Policy and Procedures for Credit Card Use



Policy and Procedures for Credit Card UseBACKGROUND INFORMATIONMany public housing authorities allow the use of credit cards to facilitate purchases necessary for PHA operations, lodging, and travel to approved PHA functions, and to facilitate other necessary transactions where the use of a credit card would expedite the transactions in an efficient manner. However, the use of credit cards is a high-risk area for PHAs. A HUD OIG bulletin found that:“Next to cash, credit card abuse is the most common form of fraud. Commissioners must ensure that there are strong policies and controls surrounding the use of the PHA’s credit cards. Not only are credit cards often used to circumvent procurement rules but many times they are used for the credit card holder’s personal expenses which have nothing to do with the PHA’s operations. When these cases are disclosed it causes great harm to the PHA’s reputation as well as leading to considerable negative press.”It must be stressed that credit cards are a payment method and not a method of procurement. The use of the credit card should still conform to the policy and procedures set forth in the PHA’s Procurement Policy. In addition, HUD Handbook No. 7460.8 REV 2 (Procurement Handbook for Public Housing Agencies) requires that when using credit cards, PHAs must adopt reasonable safeguards and procedures to assure that the credit cards are used only for the intended purposes and that PHAs have guidelines for selecting merchants/vendors, tracking purchases, and card payment/settlement procedures.PHA should consider the following items in the development of a credit card policy.Authorized Credit Card Holders. PHAs should generally minimize the number of authorized users of a PHA credit card. The PHA should consider the needs of each department and PHA position in determining whether the issuance of a credit card is needed. Under no circumstance should a Board member be issued a credit card.Credit Card Limit. The policy provides an overall PHA and individual credit card limit as an example. The PHA should establish individual credit card limit for each position based on the type of items that can be purchased with the credit card, the PHA’s historical costs for these items, and the PHA’s ability to cover the loss if the credit card was to be mis-used.Limited Use of Credit Card to Order Maintenance or Office Supplies or Services. PHA best practice is that purchases of maintenance or office supplies and services should generally be made through a purchase order which provides for better tracking and easier reconciliation. The use of a credit card for routine purchases should only be made on an exception or emergency basis.Prohibition of Purchase of Office Equipment or Computer. PHA best practice is not to allow each office or individual to purchase their own printer or computer to ensure compatibility and minimize maintenance costs. As such, the PHA’s credit card policy should prohibit the purchase of office equipment or computer above a certain dollar value. This prohibition would prevent each office or individual from purchasing for example, a printer or computer which may not be compatible with or require more support to match other devices used by the PHA.Type of Credit Cards Permitted. The PHA’s credit card policy should minimize the number of credit cards that are maintained by the PHA. To that end, the PHA shouldUtilize a major credit card that is accepted by virtually all merchants (e.g., Visa, Mastercard, Discover, American Express, etc.).The PHA should prohibit the use of a merchant-specific credit card (with possibly the exception of a gas credit card) that cannot be used for purchases made at other stores.PHAs may choose to use a merchant-specific credit card (e.g., Exxon, Shell, Chevron, etc.) for the purchase of gas for the PHA vehicles or handle purchases of gas for PHA vehicles through a purchase order arrangement made with a specific store.Points, Rewards, Cash Back for Purchases Made on Credit Card. PHA best practice is to not allow for points, reward, or cash back earned on purchases made on the PHA credit card. However, if the authority’s credit card provides for points, rewards, or cash back, the following consideration should be made:With the exception of emergencies, the credit card cannot be used to make purchases in cases when a transaction fee is applied for payment made with a credit card versus other payment methods that are available to the PHA; andPoints, rewards, or cash back using the PHA credit card belongs to the PHA or program budget that is charged and can only be used for housing activities associated with the PHA or project.PHA Employee’s Use of Personal Credit Card for PHA Business. PHA should consider whether to allow or under what circumstances would the PHA allow a PHA employee to use their personal credit card for PHA authorized business purchases and be subsequent reimbursed by the PHA. For example, an employee that has been issued a PHA credit card should not use his or her personal credit card to purchase goods and services on behalf of the agency so as to earn points, rewards, etc. and seek reimbursement.This document provides two (2) samples of a PHA credit card policy and procedures.Sample 1 – Small PHA. This scenario provides an example credit card policy and procedure for a small PHA, where the need for use of a credit card is limited to the Executive Director.Sample 2 – Large PHA. This scenario provides an example credit card policy and procedure for a large PHA, where several staff may need the use of a credit card, such as the Executive Director, Program Directors, and Maintenance Supervisors.PHAs can simply cut and paste either or both samples into their policy and procedures document and modify as needed.OTHER ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for credit card use and the major assumptions that were used to develop the sample policies and procedures.Assumption – The use of a credit card would be only for low-valued goods and services when traditional payment options are not available or become burdensome. (All PHAs)Assumption – Small PHAs use a fee accountant and therefore the PHA does