Procurement Card User Guide

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COMMONWEALTH OF KENTUCKY
FINANCE & ADMINISTRATION CABINET

PROCUREMENT CARD
USER’S GUIDE

Rev. 6-15-04
Table of Contents
Introduction…………………………………………………………… 1
Procurement Card Program Administrator Responsibilities………2
How It Works………………………………………………………… 3
Organizational Unit Procurement Card Controls and
Requirements………………………………………………………... 4
Ordering Process……………………………………………………..5
Proof of Purchase Documentation………………………………… 7
Inventory……………………………………………………………… 8
8
Reconciliation of Procurement Card Activity……………………..…..
Disputing a Transaction…………………………………………….. 9
Reporting a Lost or Stolen Procurement Card…………………… 9
10
Security………………………………………………………………......
11
Individual Cardholder Responsibilities…………………………….....
Responsibilities of the Organizational Unit’s Procurement Card
Custodian…………………………………………………………….. 13
Responsibilities of the Organizational Unit’s Procurement Card
Users………………………………………………………………..….... 14
Procurement Card Internal Controls………………………………. 15
FAP 111-58-00 PROCUREMENT CARD PROGRAM………….. 17
Questions…………………………………………………………….. 23
Introduction
The Commonwealth of Kentucky procurement card program is designed to improve efficiency in
processing low dollar purchases from any vendor that accepts a MasterCard credit card (unless
restricted by Merchant Category Code (MCC) by the Commonwealth). It may be issued to a
Commonwealth of Kentucky employee, an organizational unit or a Kentucky National Guard member.

The procurement card may be used for both the purchase of goods and services, and the payment for
those purchases. This includes any non-restricted commodity as set out in FAP 111-58-00
Procurement Card Program, which is incorporated by reference in 200 KAR 5:021 Finance and
Administration Cabinet Manual of Policies and Procedures and this User’s Guide. All procurement
cards shall be used in accordance with the Commonwealth’s procurement laws, regulations, policies
and procedures and the Executive Branch Code of Ethics. Each agency shall ensure that its
employees adhere to this FAP 111-58-00 and its related Kentucky Revised Statutes and Kentucky
Administrative Regulations.

A participating agency shall sign a Commonwealth of Kentucky Procurement Card Site Agreement to
accept its terms and conditions, which are later filed and signed by the Finance and Administration
Cabinet’s Office of the Controller.

This program enables agencies to make purchases of approved commodities directly from vendors,
with the charges assigned to the default accounting structure designated for each procurement card.
All agency charges are loaded each weekday evening by the Commonwealth Office for Technology.

As a result of this process, Procurement Desktop documents are created and routed to the agencies’
procurement card program administrator. This individual is responsible for reconciling the receipts for
purchases and ensuring that the proper accounting structure is assigned to each transaction. If the
default accounting structure is not correct, the procurement card program administrator may change it.
He/she must ensure that all procurement card documents for a cycle are approved and released in
sufficient time to pay Bank One by the due date for that cycle.

-1-
Procurement Card Program Administrator Responsibilities
Each agency head shall select a procurement card program administrator who will administer the
program and manage the overall agency operation and cardholder training. To ensure proper
separation of duties, this individual shall not be a cardholder.

The Finance and Administration Cabinet will train the agency procurement card program administrator
how to implement and operate the procurement card program. The procurement card program
administrator’s responsibilities include (but are not limited to) the following:

 Determine which of the agency’s employees and organizational units may receive cards.
 Execute, approve, sign, and maintain a Cardholder Agreement for all cardholders.
 Develop and provide mandatory training for each cardholder and organizational unit procurement
card custodian prior to using the issued procurement card. Employees who use an organizational
unit’s procurement card shall be trained prior to making a purchase. This training includes
cardholder/user duties, responsibilities and procurement policies. (Authorized signers and agency
procurement card program administrators shall attend training as directed by the Finance and
Administration Cabinet.)
 Assign a default accounting structure for each card.
 Provide cardholders and organizational unit procurement custodians a written statement
identifying those items they have a blanket approval to purchase.
 Add, change or delete cards as necessary.
 Maintain proper card controls.
 Coordinate the disputed charges process.
 Distribute activity reports to cardholders and organizational unit procurement card custodians.
 Ensure receipts are collected for every transaction per cardholder and procurement card custodian
via activity reports and reconciled to transactions within Procurement Desktop.
 Verify that the description and purpose of every transaction is identified by each cardholder and
the organizational unit procurement card custodian on the activity report, if it is not readily
understandable based upon the goods procured.
 Verify that each cardholder and the organizational unit procurement card custodian and their
respective supervisors have signed the activity report.
 Forward completed copies of all pages of the PD Procard Holders Report by the due date on the
Procard Payment Schedule to the Customer Resource Center for review by Finance and
Administration Cabinet officials.
 Coordinate the payment process to ensure timely remittance.
 Establishment of a procedure to provide reasonable assurances that cardholders receive no
monetary benefits from use of the card.
 Ensure that items purchased that are required to be included in the fixed asset inventory are
reported to the agency property officer or fiscal officer (KRS 45.313).
During each cycle, report to his/her agency head and to the Office of the Controller any
noncompliance by any procurement card cardholder, organizational unit’s procurement card custodian
or card user, or attest that all purchases are in compliance with this policy.
-2-
How It Works
The procurement card program simplifies the procurement and disbursement processes by facilitating
point-of-demand procurement. Procurement responsibility is delegated to the ordering agency,
enabling an authorized cardholder or organization unit‘s procurement card custodian to place an order
directly with the vendor. Procurement card program administrators must provide their cardholders and
organizational unit’s procurement card custodian with a statement that identifies those goods or non-
professional services for which they have a blanket approval to purchase.

