HomeMy WebLinkAboutIR 7895 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7895
c,{p,RTEAFd March 7, 1995
o� To the Mayor and Members of the City Council
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EXA Subject: Pilot Program for Procurement "Credit" Card Purchases
1873
The City of Fort Worth's financial system normally prints about 250 vendor
checks daily (excluding payroll checks). These checks represent approximately
400 invoices (payments are combined by vendor) which are individual billings
representing approximately 350 separate purchase orders. Many of these
purchase orders do not require a formal bidding process; that is, they can be
awarded and received by the various departments. These purchase orders are
typically of low dollar value and are often for items needed immediately from
established vendors with which the City has a history of purchasing. While
these PO's represent a low total dollar amount of expenditures, they comprise a
disproportionally large percentage in terms of the number of purchase orders.
These conditions -- repetitive, small purchases that do not require a formal
bidding process -- represented an opportunity for the Fiscal Services
Department. It takes the same amount of resources (excluding bidding) to
process a $5 purchase order and invoice as it does to process a $1,000 purchase
order and invoice. Our best estimate for the direct costs associated with
producing an individual check via the full PO/receipt/invoice process cycle is
$75. The procurement card project grew out of the desire to bring the costs of
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processing a payment down to the level of the actual cost of the good or
services purchased (plus the cost associated with an adequate system of internal
controls).
A pilot program to introduce a credit card procurement system was initiated in
November .1994. This effort put BankOne Mastercards into the'hands of 80
employee "guinea pigs", primarily in the City's General Services Division of
the Transportation/Public Works Department and the Equipment Services
Division of the City Services Department. Four months into the pilot project,
procurement card transactions represent approximately 25% of the volume for
those targeted purchase orders (or about 5% of all transactions). The current
volume (with the 80 initial users) is about 400 transactions and $15,000 per
month; this requires approximately 15 worker-hours of preparation and entry.
Under the existing PO/receipt/invoice system, this workload would have
required approximately 80 hours of preparation and entry. Again, these
numbers are averages based on the initial implementation of a trial program,
but they do seem promising in the ability to reduce the financial system
overhead.
The credit card system is not envisioned to replace the purchase order system
of procuring goods and services. It is simply another option in an array of
financial tools. The primary use of the credit card system will probably
remain as a means to purchase small dollar items (not requiring competitive
bids) by City personnel working outside of office areas. Items typically
purchased with the credit cards include minor construction and repair
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS-
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7895
GNp,RTEy�,,4
To the Mayor and Members of the City Council March 7, 1995
Page 2 of 2
*�T
1873 Program Subject: Pilot P ram for Procurement "Credit" Card Purchases
materials, equipment parts, miscellaneous travel expenses, and special order
supplies. The credit cards each have a $1,000 credit limit, and all are clearly
embossed with City of Fort Worth ownership and state tax identification
number. The controls over card purchases are currently more stringent (all
purchases are individually reviewed by the department and by Fiscal Services)
than normal purchase orders. All card transactions are handled and identified
separately. Card expenses are combined into the normal financial reporting for
all departments at month-end.
The CFW credit card entry system was designed, developed and implemented
by staff within the Fiscal Services Department. The credit card procurement
system is from BankOne Arizona located in Phoenix. The only external costs to
the City in the implementation of the procurement credit card system has been
the annual card fee of $40/card (a total of $3,200 for 80 cards). This cost is
divided among the participating departments. The annualized savings in
processing time is projected to be 3200 hours (evenly distributed among the
various affected departments), or an estimated $ 38,000 in worker-hours
available to pursue other duties.
r'
Bob Terrell
City Manager
ISSUED BY THE CITY MANAGER- FORT WORTH, TEXAS