not have a finance director that can review and monitor the use of the credit card. (For proper controls the Board Chair should review the credit card statement at each monthly Board meeting.) (Small PHAs)Assumption –The maximum amount (i.e., limit) that can be charged to the credit card should be based on the type of items that can be purchased with a credit card, the PHA’s historical costs for these items, and the PHA’s ability to cover the loss if the credit card was to be mis-used. (All PHAs)Assumption –Board of Commissioner should not be issued a PHA credit card. (All PHAs)Assumption –Two options are provided for PHA’s policies and procedures for the treatment of points, rewards, cash back for purchases made on the credit card: 1) a prohibition on the earning of points, rewards, or cash back on the PHA credit card; and 2) allows points, rewards, or cash back to be earned using the PHA credit card but makes clear that rewards earned belong to the PHA or project budget that is charged and the card holder is prohibited from using the credit card if a transaction or convenience fee is incurred versus other payment method.Assumption – PHA employees that are issued a credit card are prohibited from using their personal credit card and seeking reimbursement unless it is an emergency or prior approval has been obtained from the Board or senior management, as appropriate. (All PHAs)Credit Card Use Agreement Form – A sample Credit Card Use Agreement form is provided with the credit card policy. (All PHAs)SCENARIO 1 – SMALL PHAsCREDIT CARD POLICYThe Authority will have use of a credit card to purchase limited materials, supplies, and services, and to facilitate other necessary transactions where the use of a credit card would expedite the transaction in an efficient manner. Credit cards will be used only for the registration and pre-approved travel expenses related to conferences and/or workshops, and prepayments required by vendors where no other form of payment is accepted. Personal uses of the credit card is strictly prohibited.Purchases made via the credit card must comply with the Authority’s procurement and financial policies and purchasing guidelines. A credit card is a method of payment and must conform to the PHA’s procurement and financial policies. In addition, all purchases made with the credit card must adhere to the approved operating budgets. Cash advances using the credit card is strictly prohibited.It is the policy of the PHA to minimize the number of credit cards that are maintained by the PHA. As such, the Authority only will use a major credit card that is accepted by virtually all merchants. The use of a merchant-specific credit card that cannot be used for purchases made at other stores is prohibited.The Authority will establish a credit card with a limit of $2,500. The card holder is solely responsible for all charges made to the credit card. Inappropriate use of the credit card will result in disciplinary action of the employee.[The following two (2) options are provided for PHA’s policy regarding the treatment of points, rewards or cash back for purchases made using the PHA credit card.]The credit card should not earn points, rewards or cash back.ORPoints, rewards, or cash back earned using the PHA credit card belongs to the PHA or program budget that is charged and can only be used for housing activities associated with the PHA or project. The credit card cannot be used as a payment method if a transaction or convenience fee is incurred.PHA employees that are issued a PHA credit card are required to use the PHA-issued credit card for permitted Agency business. Use of a personal credit card for permitted Agency business is not allowed unless it is an emergency or prior approval has been obtained from the Board.CREDIT CARD PROCEDURESThe following credit card procedures are to be followed: 1) authorized credit card holder; 2) employee responsibility; 3) use of credit card; 4) return of goods/purchases; and 5) account reconciliation process.Authorized Credit Card HolderThe Executive Director shall have available upon approval of the Board of Commissioners a credit card to be used ONLY for goods or services for the official business of the Authority. The Executive Director will be required to complete a Credit Card Use Agreement form. The form provides a list of requirements accepted by the card holder and an understanding of disallowed activities and cost.Employee Responsibility The Executive Director is responsible for the proper use and safeguarding of the credit card issued in his or her name. The Executive Director must immediately report any card that is stolen or that has fraudulent activity.The Executive Director is responsible for the purchases made on the credit card. If the Executive Director delegates use of the card to other individuals, the Executive Director is ultimately responsible for all charges against the card.Inappropriate use of the credit card for transactions not related to Authority business may result in disciplinary action. The Executive Director will be responsible for any unauthorized purchase related to the misuse of the credit card.The credit card shall be returned to the Chairperson of the Board BEFORE the Executive Director leaves the job as Director of the Authority.The Executive Director is prohibited from using his or her personal credit card and seeking reimbursement unless it is an emergency or prior approval has been obtained from the Board.Use of Credit CardThe Executive Director may make purchases in person, by phone, or on the internet. Items must be shipped to the Authority business address. Telephone and internet purchase must be made with reputable vendors only and the vendors must be notified at the time of purchase that the Authority is tax exempt.The Authority’s credit card may not be used for the following purchases:Office equipmentRoutine purchase of maintenance supplies, office supplies, or services that can be purchased using a purchase order, unless approved by the BoardMaintenance tools and equipment over $250Personal items of any kindReturn of Goods/PurchasesThe Executive Director is responsible for returns of goods purchased by the credit card and returns