The procurement card program provides enhanced control for all transactions by producing immediate
decisions on five specific authorization criteria as explained below. When the supplier at the point-of-
sale requests a purchase authorization, the MasterCard procurement card system validates the
transaction against pre-set limits established by the Controller’s Office and the Agency Head. All
transactions are instantaneously approved or declined based on the following procurement card
authorization criteria:

1. Number of transactions allowed per day
2. Number of transactions allowed per cycle
3. Single purchase limit
4. Spending limit per cycle
5. Merchant Category Code (MCC) restrictions*

*Suppliers are assigned a Merchant Category Code (MCC), which represents their type of
business/industry. Commonwealth of Kentucky procurement cards are issued with a MCC group of 86
Exclude, which is explained in the chart below. If a cardholder attempts to use a supplier with any of
the following codes, the transactions will be denied immediately.

86 Exclude

3000-3299 Airlines
3351-3440 Automobile/Vehicle Rental
3501-3715 Hotels and Motels
5812 Eating Places, Restaurants
5813 Bars, Cocktail Lounges, Discotheques, Nightclubs, and Taverns –
Drinking Places (Alcoholic Beverages)
5814 Quick Payment Service – Fast-Food Restaurants
5921 Package Stores, Beer, Wine, Liquor
6010-6760 Financial Institutions, Cash Advances, Travelers Cheques,
Securities, Insurance, etc.

Note: Any agency requiring a card with a MCC Code Group other than 86 Exclude must send a
request to the Office of the Controller for approval.

Agencies must ensure that for every cardholder and organization unit procurement card, the
Cardholder Controls Merchant Category Code Group on the Purchasing Card Cardholder Account
form lists the code for liquor store as an excluded merchant category.

-3-
Organizational Unit Procurement Card Controls and Requirements
Effective with the June 2004 amendment of FAP 111-58-00, a procurement card may be issued to an
organizational unit that is logistically separate from its associated cabinet or agency. Unlike an
individually issued Procard that has an employee’s name embossed on the card, a Procard issued to
an organizational unit may be shared among employees of that unit. However, written justification for
each card shall be forwarded to and prior approval obtained from the Office of the Controller. This
justification must include 1) why the card is needed; 2) the anticipated types of transactions; 3) how
the organizational unit functions within the cabinet or agency. The following restrictions apply to
organizational unit card:

 Procurement cards shall not be shared between organizational units of a cabinet or agency. Formatted: Bullets and Numbering

 No more than one organizational unit procurement card shall be issued to one physical location. Formatted: Bullets and Numbering

 The organizational unit procurement card shall not be used for purchases from the Internet. Formatted: Bullets and Numbering

 The organizational unit procurement card shall be stored in a secured area with access limited. Formatted: Bullets and Numbering

 The agency head shall assign one employee in the organizational unit to serve as the Formatted: Bullets and Numbering
procurement card custodian who shall be responsible for the unit’s card and have discretion to
determine if an employee may use the card.

 The procurement card custodian shall maintain a detailed card use log that requires card users Formatted: Bullets and Numbering
to sign their name, log the date and time of the card out and in, vendor expected to be used and
items expected to be purchased.

 Each purchase shall be pre-approved before the organizational unit procurement card may be Formatted: Bullets and Numbering
logged out.

 The card number shall not be retained by an employee. Formatted: Bullets and Numbering

 Each employee shall receive a copy of FAP 111-58-00 and other written information provided to Formatted: Bullets and Numbering
cardholders in the cabinet or agency prior to using the organizational unit’s procurement card.

 Employees who used an organizational unit’s procurement card shall be trained prior to making Formatted: Bullets and Numbering
a purchase. The training shall include duties, responsibilities and procurement policies.

Note: Frequent users of an organizational unit procurement card should be issued an individual card.

-4-
Ordering Process
The procurement card program is an allowable purchasing method for approved goods and services.

Allowable purchases include:

 Any purchase not prohibited by FAP 111-58-00 that is within the limits established for the card Formatted: Bullets and Numbering
and is less than the agency’s Small Purchase Authority Single Quote Limit.
 Any purchase from a Master Agreement or Catalog Master Agreement, not prohibited by FAP
111-58-00. If the purchase is greater than the agency’s Small Purchase Authority Single Quote
Limit, the order shall be documented thoroughly showing the purchase was against an active
contract.
 Utility payments, regardless of the dollar amount.
 Registration fees for employee training and conferences.
 Out of state purchases of fuel for motor pool vehicles only if the state fleet management fuel
card is not accepted. The cardholder or procurement card user shall attach an approved
authorization for travel outside of Kentucky and a statement that the fleet management card was
not accepted by the vendor to the vendor’s invoice and submit with the transaction report.
 Photocopying costs, if the employee’s agency is located outside of Franklin County.
 Purchases from Kentucky Correctional Industries.
 Purchases from the Department of Education’s online bookstore.

Note: Any request for a card needing a Single Purchase Limit in excess of the agency’s Small
Purchase Authority Single Quote Limit must be sent to the Office of the Controller for approval.

Purchases prohibited by FAP 111-58-00, in excess of established card limits, or in excess of an
agency’s Small Purchase Authority Single Quote Limit shall be processed in accordance with
established procurement/disbursement policies and procedures.

It is essential that the following procedures be followed when using the procurement card:

1) Confirm the purchase is appropriate for the procurement card by reviewing the list of restricted
goods and services. If the purchase does not meet the criteria, the procurement card
shall not be used.

2) Ensure the purchase is a legitimate business need of the Commonwealth.

