COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 709
(By Senator Tomblin, Mr. President)
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[Originating in the Committee on Finance;
reported March 1, 2004.]
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A BILL to amend and reenact §12-3-10a, §12-3-10b, §12-3-10c,
§12-3-10d and §12-3-10e of the code of West Virginia, 1931, as
amended; and to amend said code by adding thereto a new
section, designated §12-3-10g, all relating to the purchasing
card program; providing for additional internal controls and
procedures; requiring training; modifying criminal penalties;
modifying fees; expanding the purchasing card advisory
committee; centralizing control in the auditor's office;
setting effective dates; and authorizing emergency rules.
Be it enacted by the Legislature of West Virginia:
That §12-3-10a, §12-3-10b, §12-3-10c, §12-3-10d and §12-3-10e
of the code of West Virginia, 1931, as amended, be amended and
reenacted; and that said code be amended by adding thereto a new
section, designated §12-3-10g, all to read as follows:
ARTICLE 3. APPROPRIATIONS, EXPENDITURES AND DEDUCTIONS.
§12-3-10a. Purchasing card program.
(a) Notwithstanding the provisions of section ten of this
article, payment of claims may be made through the use of the state
purchasing card program authorized by the provisions of this
section. The auditor
may establish a shall continue the state
purchasing card program for the purpose of authorizing all spending
units of state government to use a purchasing card as an
alternative payment method when making small
-dollar purchases. The
purchasing card program shall be conducted so that procedures and
controls for the
procurement and payment of goods and services are
made more efficient. The program shall permit spending units to
use
purchase purchasing charge cards to purchase goods and
services.
A purchaser using a purchasing card shall make all
purchases in compliance with all applicable statutes, rules,
policies and procedures governing the purchase. The auditor shall
biennially review the utilization levels and practices of
cardholders and establish by legislative rule a threshold for
termination of those purchasing cards not efficiently used. The
auditor shall also biennially analyze the number of purchasing
cards held by each agency, establish limits on that number when
appropriate, provide a written report to the joint committee of
government and finance by the fifteenth day of November of every
other year regarding the progress of the review and set by policy
the maximum number of cardholders allowed per agency or spending unit.
The amount of any one purchase made with the purchase charge
card shall not exceed the amount contained in the
jointly proposed
rules of the auditor and the purchasing division of the department
of administration proposed applicable legislative rule promulgated
in accordance with the provisions of article three, chapter
twenty-nine-a of this code:
Provided, That purchasing cards may
not be
utilized used for the purpose of obtaining cash advances,
whether the advances are made in cash or by other negotiable
instrument.
Purchases of Goods and services must be received
either in advance of or simultaneously with the use of a state
purchasing card for payment for those goods or services. The
auditor, by legislative rule, may eliminate the requirement for
vendor invoices and provide a procedure for consolidating multiple
vendor payments into one monthly payment to a charge card vendor.
Selection of a charge card vendor to provide state purchase cards
shall be
accomplished by competitive bid. The purchasing division
of the department of administration shall contract with the
successful bidder for provision of state purchase charge cards.
based upon expressions of interest submitted by charge card
vendors. The auditor with the assistance of the director of
purchasing shall contract with the successful vendor for provision
of state purchasing charge cards. The selection shall be based on
the combination of competence and qualification in the provision of services and a determination of the best financial arrangement for
the state. Purchase charge cards issued under the program shall be
used for official state purchases only. The auditor
and the
director of the purchasing division of the department of
administration shall
jointly propose rules for
promulgation
legislative approval in accordance with the provisions of article
three, chapter twenty-nine-a of this code to govern
the
implementation of the
purchase purchasing card program.
(b) For purposes of the purchasing card program, "spending
unit" means any department, agency, board, commission, officer,
authority, subdivision or institution of state government for or to
which an appropriation has been made or is to be made by the
Legislature. Except for spending units having five or fewer
employees, the head of each spending unit participating in the
purchasing card program or his or her designee shall designate one
or more purchasing card coordinators to serve the spending unit or
subdivisions of the spending unit. The appointees shall attend
annual training consisting of not less than six classroom hours
conducted by the auditor or the director of purchasing: Provided,
That at least one hour of training every year shall relate to
ethics and may be conducted by the auditor or the ethics
commission. All training shall be in a format approved by the
auditor. Purchasing card coordinators shall assure that
cardholders comply with all relevant statutes, rules, policies and procedures. Except upon prior written exemption by the auditor, no
purchasing card may be issued to or used by a purchasing card
coordinator.