should be credited back to the card. Cash refunds are strictly prohibited.Account Reconciliation ProcessWhen the credit card is used, the guidelines below shall be followed:The Executive Director must retain all receipts, credit card slips, and other documentation supporting any charges against the card;Pay the credit card statement in full each month; andBefore payment is made, the Chairperson of the Board will review the costs and initial each monthly credit card statement as approved.SCENARIO 2 – LARGE PHAsCREDIT CARD POLICYThe Authority will have use of a credit card to purchase limited materials, supplies, and services, and to facilitate other necessary transactions where the use of a credit card would expedite the transaction in an efficient manner. Credit cards will be used only for the registration and pre-approved travel expenses related to conferences and/or workshops, and prepayments required by vendors where no other form of payment is accepted. Personal use of the credit card is strictly prohibited.Purchases made via the credit card must comply with the Authority’s procurement and financial policies and purchasing guidelines. A credit card is a method of payment and must conform to the PHA’s procurement and financial policies. In addition, all purchases made with the credit card must adhere to the approved operating budgets. Cash advances using the credit card are strictly prohibited.It is the policy of the PHA to minimize the number of credit cards that are maintained by the PHA. As such, the Authority only will use a major credit card that is accepted by virtually all merchants. The use of a merchant-specific credit card that cannot be used for purchases made at other stores is prohibited.The Authority will establish a corporate credit card with an overall limit of $25,000. Each card issued will have an individual limit of $5,000. The card holder is solely responsible for all charges made to the credit card. Inappropriate use of the credit card will result in disciplinary action of the employee.[The following two (2) options are provided for PHA’s policy regarding the treatment of points, rewards or cash back for purchases made using the PHA credit card.]The credit card should not earn points, rewards or cash back.ORPoints, rewards, or cash back earned using the PHA credit card belongs to the PHA or program budget that is charged and can only be used for housing activities associated with the PHA or project. The credit card cannot be used as a payment method if a transaction or convenience fee is incurred.PHA employees that are issued a PHA credit card are required to use the PHA-issued credit card for permitted Agency business. Use of a personal credit card for permitted Agency business is not allowed unless it is an emergency or prior approval has been obtained from the Executive Director.CREDIT CARD PROCEDURESThe following credit card procedures are to be followed: 1) authorized credit card holder; 2) employee responsibility; 3) use of credit card; 4) return of goods/purchases; and 5) account reconciliation process.Authorized Credit Card HoldersThe administrator of the credit cards will be the Director of Finance. Card holders will be required to complete a Credit Card Use Agreement form. The form provides a list of requirements accepted by the employee as well as providing an understanding of disallowed activities and costs. Credit cards will be issued to the following positions:Executive DirectorAsset ManagerHCV Program ManagerDirector of FinanceMaintenance SupervisorEmployee ResponsibilityEmployees are responsible for the purchases made on their credit card. The card holder may delegate use of the card to other individuals within their department, but the card holder is ultimately responsible for ll charges against the card.Card holders are responsible for the proper use and safeguarding of the credit card issued in their name. The card holder must immediately report any card that is stolen or that has fraudulent activity.Inappropriate use of the credit card for transactions not related to Authority business may result in disciplinary action. The card holder will be responsible for any unauthorized purchases related to the misuse of the credit card.PHA employees that are issued a PHA credit card are prohibited from using their personal credit card and seeking reimbursement unless it is an emergency or prior approval has been obtained from the Board.Use of Credit CardThe card holder may make purchases in person, by phone, or on the Internet. Items must be shipped to the Authority business address. Telephone and Internet purchased must be made with reputable vendors only and the vendor must be notified at the time of purchase that the Authority is tax exempt.The card holder must retain all receipts, credit card slips, and other documentation supporting any charges against the card. These items must be submitted to the accounting clerk as part of the reconciliation process.The Authority’s credit card may not be used for the following purchases:Office equipmentRoutine purchase of maintenance supplies, office supplies, or services that can be purchased using a purchase order, unless approved by the Executive DirectorMaintenance tools and equipment over $250Personal items of any kindReturn of Goods/PurchasesCard holders are responsible for returns of goods purchased by the credit card and returns should be credited back to the card. Cash refunds are strictly prohibited.Account Reconciliation ProcessThe card holder is responsible for submitting all credit card documentation to accounting for the monthly reconciliation of transactions. It is the responsibility of the card holder to investigate any discrepancies or erroneous charges to their card.Credit card statements will be delivered to the finance department for verification of purchases and reconciliation of charges. Accounting will review the monthly statements and reconcile all charges to the documentation received by the individual card holders.Executive Director or Board will ensure that any questionable charges are properly investigated and mitigated prior to payment of the credit card. ................
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