3) Ensure that you have obtained specific prior approval from your supervisor or that the item is
listed on the “blanket approval” listing from your supervisor before your purchase and that all
departmental procedures regarding ordering, processing and record retention have been
followed (see Proof of Purchase Documentation).

4) If the purchase is greater than the agency’s Small Purchase Authority Single Quote Limit,
ensure the order is documented thoroughly, showing the purchase was against an active
contract.
-5-
5) Contact the supplier. Inform the supplier that payment will be made by a Commonwealth of
Kentucky MasterCard.

6) EMPHASIZE that the Commonwealth is a tax-exempt institution. If the supplier requests
the Commonwealth’s Kentucky State Sales and Use Tax Exemption Number, please provide
the supplier with the tax number listed on the back of the procurement card. A copy of the
State Sales Tax Exemption form, on file in each agency’s fiscal section, may be faxed to the
supplier as proof of the Commonwealth’s tax-exempt status.

Note: The Finance and Administration Cabinet’s Sales Tax Exempt Number is printed on the
back of each card. To obtain a copy of this State Sales Tax Exemption form, contact the
Customer Resource Center.

7) Order items (i.e., goods) or request non-professional services.

8) Provide the supplier with the Procurement Card number and the expiration date.

9) Provide the supplier with your name, the department name and complete delivery address.

10) Retain all packing slips as supporting documentation (packing slips may not be used in lieu of
a vendor receipt and/or invoice).

11) When a shipment is received, it is the responsibility of the cardholder to properly inspect the
shipment. In case of returns, the cardholder is responsible for coordinating the return directly
with the supplier and contacting the agency program administrator with any unresolved issues.
Returns for cash are not permitted. The cardholder shall also obtain a receipt showing the
credit transaction.

-6-
Proof of Purchase Documentation
The procurement card program facilitates point of demand procurement, providing authorized
cardholders the ability to purchase specific goods and services directly from a supplier. With this
authority comes the responsibility of maintaining adequate documentation. Each agency is responsible
for assigning responsibility for record retention in accordance with the General Schedule for State
Agencies, FAP 111-28-00 and FAP 120-21-00.

Documentation must be maintained as agreed in the document retention delegation agreement with
the Controller’s Office. Documentation for each transaction shall include the vendor’s name, date of
purchase, description of each item purchased, price of each item purchased, total cost, cardholder
name or card number and signature of cardholder or designee.

Documentation must provide details that support the purchase as a legitimate business expense
within the guidelines of the program (FAP 111-58-00). Supporting documentation should include, but
shall not be limited to, the following items:

 Cashier’s receipt or vendor invoice identifying the items purchased
 Receipts for credit transactions
 Packing slip (for goods received) or service report for any service performed, when agency-
required
 Order form or application, when agency-required
 Internal order form, when agency-required

Purchases of food or beverage must be accompanied by documentation explaining the reason for the
purchase, justifying the need, and proof that the purchase benefited the Commonwealth. Examples
would include prior approval memo, meeting minutes and board calendars.

The agency procurement card program administrator shall distribute an activity report to each
cardholder and the organizational unit’s procurement card custodian on at least a monthly basis. Each
cardholder and organizational unit’s procurement card custodian shall attach a valid vendor receipt or
invoice to substantiate each transaction on the report and identify the description and purpose of every
purchase, if not readily understandable based on the goods procured. The cardholder and the
organizational unit’s procurement card custodian and their respective supervisors shall sign the report
and submit it to the agency program administrator within 4 business days after the close of the cycle.

NOTE: It is no longer acceptable for cardholders and procurement card users to provide statements
signed by supervisors in lieu of missing receipts. All purchases must be documented by a valid
vendor receipt identifying goods or services purchased. Cardholders can be held monetarily
responsible for purchases not substantiated by a valid receipt.

-7-
Inventory
It is the responsibility of the agency program administrator to communicate all purchases of fixed
assets and/or tangible/traceable items to the agency property officer or fiscal officer. The procurement
card document will not generate a fixed asset shell document in ADVANTAGE Financial System;
therefore, it is essential that the agency program administrator communicate such purchases to
ensure the items are properly inventoried in ADVANTAGE.

Reconciliation of Procurement Card Activity
To ensure the accuracy of transactions posted by Bank One and that accurate payment is being made
to Bank One by the Commonwealth, cardholders and the organizational unit’s procurement card
custodian should reconcile their transactions at the end of each billing cycle.

It is the cardholder’s and organizational unit’s procurement card custodian responsibility to reconcile
each transaction on the activity report with the vendor receipt and/or invoice against the billing
statement from Bank One. Cardholders will receive a statement from Bank One at the end of each
billing cycle, which includes all transactions posted for that cycle. Any questioned charge should first
be addressed with the vendor shown on the statement and an attempt made to reach a resolution. If a
resolution cannot be reached with the vendor, the cardholder should file a dispute with the agency
procurement card program administrator.

Procurement card program administrators are responsible for ensuring cardholders’ purchases are
within the guidelines of the program and that payment to Bank One is accurate and timely. Therefore,
administrators should reconcile each receipt against the transactions on the Procurement Desktop
(PD) documents. In addition, the total payment amount from ADVANTAGE Financial should be
compared to the total amount due to Bank One per their cycle statement (TBR400). Administrators
can generate a report from the Management Reporting Database (MRDB) that will show the amount to
be paid from ADVANTAGE Financial. Bank One will express mail all cycle statements to an agency
designated individual. Any discrepancies should be addressed immediately. Administrators may
contact the Customer Resource Center for assistance.