(c) Each purchasing card coordinator shall hold a position of
knowledge and experience within the purchasing cycle of the
respective spending unit or subdivision of the spending unit. The
head of a spending unit or designee shall appoint purchasing card
coordinators in a sufficient number to allow thorough and timely
performance of their responsibilities. Purchasing card
coordinators shall, to the extent possible, occupy a supervisory or
managerial position senior to that of the cardholders subject to
the coordinators' oversight authority. The authority to approve
purchasing card monthly master invoices resides with the purchasing
card coordinator.
(d) Before an employee may be issued a card, the employee must
have successfully completed a training session specifically
designed for new cardholders. All cardholders shall complete three
hours of training biennially which may be conducted by the auditor:
Provided, That at least one hour of training every two years shall
relate to ethics and may be conducted by the auditor, the ethics
commission or by the agency's designated purchasing card
coordinator. The auditor shall approve the format for all
training.
(e) (1) The auditor shall impose by rule, penalties, including, but not limited to, suspension or termination of card
privileges, and fines for violation of any of the provisions of
this article, related rules or established purchasing policies or
procedures involving the use of a purchasing card. These rules
shall set forth graduated penalties for misuse. These penalties
shall include, but not be limited to, the following: The auditor
shall impose a suspension of purchasing card authority of a
spending unit or subdivision of a spending unit for the remainder
of the month of notification and three calendar months thereafter,
upon determination by the auditor that the head of the spending
unit has failed or refused to take corrective action as recommended
by the auditor, the director of the commission on special
investigations or the director of the legislative post audit
division or that the spending unit has a continuous ongoing
practice of misusing the purchasing card by engaging in unlawful
conduct related to the card or that the spending unit has engaged
in a continuous ongoing practice related to the use of the
purchasing card which is prohibited. Prohibited practices include,
but are not limited to, the following:
(A) Stringing transactions or splitting transactions, which
means the intentional manipulation of the ordering, billing or
payment process in order to circumvent the transaction limit
including splitting an invoice for more than the individual
transaction limit into more than one transaction or colluding with a vendor to split an order into separate invoices;
(B) Paying for 1099 reportable transactions without generating
the appropriate 1099 form;
(C) Failing to properly document and reconcile purchasing card
transactions;
(D) Purchasing goods or services the acquisition of which with
a purchasing card is prohibited by statute, rule, policy or
procedure. Except as permitted for higher education in article
five, chapter eighteen-b of this code, prohibited purchases
include, but are not limited to, payment for the following:
(i) Alcoholic beverages;
(ii) Cash advances;
(iii) Legal services;
(iv) Firearms and ammunition;
(v) Insurance premiums;
(vi) Travel-related gasoline;
(vii) Travel-related expenses;
(viii) Building leases; and
(ix) Telephone services;
(E) Acquiring goods or services for personal benefit;
accepting bribes, gratuities or kickbacks from vendors in any
amount or using the card to engage in other unlawful or unethical
practices; and
(F) Permitting more than one cardholder in each spending unit to pay registration fees, tuition costs and fees for attending
conferences with the card. These are not considered travel
expenses and may be paid with the card, provided that they are
job-related expenses, but each spending unit shall authorize only
one cardholder to pay for the unit's job-related tuition costs,
registration fees and fees for attending conferences.
(2) In those instances in which a spending unit consists of
two or more identifiable subdivisions, the auditor may limit the
suspension to one or more subdivisions of the spending unit in the
event the abuse of purchasing card authority is clearly shown to be
limited to one or more subdivisions, as opposed to the spending
unit as a whole.
(3) If the authority of a spending unit or subdivision to
participate in the purchasing card program is reinstated subsequent
to an initial suspension and the spending unit or subdivision is
found by the auditor to be eligible for suspension a second time
within a period of twelve months following the date of
reinstatement, the auditor shall impose a second suspension for the
remainder of the month of notification of the violation and twelve
calendar months thereafter.
