Credit cards can make purchases much easier for a school district, but they are also a nightmare for internal controls. Many districts allow a select number of employees to use district issued Cal Cards to assist with making certain purchases. This can enable the district to easily make routine purchases or order goods online or from vendors that will not accept a Purchase Order (PO) before shipping goods. As long as there are policies in place to regulate credit cards, they can be a valuable tool. Without proper procedures in place and strong internal controls, credit cards can create problems.
There are two necessary components to a district successfully using credit cards without them just becoming tools to circumvent controls: governing board policies dictating proper usage and the internal controls themselves need to be capable of preventing the circumvention.
- The district’s governing board should establish policies that determine who is allowed to be issued a card, what the spending limit will be for each type of employee that receives a card, and the purchasing requirements. It is important that the district keep the number of credit cards used down to the minimum number possible. If too many cards are issued it will be nearly impossible to monitor and ensure proper usage of them all.
- Furthermore, it is important that each of the issued cards have a set, predetermined limit to enable the district to properly keep track of the budget. Purchasing requirements may vary by district, but they should all enforce that the cardholder follow the district’s basic purchasing process, indicate what purchases are allowable, as well as ensure that card holders submit all original receipts for each of their district purchases.
Districts utilizing credit cards must make sure the regular purchasing procedures are not being ignored while the cards are being used. Each credit card purchase should still require some form of pre approval. Additionally if the goods are being ordered, they should be shipped to the district, not a personal residence. Moreover, all receipts turned in should be reconciled to ensure that the purchases made are allowable per district policy. As long as all policies and controls are followed, credit card usage should be a convenience to a district, rather than a hindrance.
Written by Brandon S. Collins, Accountant