CCAP Insurance Matters

By Bill Kruck, PLGIT Senior Marketing Representative

According to a recent news report, a group of Pennsylvania House Republicans is sponsoring a package of cost savings measures. Among those suggestions: pay for more state purchases with debit cards rather than checks. Representative John Bear claims electronic purchases would save the commonwealth between $62 million and $219 million dollars a year.

If a card-based purchasing system yields benefits for the state government, your county may also want to consider it. The use of a purchasing system (with a purchasing card at its core) saves time, adds security and essentially prepares your county for a trend in commerce where transactions are steadily moving from paper to plastic.

IT'S ABOUT TIME

While we have addressed the issues of purchasing card rebates and cost savings in previous articles, there are other elements that are equally important to the efficiency of daily county business, chief among these being time.

From requisitioning to reconciliation, purchasing cards can reclaim valuable time from each transaction. A 2007 Purchasing Card benchmarking report by RPMG Research reported that the use of purchasing cards shaved five days in the time between the determination of a need and the actual receipt of goods ordered.

By handing cards directly to those workers making purchases, county officials eliminate the burdensome requisition process of identifying needed products and paying for them. Use of purchasing cards eliminates the need for purchase orders for expenses like gas or hotels, and county officials spend less time on the process of requisitioning, purchasing, and invoicing for minor recurring purchases.

Managers can check specific records and run reports using a purchasing card's online database, as well as export purchasing card records into their preferred accounting software, all of which saves hours - perhaps days - in the record keeping process. In addition to the benefit of convenience, the time savings translate into a more efficient use of staff hours, better productivity and, ultimately, better use of funds.

SECURITY

In addition to improved efficiency, the use of purchasing cards also adds a solid layer of protection for any county.

Paper checks, which have historically been the most common form of payment, have proven to have some inherent weaknesses: a slow clearing process, the degree of human handling and the ready availability of sophisticated technology make paper checks especially vulnerable to fraud. In addition, paper checks may be subject to alteration or counterfeiting or create a potential for identity theft (yes, counties have identities).

Successful purchasing card programs are safeguarded with a combination of upfront controls and back-end auditing practices. In addition to required training, some common upfront measures include the establishment of cardholder transaction limits, monthly spending limits and the blocking of unauthorized merchants.

For example, workers who buy office supplies on a regular basis can have their shopping limited to a specific amount in a specific store over a specific time period (weekly, monthly or annually). Supervisors can adjust the limits as needed, and with their ability to access purchasing accounts online, it is far easier for managers to see how much is being spent by whom and on what items. This "quick-check" ability not only gives managers greater oversight, but it also serves as a deterrent against card misuse.

Staying ahead of the trend

As society in general moves toward a paper-free mode of commerce, so are counties and municipalities with foresight. As the footprint of transactions expands, the use of local or regional paper checking will begin to present more challenges. As checks continue to be processed with a standard 72-hour delay for review, purchasing cards, especially those issued by organizations like PLGIT, will continue to gain broad acceptance.

The likelihood of the trend reversing is very unlikely. In fact, a study by the global consulting firm Accenture found that, even in 2007, purchasing cards were used in 28 percent of business transactions, compared with 6 percent in 2003. With the exponential growth of technology, that number has almost certainly grown at an accelerated rate.

The PLGIT P-Card: Developed for Counties

Many financial institutions offer their own version of a purchasing card as well as incentives to use them. While some purchasing cards come with costs and fees that vary from provider to provider, there is no cost to join the PLGIT P-Card Program.

Service. The PLGIT program offers customers free 24-hour, online access to their account balances. In addition, the PLGIT-sponsored program provides participating entities with complete instructions on implementing their P-Card program. This instruction includes a free policy and procedures manual that governs the use of the cards.
Security. Even with their measures of security, P-Cards are not foolproof. To protect governments and their taxpayers, the PLGIT program offers liability coverage against abuse. Federal tax identification numbers are used in the card application process, as opposed to an individual's social security number.
Rebate. It is worth reiterating that, in addition to the time and security savings, the PLGIT P-Card offers a rebate on cumulative purchases over a certain amount.

The PLGIT P-Card, a MasterCard offered through Harris Bank, compares favorably with competing cards, offering higher rebate percentages and lower thresholds for receiving rebates. At the end of the most recent spending cycle, rebate checks were sent out to 123 participants totaling $105,000. A total rebate of $187,981 has been distributed since the program's inception.

Any simplified, hassle-free process that can help managers better execute their duties will yield significant benefits and peace of mind. A streamlined purchasing process, with substantial time savings and security measures can be just such a process. If your county is considering P-Cards, take time to compare all competing products, and review the details of the PLGIT-sponsored program.

For information contact Bill Kruck, Senior Marketing Representative working in PLGIT's Pittsburgh office, at (800) 388-4736, or call your PLGIT representative at (800) 572-1472.

This information does not represent an offer to sell or a solicitation of an offer to buy or sell any fund or other security. Investors should consider the investment objectives, risks, charges and expenses before investing in any of the Trust's portfolios. This and other information about the Trust's portfolios is available in each portfolio's current Information Statement, which should be read carefully before investing. Copies of these Information Statements may be obtained by calling (800) 572-1472 or are available on the Trust's website at www.plgit.com. While the PLGIT and PLGIT/ARM portfolios seek to maintain a stable net asset value of $1.00 per share and the PLGIT/TERM portfolio seeks to achieve a net asset value of $1.00 per share at its stated maturity, it is possible to lose money investing in the Trust. An investment in the Trust is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Shares of the Trust's portfolios are distributed by PFM Fund Distributors, Inc., member Financial Industry Regulatory Authority (FINRA) (www.finra.org). PFM Fund Distributors, Inc. is a wholly owned subsidiary of PFM Asset Management LLC. Member SIPC.

SMPLGIT, PLGIT-Class Shares, PLGIT/PLUS-Class Shares, PLGIT/I-Class Shares, PLGIT/TERM, PLGIT-CD, PLGIT/ARM, PLGIT/SAM, and PLGIT-CAP are service marks of the Pennsylvania Local Government Investment Trust.

The Pennsylvania Powercard Program (the "Program") offers a Procurement Card (a "P-Card"), issued by Harris Bank, N.A., and marketed by PFM Financial Services LLC. PLGIT is a Program sponsor and the Program is marketed to PLGIT Participants. PLGIT receives no compensation for its sponsorship and the Trust is indemnified against any liabilities or costs relating to the Program.