SUBCHAPTER
9A. DISBURSEMENTS WITHOUT VENDOR CERTIFICATION
5:30-9A.1 Purpose
These
rules set forth standards for contracting units to follow when
using procurement cards and electronic funds transfers for the
acquisition of goods and services. These rules expressly permit the use of procurement
cards and electronic funds transfers in any of the circumstances
enumerated at N.J.S.A. 40A:5-16(c) and, therefore, permit payments
to procurement card issuers, notwithstanding the provisions of
N.J.S.A. 40A:5-16(a). These rules are intended to ensure that local
units understand the risks associated with the use of procurement
cards and electronic funds transfers in the acquisition of goods
and services and implement sound fiscal and control practices
governing such use. These rules do not permit the use of financial
institution credit cards or debit cards by contracting units,
nor do they alter or modify the requirements of N.J.S.A. 40A:5-16(b),
or N.J.S.A. 40A:5-17 regarding approval or payment of funds to
the procurement card issuer.
5:30-9A.2 Definitions
The
following words and terms, when used in this chapter, shall have the
following meanings, unless the context clearly indicates otherwise:
"Advance payment" means those transactions for which an obligation
to pay a procurement card issuer arises out of the acquisition of goods
and services permitted by N.J.S.A. 40A:5-16(c).
"Approval
Officer" means the supervisory individual who oversees the activities
of the Chief financial officer.
"Authorized procurement card user" means the individual employee
of the contracting unit authorized by the chief administrative officer
to make transactions using a procurement card and whose name physically
appears on the procurement card.
"Chief administrative officer" means the appointed employee
who oversees the day-to-day administrative affairs of the contracting
unit including, but not limited to the following titles: business administrator,
administrator, township or city manager.
In the absence of a chief administrative officer, the chief financial
officer shall assume the administrative procedures set forth in these
rules.”
"Chief
financial officer" or "CFO" means the individual statutorily responsible
for supervising the accounts and finances of a contracting unit, and
shall include any certifying and approval officer appointed pursuant
to N.J.S.A. 40A:5-17(a), or such individual in similar capacity legally
appointed by the governing body of a contracting unit.
"Contract"
means the written agreement entered into by a contracting unit and an
authorized procurement card user for the purposes authorized in these
rules.
"Contracting
unit" means any county, municipality, board, commission, committee,
authority or agency, and which has administrative jurisdiction over
any district other than a school district, project, or facility, included
or operating in whole or in part, within the territorial boundaries
of any county or municipality which exercises functions which are appropriate
for the exercise by one or more units of local government, and which
has statutory power to make purchases and enter into contracts awarded
by a contracting agent for the provision or performance of goods or
services.
"Disbursement"
means any payment of moneys, including any transfer of funds, by any
means, to the procurement card issuer, and for the purposes of these
rules, shall not include the obligation to pay arising out of transactions
consummated by the use of a procurement card.
"Electronic
funds transfer" means any method of transferring moneys permitted by
this rule that does not involve the physical presentation of a paper
check, including, but not limited to:
wire transfers, e-checks, automated clearing house (ACH) transfers,
and transactions initiated by phone or fax.
"Governing
body" means the board, commission, council or other body having control
of the finances of the contracting unit.
In those contracting units where a chief executive officer is
authorized by law to participate in such control through powers of recommendation,
approval or veto, the term includes such chief executive officer to
the extent of such participation.
"Issuer"
means the financial institution that has issued a procurement card,
provides services, billings and statements in support of a procurement
card or receives payments in satisfaction of obligations created from
the use of a procurement card. For
purposes of these rules, issuer includes intermediary transfer agents
who participate in the process of implementing electronic funds transfers
on behalf of the contracting unit.
"Local
unit" means a municipality, county, or authority subject to the "Local
Authorities Fiscal Control Law," P.L. 1983, c. 313 (N.J.S.A. 40A:5A-1
et
seq.).
"Payment
documentation" means such documentation, including evidence of approvals
and certifications, as is required by N.J.S.A. 40A:5-16(b), N.J.S.A.
40A:5-17 and these rules prior to the legal paying out of moneys.
"Permitted
use" means such use of procurement cards or electronic funds transfers
as are specifically permitted by action of the governing body and the
chief financial officer, but in no case beyond the scope of use permitted
by N.J.S.A. 40A:5-16(c) or these rules.
"Procurement
card," "P-card", or "purchasing card" means an account or the physical
card that represents an account governed by characteristics specific
to a procurement card. These
characteristics include limits of time, amount, access, and purchase
category controlled by the contracting unit in accordance with an agreement
with an issuer. While such cards may have the appearance of
a credit card, such as Visa™, MasterCard©, American Express
or Discover, such general-purpose cards are not procurement cards and
are not permitted under these rules.