-8-
Disputing a Transaction
A cardholder or procurement card program administrator may dispute any individual charge that
appears on their cycle statement. If a charge is not recognized by the cardholder, or appears to be
incorrect, and resolution cannot be reached with the vendor, the cardholder must communicate this
discrepancy to the agency procurement card program administrator. The cardholder or agency
program administrator should then communicate the disputed charge to Bank One within 60 days of
the statement date.

Note: Transactions made against an organizational unit card can not be disputed. However, the
program administrator may contact the bank for assistance in researching the transaction.

The Statement of Questioned Item form may be used to report the dispute to Bank One. Other ways
to report a dispute include:

Phone 1-888-297-0768 (coverage available 24/7)
Email FcComCardDisputes@firstusa.com
Fax 1-847-931-8861
Mail PO Box 2015
IL1-6225
Elgin, IL 60121-2015

Note: The Statement of Questioned Item form or other written documentation must be retained in
accordance with the General Schedule for State Agencies.

Reporting a Lost or Stolen Procurement Card
It is the responsibility of the cardholder or procurement card user to report the loss of a procurement
card immediately to Bank One. The Commonwealth is responsible for all charges on a card up to the
point it is reported lost or stolen. Therefore, it is imperative that cardholders and procurement
card users report the lost or stolen card to Bank One immediately.

Bank One representatives are available 24 hours a day, seven days a week. When reporting a lost or
stolen card, the cardholder must tell the representative that they are calling regarding a procurement
card.

Lost or Stolen Card: (800) 316-6056 X7340

After reporting a lost or stolen individual procurement card to Bank One, the cardholder must also
immediately report the lost or stolen card to the agency program administrator and his/her
supervisor. A new card shall be issued if approved by the cardholder’s supervisor. A card that has
been reported lost or stolen that is subsequently found shall be given to the agency program
administrator.

-9-
After reporting a lost or stolen organizational unit card to Bank One, the procurement card user
shall notify the organizational unit’s manager, the organizational unit’s procurement card
custodian and the agency procurement card program administrator. The procurement card
program administrator will need to contact Bank One to have the organizational unit card reissued.

Security
It is important that cardholders remember to safeguard not only their card, but also their card number.
A card or card number in the wrong hands can result in fraudulent charges. Therefore, to minimize the
risk of fraud, cardholders should adhere to the following:

 Keep procurement card in a safe location Formatted: Bullets and Numbering
 Do not loan or share cards issued in the name of an individual (per FAP 111-58-00)
 Ensure all written documentation (forms, reports, statements, receipts, etc.) containing card
numbers is stored in a safe location
 Destroy any written documentation containing card numbers that is not needed

If fraudulent charges appear against a card:

 Report the charge(s) to Bank One Customer Service immediately Formatted: Bullets and Numbering
 Report the charges to your agency procurement card program administrator
 Report the charges to the statewide procurement card program administrator within the
Customer Resource Center
 Investigate to determine possible causes of fraudulent activity

Bank One Customer Service 1-800-316-6056 X7340 (Team D)
Statewide Procurement Card Program Administrator 1-877-973-4357 or
1-502-564-9641

Note: Organizational unit card custodians should ensure the card is in a secure location and all card
users are aware of the proper security practices.

- 10 -
Individual Cardholder Responsibilities
Each individual procurement card is issued exclusively to a state employee and shall not be shared or
loaned. An employee issued an individual card is required to sign a Commonwealth of Kentucky
Procurement Card Cardholder Agreement accepting the terms and conditions provided by the Finance
and Administration Cabinet. An individual card embossed with the employee’s name shall be issued
and used exclusively by that employee.

As an individual cardholder for the Commonwealth of Kentucky Procurement Card Program, several
responsibilities are expected of you. To ensure compliance with Program Policies and Procedures, an
individual cardholder shall:

 Activate card upon receipt (Phone number is on the card.) Formatted: Bullets and Numbering

 Be aware of allowable purchases on the card as referenced in FAP 111-58-00, FAP 111-55-00,
and FAP 220-10-00 and the blanket approval provided by the agency.
 Obtain prior supervisory approval for purchases not shown on the agency’s blanket approval.
 Provide additional documentation for purchases of food or beverage that justify the need,
explain the reason for the purchase and proof that they benefited the Commonwealth.
 Not violate any procurement laws, regulations, policies, procedures or the Executive Branch
Code of Ethics.
 Request that the vendor include a detailed receipt with the package when placing an order. The
credit card receipt and packing slip may serve as supporting documentation. (However, since a
detailed receipt identifying goods or services must be submitted, the credit card receipt may be
used as a valid receipt instead of supporting documentation if it provides detailed information.)
 Make sure shipping and handling are included in the stated price.
 If the purchase is greater than the agency’s Small Purchase Authority Single Quote Limit, Formatted: Bullets and Numbering
ensure the order is documented thoroughly, showing the purchase was against an active
contract/master agreement.
 When ordering via telephone or placing catalog orders, make sure the complete shipping
address and instructions are provided to the vendor.
 Review the PD Procard Holders Report and complete the description and purpose fields for
each transaction, if not readily understandable based upon the goods procured.
 Sign the activity (i.e., PD Procard Holders) report and obtain your supervisor’s signature on the
report attesting that the purchases were for the benefit of the Commonwealth and not for personal
use.
 Submit the activity report with a valid receipt for each charge, to your procurement card
program administrator within 4 business days after the close of the cycle. (Receipts must be
submitted to the program administrator on at least a monthly basis, and this frequency is at the
administrator’s discretion.)
 Inform the merchant that your card is tax exempt since you are an agent of the Commonwealth.
(Tax exempt number is on the back of the card.) A copy of the certificate must be sent to the
vendor upon request.

