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Results of the Survey on Acquisition Card Usage

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DATE: December 18, 1996

TO: Senior Financial Officers and Senior Full-time Financial Officers

SUBJECT: Results of the Survey on Acquisition Card Usage

Late this past summer, we surveyed users of acquisition and travel cards. Our report on the acquisition card survey results is attached and I will send you the travel card survey report shortly. The acquisition card survey raises some issues we must address and I will describe them in this letter. Those departments using the Mastercard for their acquisitions will find a monthly report on purchases attached as well which I will also mention.

It is apparent from reports we receive from the credit card companies that the card is becoming the payment vehicle of choice, and we are projecting that this will continue for several years. We expect that using the card will bring labour savings over time and the survey supports this contention.

However, the reduction of labour in the procurement cycle does create control issues for the departments' comptrollers. Our survey reveals only a few instances of known card abuse, but it also shows that very little monitoring has been done and not much is planned for the next year. The Auditor General is now conducting a government wide audit of the acquisition card program and I encourage you to review your department's plans for an internal audit review of the program.

If your department uses Mastercard, a report is attached showing the breakdown of your department's expenditures to October 31. Any charges for airlines, lodgings, car rental, travel agencies, service stations or vehicle parts and repair are to be investigated as possible violations of Treasury Board policies. It may be that some of these expenses should have been charged to either a travel card or a fleet management card. From previous similar exercises, we know that vendor coding by the card companies may explain some of the charges. If your department is not complying with the policies, please take steps to correct the situation.

Many departments are having difficulty meeting their payment due dates and are paying late interest charges. Such expenditures are avoidable and I ask that you review your account verification practices taking into consideration the Treasury Board policy permitting post payment verification. We found some duplication of accounting records which could be a reason for the delays. Limited delegation of financial authority and limited decentralization of purchasing are other contributing factors within the departments' ability to change where management deems appropriate.

We noted a great range in the credit limits on the acquisition cards. Some were obviously far too low and created problems every month when accounts were not settled quickly enough to free up the credit limit. To take advantage of the credit card's power in the procurement process, limits must be adequate to the needs of the organization, and they would be worth reviewing in many departments.

On balance, departments seem quite satisfied with the program. They can generally point to labour savings, and they have very few issues with the card companies. Those raised in the survey, such as merchants increasing the price when a card is offered in settlement, will be discussed with the card suppliers.

On a personal note, I ask that you convey my appreciation to those people who responded to our survey. In many cases, they had to do some research before they could answer, and they did a fine job. We learned much from their work, and their comments will figure into the coming contract discussions.


R.J. Neville

Assistant Secretary and Assistant Comptroller General

Financial and Contract Management Sector



1.1 Government wide: The survey was sent to 84 departments and agencies at the end of July, 1996. At that time, there were:

  • 77 departments and agencies with cards;
  • 18,058 cards in circulation;
  • 46,351 July purchases, worth
  • $11.7 million
1.2 Updated Usage: Since the survey was conducted, more cards have been issued and use has increased. At the end of October 1996, there were:
  • 19,519 cards in circulation, used for
  • 57,251 October purchases, worth
  • $15.5 million.

1.3 Level of Response: Almost all of the larger departments and many of the smaller departments and agencies responded to the survey. Of the 84 surveyed:

  • 77 of 84 departments had cards (92%);
  • 38 departmental co ordinators responded (49% of 77 departments);
  • 36 departmental financial services responded (47% of 77 departments);
  • 609 cardholders responded (3.3%);
  • representing 83% of July purchases by all departments, in dollars;
  • representing 85% of cards in use by all departments.

1.4 Potential Growth in Use: Questions about potential to use more cards were not well answered and the data was not useful. As demonstrated in 1.2 above, use of the card is growing and our projections are as follows:

  Mar/97 Mar/98
Number of cards: 21,650 26,950
Transactions/month: 66,450 88,850
Value of purchases/ month: $18.8 million $26.1 million

1.5 Cardholders: It was interesting to see who acquisition card:

  • 24% of cards held by RC Managers;
  • 34% held by their secretaries or support staff;
  • 25% held by materiel personnel; and
  • 17% held by others, such as program officers.
1.6 Geographic Distribution: There is a fairly even distribution of cards geographically:
  • 33% at National Headquarters;
  • 30% at Regional/District Headquarters; and
  • 36% in Local Offices etc.
1.7 Distribution by Function: But, most cards are concentrated in Finance or Administration units across the country:
  • 65% in Finance/Administration; and
  • 35% in Program Operations.