"Procurement
card statement" is the detailed billing or portion thereof that lists
transactions initiated via procurement card, which statement is sufficient
for review and reconciliation and constitutes a part of the payment
documentation.
"Reconciliation
of activity" means the process used to determine that all transactions
on the procurement card statement are accurate, authorized and allocable
to encumbered appropriations.
"Supervisory
review" means the process performed by an individual in a supervisory
capacity to confirm the propriety and accuracy of procurement card use
initiated by subordinates.
"Transaction"
means any activity that may result in demand to the contracting unit
by a procurement card issuer for payment, or representing any other
change or adjustment to the procurement card account.
5:30-9A.3 Authorization to use procurement cards and electronic funds
transfers for the acquisition of goods and services
(a) The governing body of a contracting unit may
adopt policies that permit its specifically named employees to use procurement
cards or electronic funds transfers for the acquisition of goods and
services under the circumstances set forth in N.J.S.A. 40A:5-16(c). Such policies shall be in writing and shall
be approved by resolution of the governing body. Such policies shall not exceed the limits and requirements expressed
in the following conditions:
1. The conditions for advance payment under N.J.S.A.
40A:5-16(c)(1), covering circumstances when payment to vendors is required
in advance of the delivery of certain goods or services that cannot
be obtained from any other source at comparable prices, are as follows:
i. An individual transaction shall not exceed
15 percent of the contracting unit’s bid threshold;
ii. Advance payment is required by the vendor;
iii.
Comparable pricing is not otherwise obtainable for such goods or services
to be available at the time and place required; and
iv. The contracting agent has listed or otherwise
approved such item for purchase from a particular vendor.
2. The
conditions under N.J.S.A. 40A:5-16(c)(2), relating to circumstances
when ordering, billing and payment transactions for goods or services
are made through a computerized electronic transaction, are as follows:
i. Transactions occurring under these circumstances
shall not exceed 15 percent of the contracting unit’s bid threshold;
ii. When an order is placed from a computer to
a computer, such as on the Internet or similar computer network;
iii. The vendor requires immediate payment; and
iv. The contracting unit’s purchasing agent has
approved such item for purchase from a particular vendor.
3. The conditions under N.J.S.A. 40A:5-16(c)(3)
, which permits local units to pay out moneys without requiring certification
are as follows:
i. An individual transaction shall not exceed
15 percent of the contracting unit’s bid threshold, or shall be authorized
pursuant to a contract awarded by the governing body; and
ii. Certification is not readily obtainable by
the contracting unit; but such exceptions shall not include reimbursement
of employee expenses or payment for personal services.
4. The following circumstances are deemed appropriate
for P-card or electronic funds transfer use:
i.
Transactions shall be limited to the transaction thresholds specified
in (a) 1, 2 and 3 above;
ii. Items purchased must be tangible supplies,
parts or materials necessary for ongoing operation and function of the
contracting unit (for example, office supplies, sanitary supplies, auto
supplies), or non-tangible items including e-z pass and utility payments,
publications, memberships in organizations, conferences and training
fees;
iii. Such items are purchased in transactions where
vendor certification would not normally be readily available at the
time of purchase;
iv. The cost of such purchases is comparable to
costs available from other vendors where other vendors can provide the
required goods and services in a timely manner; and
v. The contracting unit’s purchasing agent has
approved such item for purchase from a particular vendor;
(b) This section does not change bid thresholds or
other limits in the Local Public Contracts Law (N.J.S.A. 40A:11-1 et
seq.).
(c) A procurement card number may be used in lieu
of a credit card number required by a vendor.
5:30-9A.4 Conditions for use of procurement cards
or electronic funds transfers; organization and access
(a) Contracting units shall meet the following
requirements prior to implementing procurement card and electronic funds
transfer programs:
1. The contracting unit adopt the appropriate administrative
ordinance or resolution authorizing the specific purposes for use of
procurement cards or electronic funds transfer consistent with the provisions
of N.J.S.A. 40A:5-16(c) and limited by these rules. Examples of specific purposes may include and
are not limited to acquisition of office supplies with individual value
of less than $50.00, membership dues, publication or subscriptions,
auto parts and supplies with individual values of less than $150.00,
parts and repairs necessary for the comfortable occupancy of municipal
buildings not to exceed $500.00.
2. The chief financial officer, in consultation
with the governing body or its designee, where applicable, shall promulgate
policies and procedures governing the use of procurement cards and cause
a copy of said policies and procedures to be distributed to each individual
whose duties may at any time include the use of a procurement card,
supervisory review, or reconciliation of activity.
3. The Chief administrative
officer, with the advice and consent of the Chief financial officer,
will identify authorized procurement card users within the organizational
structure that will benefit from the use of a procurement card and establish
limits by amount, period (time), and category of usage permissible.
The CFO shall identify an individual to conduct a supervisory
review of procurement card activity of these assigned individuals.