- 11 -
 Ensure that sales tax is not charged.
 Not return merchandise for cash.
 NOT share a card. (Cardholder shall be liable for any misuse of the card.)
 Contact Bank One at 1-800-316-6056 immediately if card is lost or stolen. Also inform your
agency’s procurement card program administrator and your supervisor. Failure to do so may result
in penalty or removal of card.
 NOT use a procurement card for personal purposes.
 Be aware of maximum limits (including maximum number of transactions and dollar amount)
stated on the signed Cardholder Agreement. If your maximum dollar amount is $1,000, you must
not spend over this amount per transaction, including shipping and handling charges. Failure to
comply with limits may result in removal of card. Note: A transaction cannot be split into two
transactions in order to avoid the maximum limit.
 Document upon or attach to the receipt each credit received (i.e. defective item, wrong item
sent, etc).
 Notify your agency procurement card program administrator before you leave your position or
when you no longer need a procard.

Note: Improper use of the procurement card may result in revocation of card and disciplinary
action, up to and including termination of employment. For the first substantiated violation,
the agency shall, at a minimum, issue an appropriate reprimand that includes a specific notice
that a second violations will result in revocation of the procurement card and further potential
disciplinary action, up to and including dismissal. Any substantiated second violation, within
two years of the first violation shall automatically result in revocation of the procurement card, in
addition to any further disciplinary action as warranted.

- 12 -
Responsibilities of the Organizational Unit’s Procurement Card
Custodian
The custodian is responsible for the organizational unit’s procurement card and has the discretion to
determine if an employee may use the organizational unit’s card.

The custodian must maintain a detailed card use log that includes:
 The card user’s name; Formatted: Bullets and Numbering
 The card user’s signature;
 The date and time the card is logged out;
 The date and time the card is logged back in;
 The vendor to be used;
 The items to be purchased.

NOTE: It is essential that the custodian maintain a detailed log to ensure that he/she is
not held responsible for any misuse of the card when it is not in their possession. If the
custodian is unable to show where the card was when not in his/her possession via detailed
logs and misuse occurs, he/she is responsible for any violation. The card must be in a
secured or locked location when not signed out.

The procurement card custodian is responsible for:

 Reconciling the procurement card billing statement at the end of each billing cycle to all cashier Formatted: Bullets and Numbering
receipts and invoices to ensure the accuracy of the statement.

 Submitting to the agency procurement card administrator, on at least a monthly basis, a valid Formatted: Bullets and Numbering
receipt for each charge. The receipts for each procurement card cycle must be submitted to the
administrator within four (4) business days after the end of the cycle.

For each procurement card cycle, when there are purchases on the card, the custodian will
receive:
1. An activity report from the agency procurement card program administrator.
2. A monthly statement from the financial institution (Bank One) that holds the procurement card
contract.

 The custodian must reconcile the activity report against the monthly statement to ensure the
accuracy of the billing by the financial institution. The custodian shall identify the description and
purpose of the transaction on the report, if not readily understandable based on the goods
procured.

 The custodian and his/her immediate supervisor must sign the activity report stating that the
purchases were for the benefit of the Commonwealth and not for personal use.

 This statement/activity report must be submitted to the administrator within four business days after
the end of the cycle.

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Responsibilities of the Organizational Unit’s Procurement Card
Users
 Be aware of allowable purchases on the card as referenced in FAP 111-58-00, FAP 111-55- Formatted: Bullets and Numbering
00, and FAP 220-10-00 and the blanket approval provided by the agency.
 Obtain pre-approval from your supervisor for each purchase not explicitly authorized in
writing before logging out the organizational card from your agency’s custodian.
 Log out the card with the card custodian.
 Not use the card for purchases from the Internet.
 Maintain documentation that provides detail supporting the purchase as a legitimate Formatted: Bullets and Numbering
business expense within the guidelines of the program (FAP 111-58-00). This documentation
should include, but shall not be limited to, the following items:
 Cashier’s receipt or vendor invoice identifying the items purchased
 Receipts for credit transactions
 Packing slip (for goods received) or service report for any service performed, when agency-
required
 Order form or application, when agency-required
 Internal order form, when agency-required
 Not violate any procurement laws, regulations, policies, procedures or the Executive Formatted: Bullets and Numbering
Branch Code of Ethics.
 Inform merchant that your card is tax exempt because you are an agent of the
Commonwealth. (Tax exempt number is on the back of the card.) A copy of the certificate must be
sent to the vendor upon request.
 Ensure sales tax is not charged.
 Ensure shipping and handling are included in the stated price.
 Request that the vendor include a receipt with the package when placing an order. The Formatted: Bullets and Numbering
credit card receipt and packing slip may serve as supporting documentation. (However, since a
detailed receipt identifying goods or services must be submitted, the credit card receipt may be
used as a valid receipt instead of supporting documentation if it provides detailed information.)
 Do NOT return merchandise for cash.
 Do not share the card with another organizational unit within your cabinet/agency.
 Do not share the card with another employee.
 Ensure that all cardholder duties are performed for each transaction. Formatted: Bullets and Numbering

 If the location of the card is unknown for any time, notify Bank One immediately at 1-800-
316-6056. Failure to do so may result in penalty or removal of card. You must next notify your
organizational unit’s manager, the procurement card custodian and your agency’s procurement
card program administrator. (See the previous Security section).
 The card number shall not be written down, retained or used at the discretion an
employee.
 Do NOT use a procurement card for personal purposes.
 Log in the card with the card custodian.
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Procurement Card Internal Controls
An agency must establish internal controls, including separation of duties, (e.g., agency
procurement card program administrators and authorized signers must not be cardholders) to ensure
that applicable procurement and payment policies are followed.