1.8 Importance Of Choice Of Cards: The government currently has contracts with three suppliers of credit cards for the acquisition of goods and services other than travel and vehicle related expenses. Of those who answered the question, 66% stated that having a choice was important to them. They wanted to be able to use a second card when a merchant did not take the first one offered.

1.9 Actual Variety Of Cards In Possession: In spite of this, most had only one card, although they often stated their intention to apply for another, as follows:

  • 94% had only one card;
  • 5% had two cards; and
  • 1 % had three cards.

1.10 Low Credit Limits: Credit card companies will allow high credit limits in contrast with some managers who set them quite low. We found that the credit limits ranged from $100 to $300,000 at the extremes. A very low limit often leads to problems because it will often be exceeded when the previous month's account balance is not paid before the due date. Ten percent of respondents reported this was a problem either at month end or at year end.

In accordance with the policy, credit limits should be established to meet genuine requirements taking into consideration the monthly dollar purchase volume and the time the RC requires to settle its monthly account. Since the manager's liability is only $50 when a card is lost or stolen and then used, which is the essence of "low risk", consideration should be given to increasing credit limits wherever possible, perhaps using the survey results as a guideline. We found as follows:

Up to $1,000 6%
$1,001 $5,000 35%
$5,001 $10,000 16%
$10,001 $20,000 21%
$20,001 $50,000 18%
$50,001 $100,000 4%
Over $100,000 1%
Average limit per card companies $12,980

1.11 Types of Purchases: Respondents stated that the cards were generally being used to make routine purchases. Office supplies, books, periodicals, training courses, spare parts, software and computer were the most common expenditures. The card was occasionally used to pay for hospitality and conference expenses as well. However, monthly reports from the credit card companies indicate that some departments using the cards to make purchases which should perhaps be charged to travel cards or fleet management cards. Departments are expected to examine their use of the cards and take appropriate action if required with Treasury Board policy on the use of all cards.

1.12 Geographic Distribution of Suppliers: about domestic, US and foreign purchases were unreliable. Our own monthly reports show that the split is as follows:

  • 93.0% were domestic purchases;
  • 6.7% were US purchases; and
  • .3% were other currency purchases.


2.1 Cardholders with Travel Cards: Because cardholders often suggest combining all cards into one for all type of purchases, we asked how many acquisition cardholders also had Diners Club/enRoute individual travel cards. The percentage with both was higher than expected: 32% of those who responded had both cards. They were scattered throughout all levels of the government with no level having a greater concentration than another.

2.2 Combining Cards: When asked if they thought it would be beneficial to use the acquisition card to pay travel costs and vehicle related costs, cardholders responded as follows:

  • 51% favoured using it for travel; and
  • 55% favoured using it for vehicle costs.

The problems associated with combining the cards are discussed in Section 9.5 below.


3.1 Preference for Electronic Commerce: It is not surprising that departments would like to conduct their business electronically. We found:

  • 79% would prefer electronic communication;
  • 21% would prefer paper; and
  • none were then receiving electronic reports.

4.1 Co-ordinators' General Satisfaction: There was a very high level of satisfaction with the three card suppliers on matters such as access to representatives, speed of their response to inquiries, and the quality of reports. Our survey revealed as follows:

  • 95% of co ordinators said service was good or excellent; and
  • 96% of cardholders said service was good or excellent.

Most of the very few complaints from coordinators related to implementation issues such as documentation and training.

4.2 Cardholders' General Satisfaction: In general cardholders had very few problems with the card companies. We found:

  • only 2% of them reporting any problems over erroneous charges and the interest thereon and these problems were usually quickly resolved;
  • but 11.6% had problems reconciling, which is too high for such an important function.

