should be carried out within the first year. As a
minimum, the following controls should be reviewed in
carrying out these reviews:
Control
Guides
a) Physical
control of cards
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Is there an
up-to-date record of all cards showing identification
and location of custodian?
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Is there a formal
procedure in place to ensure that cards are returned
when the cardholder vacates the position,
notwithstanding the reason?
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Is there ongoing
monitoring to identify non activity of a card for more
than 90 days and subsequent follow-up to confirm
physical presence of the card.
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Is there a procedure
in place to report, record and replace lost or stolen
cards? Have instances been reported promptly?
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Is there a
verification process that ensures applicants are
eligible departmental employees?
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Are proper
delegations in place prior to issuing cards?
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Are cardholders given
clear instructions on how to activate their card and
instructed to sign the card before issuing?
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Does the cardholder
keep the card in a secure location with controlled
access?
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Are the managers and
cardholders aware of the applicable policies and
procedures for using acquisition cards?
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Has the cardholder
read, understood and signed an «Acknowledgement
Form» clearly highlighting the requirements and
the cardholder responsibilities?
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Are the credit limits
and other restrictions reasonable in relation to how
the card is being used?
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Is there a proper
procedure in place for management to review the
validity of charges on each statement and necessary
follow-up?
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Can payment records
provide:
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Who requested the
goods or services.
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Who purchased goods
or services.
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Confirm receipt of
goods or services.
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Signature under S.34
of the FAA.
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Are formal records
kept for «disputed items» including
clearance history?
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Are taxes on
acquisition card purchases being recorded
properly?
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Is foreign exchange
being applied in accordance with the agreement with
card issuers?
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Are the card
coordinators and account verification officers carrying
out adequate monitoring?
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Is the acquisition
card purchase log reconciled to the monthly
statement?
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Are restrictions as
set by Treasury Board Policy on using these cards being
followed:
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No personal
use.
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No cash
advances.
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No travel related
expenses.
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No vehicle and
maintenance expenses.
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No purchases from
other government departments.
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Are items being
included in inventory or training records as
required?
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Have Financial
Services implemented appropriate systems and procedures
to ensure that the department benefits as much as
possible from the rebates offered by the card issuers
for early payment?
Next version –
Topics to be addressed
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Segregation of duties – what control measures
should be implemented when the cardholder is the person
responsible to either receive the goods and/or approve
under section 34 of the FAA.
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Telephone purchases.
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What actions should be taken when cases of fraud,
abuse or misuse of the acquisition card are
discovered?
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What are the best practices with respect to
inventory accounting?
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Advice on the type of purchases, limits calculations
and other restrictions.
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Special situations – travel, vehicle,
hospitality, etc.
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Best Practices - Account verification. Centralized
payment, regional operations and centralized payments,
audit trail, etc.
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Guide for internal auditors.
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Acquisition cards and delegated financial
authorities.
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Best Practices – Procurement and most relevant
contracting issues.
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