The agency’s fiscal officer is required to develop a written plan establishing such controls.

This plan should include the following procedures at a minimum:

a. Each cardholder and procurement card user must be informed, in writing, of the specific
goods and services that they are allowed to purchase without prior supervisory
approval.

b. Each cardholder and procurement card user must request prior supervisor approval for
any purchase that is not explicitly authorized in writing by the blanket supervisory
approval.

c. Each cardholder and organizational unit’s card custodian must submit to the agency
card administrator, on at least a monthly basis, a valid receipt for each charge. The
itemized receipt or email confirmation shall be issued by the merchant and identify the good or
service purchased. (Dues and subscriptions are allowed to be documented by an order form.)

All receipts are required to be submitted to the administrator within four (4) business
days after the end of the procurement card cycle.

d. The cardholder or organizational unit’s card custodian and his/her immediate supervisor
must sign a statement that the purchases were for the benefit of the Commonwealth and
not for personal use for each procurement card cycle, where the cardholder or
organizational unit’s card custodian has made purchases.

Each cardholder or organizational unit’s card custodian shall identify the purpose of the
transaction, if it is not readily understandable based on the goods procured.

This statement shall be submitted to the administrator within four (4) business days after
the end of the cycle.

d. Purchases of food or beverage must be accompanied by documentation explaining the
reason for the purchase, justification of the need, and proof that the cardholder’
purchase benefited the Commonwealth. Examples of this documentation include, but are
not limited to, prior approval memos, meeting minutes and board calendars.

e. Each cardholder and organizational unit’s card custodian will receive a monthly
statement from the financial institution (e.g., currently Bank One).

Each cardholder and organizational unit’s card custodian must reconcile the activity
report (received from the procard administrator) against the monthly statement to ensure
the accuracy of billing by the financial institution.

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The cardholder and organizational unit’s card custodian should:

1. Verify that each listed charge on the statement is valid and matches the
transaction documentation (i.e., itemized receipts),
2. Identify any disputed charges (except for department cards), and
3. Reconcile credits in the same manner as transactions.

f. Each agency shall take appropriate disciplinary actions whenever any violation of this
policy is identified.

For the first substantiated violation, the agency shall, at a minimum, issue an appropriate
reprimand, including specific notice that a second violation will result in revocation of card
privileges and further potential disciplinary action up to and including dismissal. Any
substantiated second violation within two (2) years of the first violation shall automatically result
in revocation of card privileges, in addition to further disciplinary action as warranted.

Any violation that involves the use of the card for personal purposes shall require the agency to
collect reimbursement of the charge, along with revocation of card privileges and disciplinary
action as either or both may be deemed appropriate under the circumstances.

g. During each cycle, each agency procurement card administrator shall either:

1) Report to his/her secretary or agency head and to the Office of the Controller any
noncompliance by any cardholder or organizational unit’s card custodian or card
user, OR
2) Attest that all purchases are in compliance with FAP-111-58-00.

Verification that transactions are in compliance includes but is not limited to, identifying
transaction amounts that exceed either monthly or single transaction limits, split transactions,
transactions with unidentified or restricted vendors, sharing individually issued cards, use of
multiple cards by employees not so authorized, transactions during employee vacations and
weekends, and declined transactions.

h. Each agency must establish a process to examine and monitor compliance with FAP
111-58-00 by cardholders, organizational unit’s card custodians, card users, authorized
signers and agency procurement card administrators. The results of reviews must be
documented and retained.

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FAP 111-58-00
PROCUREMENT CARD PROGRAM
A procurement card may be used by a state employee for both the purchasing of goods and services,
and the payment for those purchases. The use of a procurement card by employees of the
Commonwealth is authorized as another payment option to the One Price Quotation procedure of FAP
111-55-00 for purchases listed in section 5 of this policy. Use of this card shall be in accordance with
the Commonwealth’s procurement laws, regulations, policies and procedures and the Executive
Branch Code of Ethics. A purchase transaction processed against a procurement card shall comply
with the requirements of the Finance and Administration Cabinet Manual of Policies and Procedures,
except as modified herein. Each agency shall ensure that its employees adhere to this policy. A
violation may result in action at the discretion of the Finance and Administration Cabinet in accordance
with Kentucky Revised Statutes.

1. A participating agency shall sign and accept the terms and conditions of the Commonwealth of
Kentucky Procurement Card Site Agreement. A procurement card may be issued to a
Commonwealth of Kentucky employee, an organizational unit, or Kentucky National Guard member
as authorized in section 3 of this policy.

2. Each frequent user should be issued an individual card. An employee issued an individual card
shall sign and accept the terms and conditions of the Commonwealth of Kentucky Procurement
Card Cardholder Agreement provided by the Finance and Administration Cabinet. An individual
card embossed with an employee’s name shall be used exclusively by that employee and shall not
be shared or loaned to other employees.