4.3 Categorizing the Problems: There are three kinds of problems: those attributable to the card companies; those resulting from the merchants' practices; and those caused by the departments themselves. The survey revealed:

4.4 Problems with Card Companies: Attributable to the card companies, these issues are more related to industry practices than any negligence:

  • foreign exchange differences posted to accounts, a timing issue which confuses;
  • a lack of statement detail, which hinders matching to ordering documentation;
  • late statements, but the delay could be anywhere in the processing chain; and
  • erroneous charges on accounts, which were almost always corrected promptly, with the interest reversed.

4.5 Problems with Merchants: These issues are attributable to merchant practices, and are discussed in Section 7:

  • Different name on statement and invoice, which usually happens when the registered merchant is "operating as" a vendor under another name;
  • Back and partial orders create confusion;
  • Incomplete supplier documentation; and
  • Suppliers charging Retail Sales Taxes.

4.6 Problems with Departments: These issues are attributable to the departments, and discussed below in Section 6:

  • Internal accounting issues. new systems


5.1 Payment Options: The three contractors each offer one or more of the following payment terms:

  • Option 1: 30 days from invoice date, the PODD option;
  • Option 2: 25 days from invoice date, individual billings;
  • Option 3: 25 days from invoice date, consolidated billings; and
  • Option 4: 7 days electronic settlement, consolidated billings.

The survey question about payment methods was not well answered but the trend seems clear. Very few departments were using the fourth option of electronic settlement. The most common option was the second. This is probably a factor contributing to problems many departments had in meeting payment due dates, a subject discussed in the following section.

6.2 Account Verification Issues: The common practice seems to be to perform account verification before these accounts are settled. Those departments facing interest charges because of late payment should consider post payment verification. This is encouraged for low risk transactions by the Treasury Board policy on account verification which can be found in Chapter 2 5 of the Comptrollership component of the Treasury Board Manual. We found as follows:

  • 21% of cardholders find it difficult to verify monthly accounts in time to meet the due date;
  • 29% of those with problems give these accounts special high priority treatment to reduce risk of late payment;
  • 21% of them verify the accounts after payment; and
  • 44% did not explain their procedures but did complain that not enough time was allowed to settle the accounts. (44 of 101 responses to the question).

6.3 Urgent Cheque Issue as Solution: The number of financial services offices using PWGSC urgent cheque issue facilities to cope with due date pressure was quite high:

  • 14% Always or often use them;
  • 16% Seldom or occasionally use them; and
  • 62% never use them.

6.4 Productivity Gains: Still, productivity gains were widely reported:

  • 57% of finance offices reported work has been reduced from slightly to significantly;
  • 30% report that the work has remained about the same; but
  • 14% report that work has actually increased because of the acquisition card program.

When we looked more closely at the responses stating that the workload had remained the same or had actually increased, we could not reach any conclusions. Some used urgent cheque issue frequently, and others not at all.

6.5 Impact on Petty Cash: There has been some reduction in the use of petty cash for advances. We found:

  • 49% of financial services offices reported a decrease in the use of petty cash; and
  • 40% was the average decrease in the amount of petty cash used.


7.1 More Problems than Expected: Cardholders reported a problem rate higher than anticipated, as follows:

  • 15% of cardholders reported they problems when using the card;
  • 71 % of the problem was merchants not accepting the particular card offered; and
  • 3% of the problem was merchants who charged retail sales tax.

7.2 Price Increases: We were surprised by the high percentage of cardholders who reported that merchants were changing the price of goods or services when a credit card was offered to settle an account. According to the survey:

  • 3.5% reported merchants increased the price when an acquisition card was offered; and
  • 7.6% reported merchants withdrew discounts when an acquisition card was offered.

We understand that these practices violate the merchants' agreements with the card companies and have already relayed the message to the card suppliers.


8.1 Lost and Stolen Cards: Twenty one cards were reported lost or stolen in the past year by coordinators responding to the survey. Since the survey reflects activity in those departments holding 85% of all the 18,068 cards in circulation, extrapolation across government suggests that about one tenth of one percent of all cards are lost or stolen annually. Since our risk, according to our contracts with the card suppliers, is $50 for each card, the government's potential loss is about $1,200 annually.

