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London Borough of Tower Hamlets
Case study – Purchasing Cards
Presentation By
David Pridmore
Senior Procurement Manager
Category & Contract Management
London Borough of Tower Hamlets
Food for thought
• Is it ever acceptable to spend Public Money on…
• Flowers for work colleagues?
• Meals to thank staff?
• Arsenal season ticket?
Time Line
• 1999 Purchasing Card programme started.
• 1999 Rolled out 4 Cards.
• 2000 Rolled out Cards Across the Council.
• 2006 Introduced D CAL.
• 2006 Most Categories opened and Limits increased.
• 2007 Card numbers peaked at 719 (361 active).
• 2007 Nil Assurance Audit.
• 2008 Purchasing Card Relaunch.
• 2009 Target £8M with 400 cards.
Why Tower Hamlets Implemented P Cards
• Implementing Electronic Government (IEG)
• 1998/99: > 18,200 orders < £250.
• Purchase to Pay unwieldy & costly
• Poor controls
• Management information
• Payment efficiencies
How Tower Hamlets implemented the scheme
• Business Case Prepared for Cabinet.
• Barclaycard GPC through OGC Framework.
• Guidelines and Protocols
• Transaction log
• Pilot: 4 cards
• Roll-out
Purchasing Card Review
• January 2006: 660 cards; 1895 transactions
• All Merchant Categories except cash
• Increased credit limits
– Monthly limit increased from £1,000 - £4,000
– Single Transaction limit from £250 - £1,000
– Monthly limit as high as £50,000
• Introduced embedded cards into corporate contracts
• Electronic Authorisation process
Benefits
• Quicker and easier
• Reducing high volume, low value and low risk
requisitions
• Able to manage and analyse purchasing
trends
• Reduced potential for duplication.
• Improved payment performance
• Reduced number of invoices
D Cal
• Since 2006
• Card holders able to review transactions
• Approvers able to approve transactions
• Cardholder able to assign VAT
• Monthly report: reviews and approvals
• Visibility of those who have not reviewed or
approved!
Internal Audit Concerns
• Ensure that all transactions are approved.
• Ensure that only the relevant Merchant categories
are opened.
• Ensure that all card holders and approvers have
been trained on D-Cal.
• Ensure that all card holders and approvers are
recorded on a single data base.
• Introduce a new procedure for leavers and maternity
leave.
• Produce a monthly exceptions report that identified
unusual spending patterns.
High Profile Cases
• Deputy Mayor of London
• Metropolitan Police
• East Riding Council
Re-Launch
LONDON BOROUGH TOWER HAMLETS
VISA CARD RE-LAUNCH
26TH SEPTEMBER 2008
Reasons for Re-Launch
• Low Assurance Audit Review.
• Rationalising the number of Cards whilst
increasing the expenditure.
• Updating our internal procedures.
• Creating a single Purchasing Card data base.
• Introducing Barclaycard on-line.
Re- Launch Benefits
• Reduced timescale of payments
• Reduced costs of procurement
• Improve focus and flexibility
• Ability to place orders quickly
• Reduce the volume of purchasing orders and
invoices
• Standard Merchant Categories; others subject to
business case
Re-Launch Efficiency Objectives
• OGC estimate: £28.00 saving per transaction
• 41,000 transactions: efficiency saving of £1million.
• Reduce the number of card holders whilst increasing
expenditure
• Rebate increased from £9,000 – >£18,000
• Ensure future expenditure directed towards corporate
contracts and agreed frameworks
Re- Launch - Risk Mitigation Actions
• Unauthorised expenditure.
• Correct levels of expenditure.
• Safeguards against the use of cards after
staff have left the Council.
• Inappropriate goods / services.
• Dormant cards in circulation.
• Rationalise the number of cards in
each department.
Re-launch – Approval Process
• Reviewing and approving of transactions
• Card holders review all their transactions on D-Cal as soon as
they receive their monthly statement.
• Cardholder responsibility to assign VAT
• Authorisers must approve all transactions 28th of each month.
• Transaction Log/Statements
• Continue to complete logs and get them approved.
What has been achieved by implementing cards
Based on the £28.00 per Transaction
identified by the National Audit Office.
From January 1st 2005 – September 30th 2009
Tower Hamlets have saved
£4,844,784
With 173,028 Transactions
How we evolved (spend £ Millions)
Total Spend
£8,000,000
£7,000,000
£6,000,000
£5,000,000
£4,000,000
£3,000,000
£2,000,000
£1,000,000
£0
2005 2006 2007 2008 2009
Total Spend £4,608,441.00 £4,419,941.00 £5,547,257.00 £6,754,272.48 £4,810,760.00
Card Numbers
Card Holders
800
700
600
500
400
300
200
100
0
2005 2006 2007 2008 2009
Ave Total Cards 665 671 619 489 433
Ave Active Cards 340 335 331 333 316
How we evolved (number of transactions)
Total Transactions
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2005 2006 2007 2008 2009
Total Transactions 29,812 31435 39670 42758 29353
Rebates
purchase card usage in relation to rebate levels
Rebates
2006/07 £9,000
2007/08 £16,000
2008/09 £18,000 active cards
trend
inactive cards
rebate levels
years
How we are moving forward
• Review of Cards in Corporate Contracts.
• Requisition 2 Pay
• D CAL Review
• Spend Analysis on review
• Supplier Engagement
Requisition 2 Pay
• Creates requisitions & orders
• On-line approval of orders through Workflow
• Pre-approved suppliers
• Automatic 3-way match
• End-to-end view of process from requisition-
to-pay
• Catalogues of goods & services
• Interface to finance system
• Process efficiencies
Traditional Processes
Problem 2:Invoice
processing is a
Requisition
slow, manual,
inaccurate and very
Purchase expensive process
Order
Supplier
Goods
received
Invoice
received
Invoice
Problem 1: Little approval
process
control over who
spends what, on
Payment
what and with
whom
The Future
• Full Review of Purchasing Cards against Requisition
2 Pay.
• Supplier Engagement Project.
• Review of D CAL against the Buying Solutions GPC
eSolutions system.
www.buyingsolutions.gov.uk/notices/downloads/doc-
184.pdf -
• Barclaycard On-Line Management of the Cards.
• Card Holder Statements on Line.
What do you think?
• Is it ever acceptable to spend Public Money on…
• Flowers for work colleagues?
• Meals to thank staff?
• Arsenal season ticket?
Lessons Learned
• Performance Indicators
• BVPI8
• Benefits realisation
• Need for monitoring
• Horses for courses
• Reputation risk
Summary
• Ensure Correct Procedures are in Place.
• Involve Auditors in the Implementation
process.
• Identify the areas of expenditure you want the
scheme to cover.
• Monitor Compliance.
• Review the scheme on a regular basis.
• Publicise the benefits and savings achieved
by the scheme.
Questions
Please contact me:
Tel: 0207 364 1538
Email: david.pridmore@towerhamlets.gov.uk
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