3. A procurement card may be issued to an organizational unit that is logistically separate from the
associated cabinet or agency. Written justification shall be sent to and prior approval shall be
obtained from the Office of the Controller for each card. Justification shall include an explanation of
why the card is needed, expected types of transactions, and how the organizational unit functions
within a cabinet or agency. In addition to the other sections of this policy, controls and restrictions
on procurement cards issued to organizational units are as follows:

a. Procurement cards shall not be shared between organizational units of a cabinet or agency.

b. Not more than one organizational unit procurement card shall be issued to one physical
location.

c. The agency head or the agency head’s designee shall sign the Commonwealth of Kentucky
Procurement Card Cardholder Agreement for the organizational unit card provided by the
Finance and Administration Cabinet.

d. The procurement card shall not be used for purchases from the Internet.

e. The procurement card shall be stored in a secured area with access limited.

f. The agency head shall assign one employee in the organizational unit to serve as the
procurement card custodian. The custodian shall be responsible for the organizational unit’s
procurement card, and shall have discretion to determine if an employee may use the
organizational unit’s card.
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g. The procurement card custodian shall maintain a detailed card use log that includes the
cardholder’s name, cardholder’s signature, date and time logged out, date and time logged in,
vendor, and items to be purchased.

h. Each purchase shall be pre-approved before the card may be logged out.

i. The employee using the organizational unit’s card and the procurement card custodian shall
ensure that all cardholder duties are performed for each transaction.

j. If the location of the card is unknown for any period of time, the employee who signed out the
card shall notify the issuing bank, the organizational unit’s manager, the organizational unit’s
procurement card custodian, and the agency’s procurement card program administrator.

k. The card number shall not be written down, retained or used at the discretion of an employee.

l. Each employee shall receive a copy of this policy and other written material given to other
cardholders in the cabinet or agency before using the organizational unit’s procurement card.

4. A card may be issued to a Kentucky National Guard member, if the Governor orders the Kentucky
National Guard into active duty pursuant to KRS 38.030. Each participating National Guard
member shall sign and accept the terms and conditions of the Commonwealth of Kentucky
Procurement Card Cardholder Agreement. The procurement card program administrator of the
Department of Military Affairs shall retain the card in a central location when not being used by the
Kentucky National Guard member on active duty. The card shall be cancelled at the conclusion of
the Guard member’s active duty.

5. The procurement card may be used for the following transactions, if within the card limit:

a. Any purchase not prohibited in section 6 of this policy, and not otherwise allowed by
subsections b-h of this section, that is no greater than the limit established for the card or the
agency’s small purchase, single quote limit, whichever is less.

b. Any purchase from a Master Agreement or Catalog Master Agreement. If the contract
purchase is greater than the single purchase limit established for the card, the order shall be
processed electronically on the state’s procurement system.

c. Any utility payment, regardless of the dollar amount.

d. Registration fees for employee training and conferences.

e. Out of state purchases of fuel for motor pool vehicles only if the state fleet management fuel
card is not accepted. The cardholder shall attach an approved authorization for travel outside of
Kentucky and a statement that the fleet management card was not accepted by the vendor to
the vendor’s invoice and submit with the transaction report.

f. Photocopying costs if the employee’s agency is located outside of Franklin County.

g. Purchases from Kentucky Correctional Industries.

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h. Purchases from the Department of Education’s online bookstore.

6. The procurement card shall not be used for the following transactions:

a. Travel and entertainment related expenses and advances.

b. Alcoholic beverages.

c. Automotive gasoline, except as stated in subsection 5(e) above.

d. Cash advances.

e. Salaries and wages.

f. Legal services.

g. Lease purchases.

h. Insurance premiums and bonds.

i. Services covered by Personal Service Contract statutes and regulations.

j. Printing services.

k. Purchase from another Commonwealth agency, except if expressly permitted by the Finance
and Administration Cabinet.

l. Used equipment.

m. Purchase from an auction.

7. An agency shall ensure that, for every card issued, the Cardholder Controls Merchant Category
Code Group on the Purchasing Card Cardholder Account form lists the code for liquor store as an
excluded merchant category.

8. Purchases shall be for the use and benefit of the Commonwealth. No personal purchases shall be
allowed.

9. A cardholder shall report a lost or stolen card immediately to the issuing bank, the cardholder’s
supervisor, and the agency’s procurement card program administrator. A new card shall be issued
if approved by the cardholder's supervisor. A card that has been reported lost or stolen that is
subsequently found shall be given to the agency procurement card program administrator.

10. A cardholder shall, as an agent of the Commonwealth, ensure the proper use of the
Commonwealth’s tax exempt registration number.

11. A cardholder shall properly inspect all shipments. In case of returns, a cardholder shall coordinate
the return directly with the supplier and contact the agency program administrator with any
unresolved issues. Returns for cash are not permitted.

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12. An agency shall maintain the documentation for all transactions in accordance with the General
Schedule for State Agencies, FAP 111-28-00 and FAP 120-21-00. Receipts for source
documentation shall include the vendor’s name, date of purchase, description of each item
purchased, price of each item purchased, total cost, cardholder name or card number, and
signature of cardholder or designee.

13. An agency shall ensure that the proper classification structure is charged for the purchase.

14. An agency shall attempt to resolve a dispute with the vendor. If a resolution is not achieved, the
agency shall report the dispute to the issuing bank.

15. Each head of an agency that is issued a procurement card shall select an agency procurement
card program administrator who shall administer the program. To ensure proper separation of
duties, the agency procurement card program administrator shall not be a cardholder. The
Finance and Administration Cabinet shall train the agency procurement card program administrator
on the implementation and operation of the procurement card program. The agency program
procurement card administrator shall manage the overall agency operation and cardholder training,
with duties to include but not be limited to the following:

a. Determination of the agency's employees and organizational units who may receive
procurement cards;

b. Approval and execution of each Cardholder Agreement;

c. Development and provision of mandatory training for each cardholder and organizational unit
card custodian prior to issuance of the procurement card. Employees who may use an
organizational unit’s card shall be trained prior to use of the card. The cardholder training shall
cover duties, responsibilities and procurement policies. Authorized signers and agency
procurement card program administrators shall attend training as directed by the Finance and
Administration Cabinet.

d. Assignment of a default accounting structure for each card;

e. Coordination of the disputed charges process;

f. Distribution of activity reports;

g. Coordination of the payment process to ensure that timely remittance is made;

h. Establishment of a procedure to provide reasonable assurances that cardholders receive no
monetary benefit from use of the card; and

i. Assurance that purchased items required to be included in the fixed asset inventory are
reported to the agency property officer or fiscal officer.