8.2 Abuse by Cardholders: According to the survey, departmental coordinators know of very little abuse of the acquisition card, with only twenty incidents reported. The cards are currently used about 50,000 times per month.

8.3 Non compliance with Policy: Although most departrnents require employees to sign the obligations form when they are given a card, some do not. These departments are not complying with the Treasury Board policy on acquisition cards and they are expected to take steps to remedy this situation. The policy states that 'a written acknowledgement of responsibilities and obligations must be obtained from each cardholder.'

8.4 Unnecessary Restrictions on Use: A few departments have set restrictions on the use of the card other than those imposed by the Treasury Board policy. Unless they are established to meet very peculiar circumstances, such restrictions are seldom justified by the level of risk associated with using the card. A few managers have imposed restrictions on the types of merchants to be offered the card as payment. Some managers have imposed restrictions on the single transaction arnount which can be charged.

8.5 Monitoring the Program: Few departments mentioned that their monitoring techniques to ensure compliance included scrutiny by internal auditors. More effort needs to be put into the internal audit review according to the survey results which are as follows:

  • 59% reported that no intemal audit had yet been done of the program;
  • 63% of these departments did not plan to perform a review in the coming year; and
  • consequently, at the end of the coming year, 37% of all departments will not have performed internal audit review of the program.

The Auditor General is currently conducting a government wide review of the program. We encourage departments to conduct their own review to ensure compliance with the Treasury Board policy.


9.1 Interest on Overdue Accounts: Overwhelmingly, the most important issue for the departments was interest on overdue accounts and the processing problems caused by the short time for payment before the due date. According to the survey:

  • 79% of respondents stated that interest on late payments was an issue; and
  • 7% of respondents stated that acceptability of the card by foreign and remote suppliers was an issue.

9.2 How PODD System Works: The due date is calculated from the statement date, unlike trade accounts, and credit card companies will charge interest from the due date until the day the payment is credited to the account. There is no allowance for days in the mail. We have advised against using the Payment on Due Date System to settle these accounts. If it is used, these factors must be considered when specifying the due date since it will be the date the cheque is actually produced.

9.3 Most Often Suggested: The most common suggestions related to the proliferation of cards and interest charges, and according to the survey:

  • 21% suggested that the due date be extended;
  • 11% suggested that the card be the mandatory means of settling accounts, or at least, the preferred means; and
  • 32% suggested that the travel and fleet management cards should be combined with the acquisition card.

Some commentary on the feasibility of these suggestions is appropriate.

9.4 Comments on Extending the Due Date: The time allowed for settling accounts without attracting interest could be increased, but not without some kind of increase to the cost of the program, such as a transaction fee. The survey showed that departments have chosen payment options which do not carry transaction fees, choosing instead the shorter payment period although this creates pressure to process payments quickly. The problem remains one of adapting account processing practices to meet the shorter due date.

9.5 Comments on Mandatory Use of the Card: Treasury Board policy, as stated in Chapter 2 10 of the Comptrollership component of the Treasury Board Manual, emphasizes that credit cards are the preferred means of settling accounts, although other methods are not prohibited. There will always be a need for other means of paying bills as many merchants will continue to operate without accepting credit cards. Departments are free to consider the merchant's willingness to accept cards when making their purchase decisions.

9.6 Comments on A Single Card for all Purchases: Combining cards seems reasonable, and although there are some difficult issues which are briefly mentioned below, including changes to government policy, we will investigate the possibility further.

Information Requirements: Credit card companies do not currently capture the kind of information government requires and currently receives fleet management card system.

Personal Liability for Travel Expenses: Currently, travellers are personally liable for expenses charged to their travel cards, and only those which legitimate travel expenditures are reimbursed to them in the claim process. The departments are liable for expenses charge to acquisition cards. A way would have to be found to ensure that personal expenses such as room service are not chareged to the government account.

9.7 Delegation of Authority and Decentralization: With 24% of the cards in the hands of RC managers, and with 6% of the cards having a credit limit of $1,000 or less, we were surprised that there was only one suggestion to increase the level of financial delegation and that purchasing be decentralized. It was not much of an issue although delegation of Section 34 below the RC manager would accelerate the payment process, and decentralization would simplify purchasing.

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