Purchasing Cards – Are They Right for Me?

by Casey R. Good, CPA, Audit Manager

Posted on June 27, 2018

Since their introduction in the early 2000s, Purchasing Cards (PCards) have increased in popularity throughout the country.  They offer several benefits to the procedures in the traditional accounts payable cycle, not requiring purchase orders and cutting physical checks.  With additional control established over the program, they can be appealing for school district use. 

Benefits of the program include:

  • Online/realtime management (review of expenses)
  • Useful for vendors that will not accept purchase orders
  • PCard expenses may be integrated into accounting software packages
  • Merchant Category Codes can restrict a given card to a type of purchase (i.e., maintenance can only buy from hardware stores)
  • Rebates or Cash Back

Perhaps the most enticing feature, cash back or rebates are offered by several vendors as an incentive for using their PCards.  Rebate revenue, if in same fiscal year can be used as a reduction of the original expenditure.  Otherwise, it should be recorded as miscellaneous revenue in the fund of the original expenditure if easily identifiable or in the Auxiliary Operations Fund.  If deposited in the Auxiliary Operations Fund, it can be used for any District purpose. 

Despite their benefits, however, there are also certain risks can be associated with a PCard program.  Most notably and depending on the implementation of the program, there is a risk of unapproved transactions at the department/site level as purchase orders are typically not required for use.  Additionally, there is an increased risk for fraudulent transactions if not used/monitored properly.  To mitigate this risk, the following key procedures should be clearly documented when implementing a PCard program:

  • PCard limits including transactional level and weekly/monthly limits
  • Purchases that can be made using a PCard
  • Roles and responsibilities for the PCard administrator, accounts payable, site/department administrator and the cardholder

Prior to implementing purchasing cards, districts should analyze their purchasing practices and determine if a PCard program would be beneficial.