16. An agency shall receive and distribute information on all purchases to all cardholders and any
associated approving personnel. The cardholder or organizational unit’s card custodian shall
reconcile the procurement card billing statement at the end of each billing cycle to all cashier
receipts and invoices to ensure the accuracy of the statement. The cardholder shall address any
questions regarding disputed charges to the vendor reported on the statement and attempt to
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reach a resolution. If a resolution cannot be reached with the vendor, the cardholder shall contact
the procurement card program administrator.

17. An agency shall establish internal controls, including separation of duties, to ensure that applicable
procurement and payment policies are followed. The agency’s fiscal officer shall develop a written
plan establishing such controls. This plan shall include the following procedures at a minimum:

a. Each cardholder and procurement card user shall be informed, in writing, of the specific goods
and services that they may purchase with the procurement card, without prior supervisor
approval.

b. Each cardholder and procurement card user shall request prior supervisor approval for any
purchase not explicitly authorized in writing in accordance with subsection a. of this section.

c. Each cardholder and organizational unit’s card custodian shall submit to the agency card
administrator, on at least a monthly basis, a valid receipt for each charge. The itemized receipt
or email confirmation shall be issued by the merchant and identify the good or service
purchased. Dues and subscriptions may be documented by an order form. The receipts for
each procurement card cycle shall be submitted to the administrator within four (4) business
days after the end of the cycle.

d. Each procurement card cycle for which the cardholder or organizational unit’s card custodian
has made purchases, the cardholder or organizational unit’s card custodian and his or her
immediate supervisor shall sign a statement that the purchases were for the benefit of the
Commonwealth and not for personal use. Each cardholder or organizational unit’s card
custodian shall identify the purpose of the transaction, if it is not readily understandable based
on the goods procured. This statement shall be submitted to the administrator within four (4)
business days after the end of the cycle.

e. Purchases of food or beverage shall be accompanied by documentation explaining the reason
for the purchase, justification of need, and proof that they benefited the Commonwealth.
Examples of this documentation include, but are not limited to, prior approval memo, meeting
minutes and board calendars.

f. Each cardholder and organizational unit’s card custodian shall receive a monthly statement
from the financial institution that holds the procurement card contract. Each cardholder and
organizational unit’s card custodian shall reconcile the activity report against the monthly
statement to ensure the accuracy of billing by the financial institution. The cardholder and
organizational unit’s card custodian shall verify that each listed charge is valid and matches the
transaction documentation, identify any disputed charges, and reconcile credits in the same
manner.

g. Each agency shall take appropriate disciplinary actions whenever any violation of this policy is
identified. For the first substantiated violation, the agency shall, at a minimum, issue an
appropriate reprimand, including specific notice that a second violation will result in revocation
of card privileges and further potential disciplinary action up to and including dismissal. Any
substantiated second violation within two (2) years of the first violation shall automatically result
in revocation of card privileges, in addition to further disciplinary action as warranted. Any
violation that involves the use of the card for personal purposes shall require the agency to

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collect reimbursement of the charge, along with revocation of card privileges and disciplinary
action as either or both may be deemed appropriate under the circumstances.

h. During each cycle, each agency procurement card administrator shall report to his or her
secretary or agency head and to the Office of the Controller any noncompliance by any card
cardholder or organizational unit’s card custodian or card user, or shall attest that all purchases
are in compliance with this policy. Transaction validation shall include, but is not limited to,
identifying transaction amounts that exceed either monthly or single transaction limits, split
transactions, transactions with unidentified or restricted vendors, use of multiple cards by
employees not so authorized, transactions during employee vacations and weekends, and
declined transactions.

i. Each agency shall establish a process to examine and monitor compliance with this policy by
cardholders, organizational unit’s card custodians, card users, authorized signers and agency
procurement card administrators. The results of reviews shall be documented and retained.

18. An agency head shall either serve as, or appoint an employee of the agency to serve as, the
authorized signer with responsibilities including, but not limited to giving instruction to the
authorizing bank, and signing each Procurement Card Cardholder Agreement on behalf of the
agency as provided by the Finance and Administration Cabinet.

19. An agency shall process payments in the state’s procurement system in sufficient time to pay the
issuing bank. If authorization is not received in sufficient time, the agency shall be responsible for
payment of interest charges.

20. An agency shall ensure that all 1099 reportable purchases are coded to the proper object codes.

21. The Finance and Administration Cabinet shall maintain the overall responsibility for the
procurement card program, and shall take the following actions to ensure that each participating
agency is in compliance with this policy:

a. The Finance and Administration Cabinet shall make available a report for each cardholder to
identify his or her charges, to attach the valid receipts, and to confirm through both cardholder
and supervisory signature that the goods and services were for the use of the Commonwealth.

b. The Finance and Administration Cabinet may conduct an independent audit to ensure
compliance with this policy by each agency.

c. Monthly, the Finance and Administration Cabinet shall review reports and documentation
submitted by agencies. Based on card usage, the cabinet may determine that an agency or
cardholder shall be subject to additional review.

d. The Office of the Controller annually shall review the number of procurement cards issued
based on the organizational structure of the agency, ensure that a cardholder’s use of the
procurement card warrants the continued issuance of the card, and spending limits for cards.

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Questions
If you have questions regarding the procurement card program or this guide, please contact the
Finance & Administration Cabinet, Office of the Customer Resource Center (CRC) at 1-502-564-9641
or toll free at 1-877-973-4357.

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