In the case of officers of the contracting unit, a peer may conduct
the supervisory review.
(b) An authorized procurement
card user is prohibited from using a P-card to conduct personal business
or for any circumstances that are not authorized in N.J.S.A. 40A:5-16(c)
or N.J.A.C. 5:30-9A.3.
5:30-9A.5
Procurement card limit and control requirements
(a) A procurement card differs substantially from
a credit card issued by a financial institution because of the controls
that may be exercised by the contracting unit.
Before selection of an issuer (and in addition to consideration
of fees and rebates, software and computer requirements, and accessibility
to the vendor), the following limits and controls shall be available
to and exercisable directly by the CFO or other management-level officers
of the contracting unit:
1. The ability to control limits on-line and in
real-time;
2. The ability to establish, change or delete limits
on each card individually;
3. The ability to categorically restrict the use
of individual cards;
4. The ability to establish a cumulative limit
for a specific period;
5. The ability to review current activity on-line;
and
6. The ability to receive sorted or sortable detailed
reports of activity, by authorized care user, department or spending
category.
5:30-9A.6 Electronic funds transfer authorization
Electronic
funds transfers shall be authorized by the CFO.
5:30-9A.7 Policies and practices governing use of procurement cards;
audit
(a) The contracting unit shall ensure that the use
of procurement cards is governed by sound fiscal and management controls. All policies and procedures shall be enforced
to ensure that the contracting unit shall establish procedures regarding
the use of procurement cards as follows:
1. All authorized procurement card users, individuals
responsible for supervisory review, individuals responsible for activity
reconciliations, the purchasing agent, and the CFO are required to complete
training on the policies and procedures governing the use of procurement
cards;
2.
Procurement cards shall be issued in the name of a specific individual. Said individual, upon completion of the requisite
training, shall complete and sign a contract of understanding that includes
financial responsibility for misuse of the procurement card. A card shall not be issued unless it can be
shown that such issuance is necessary for the conduct of ongoing operations
in the normal course of providing government services. Under no circumstance shall procurement cards be used to purchase
personal property or services, including travel and dining expenses. Existing law, N.J.S.A. 40A:5-16.1, provides
mechanisms for employees to receive travel and expense funds in advance. A procurement card is not to be issued to an
individual who is neither covered by a fidelity bond nor by a blanket
honesty policy held by the contracting unit and shall be cancelled if
a person to whom a procurement card is issued becomes ineligible for
coverage under the fidelity bond or blanket honesty policy; and
3.
Violations of policies governing the use of procurement cards
or intermediary transfer agents shall result in appropriate remedial
or disciplinary action without regard to the position held by the card
user.
(b) The CFO is responsible for the identification,
analysis and management of all risks associated with the use of procurement
cards.
(c) The contracting unit shall publish and distribute
within the organization all polices and procedures that govern all procurement
card users, their supervisors, the purchasing agent, the accounts payable
and accounting personnel responsible for reconciliation of procurement
card statements and the disbursement of funds in satisfaction thereof. Said policies and procedures shall, at a minimum,
describe the following:
1. Who may use a procurement card;
2. The documentation required to be submitted by
authorized procurement card users to support transactions, including
electronic funds transfers;
3. The training required before an individual is
permitted to use a procurement card;
4. The types of transactions permitted (personal
use is not permissible);
5. The initial limits and procedure for establishing
or revising limits in the future;
6. Encumbrance of limits assigned or amounts
to be transferred electronically;
7. The penalties and disciplinary action to be
assessed for improper use of a procurement card;
8. Who is to conduct supervisory reviews;
9. Procedures for contesting items appearing
on the procurement card statement;
10. Procedures for collecting restitution
resulting from misuse;
11. Reconciliation of activity; and
12. Requirements for distribution of funds
to the issuer.
(d) The CFO, with the assistance of the purchasing
agent, shall assure that the following information is gathered and reviewed
prior to any disbursement of funds to the issuer:
- Evidence
of each transaction, including a receipt or other acceptable documentation
provided by the vendor of goods or services, and certified by the
authorized procurement card user as having been received as described;
- Evidence
of supervisory review, certified by the reviewer that the purchase
was appropriate and necessary;
- A
reconciliation of activity performed upon the transaction evidence,
supervisory review and procurement card issuer statement; and
- A
distribution report indicating the complete allocation of funds to
be paid against previously appropriated and encumbered items.
(e) In addition to the annual assessment of internal
controls conducted by the registered municipal accountant, the CFO is
responsible for monitoring and assessing the quality of internal control
performance on a continuing basis to assure that all controls are actively
pursued each cycle without exception.
5:30-9A.8
Eligible procurement card issuers; eligible providers of
wire transfer services
Procurement
card issuers and providers of wire transfer services are to be financial
institutions chartered by Federal or state authority.
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