(4) If the authority of a spending unit or subdivision of a
spending unit to participate in the purchasing card program is
reinstated subsequent to a second suspension and the spending unit
or subdivision is found by the auditor to have committed acts within twenty-four months following the date of reinstatement which
would again require suspension, the auditor shall impose a
suspension for the remainder of the month of notification of the
violation and for thirty-six calendar months thereafter. The
auditor shall propose rules for legislative approval setting forth
duration and conditions of probation to be applied to units
following suspensions.
(5) Provisions relating to the suspension or revocation of
purchasing card privileges of a spending unit do not apply in those
instances in which a spending unit discovered any of the violations
enumerated in this section internally and promptly took meaningful
corrective action to prevent future reoccurrences. Meaningful
corrective action includes written notification by the head of the
spending unit directed to the auditor, reporting the nature of the
violations, the name of each employee and vendor involved and the
corrective action taken to prevent future occurrences, inclusive of
any disciplinary action taken against an employee. The auditor
shall then notify the director of the purchasing division, the
director of the legislative post audit division and the director of
the commission on special investigations of the corrective action
taken by the spending unit.
(6) If a vendor participating in the card program is found by
the auditor to be engaged in substantive violations of provisions
of this article or related rules or to be engaged in other unethical conduct with respect to dealings with the state or any
spending unit of the state, the director of the purchasing division
shall prohibit the vendor from selling goods or services to the
state or its spending units by this or any other means for a period
of five years. Any affected vendor may submit to the director of
the purchasing division of the department of administration a
written request for review. Upon receipt of the request for
review, the director of the purchasing division shall provide for
an independent review by an individual appointed by the director
and vested with authority to set aside the suspension.
(7) Any vendor who is ineligible to provide goods and services
to the state pursuant to conventional purchasing mechanisms is also
barred from participation in the purchasing card program.
(8) The auditor shall report immediately to the commission on
special investigations regarding: Problems encountered with
individual spending units and with the card program as a whole; the
total dollar amount and number of violations as defined within the
various categories set forth in subdivision (1), subsection (e) of
this section; and any violations or unethical conduct on the part
of participating vendors. The report shall include any intent to
modify the purchasing card transaction limits then in effect.
(f) No purchasing card vendor may provide a bribe, gratuity,
or kickback in any amount to a purchasing cardholder or a state
spending unit.
(g) The auditor shall suspend the privilege of a vendor to
participate in the card program when the auditor has reason to
believe that the vendor has violated any of the statutes, rules,
policies or procedures concerning the purchasing card. The auditor
shall use certified mail to notify promptly in writing each vendor
whose privilege to participate has been suspended. The suspension
shall be for at least one month.
(h) Any vendor whose privilege to participate in the
purchasing card program has been suspended under the authority
provided in this section may submit to the director of the division
of purchasing a written request for review. Upon receipt of the
request for review, the auditor shall provide for an independent
review by an individual appointed by the auditor and vested with
authority to set aside the suspension.
(i) The auditor shall report immediately to the commission on
special investigations and the division of purchasing any material
purchasing card audit findings encountered with individual spending
units and with the purchasing card program as a whole, any
suspensions and the total dollar amount and number of violations as
set forth in this section, including violations by vendors. The
report shall include any existing plan or any actions taken by the
auditor to address the violations.
(j) The auditor may prohibit uses of the state purchasing
card, consistent with the best interests of the state.
(k) The auditor shall review documentation required of
spending units as well as the spending unit's internal operating
procedures related to the unit's participation in the card program.
The director of the division of purchasing shall review
documentation required of spending units as it relates to
purchasing procedures. The director of the division of purchasing
shall regularly notify the auditor of purchasing card transactions
that are in violation of purchasing statutes, rules, policies or
procedures. Purchasing card documentation shall comply with the
following minimum criteria and shall contain no less supporting
detail or documentation than required in this subsection:
(1) Each purchasing card transaction shall be documented on a
form provided or approved by the auditor;
(2) Each form shall set forth the name of the vendor, the name
of the spending unit or subdivision of the spending unit, the name
of the cardholder responsible for the transaction and, in the event
competitive bids are required, shall include an itemized list of
each commodity or service being purchased, quantities to be
purchased, unit pricing for each bidder, the identity of the
vendors bidding, date of receipt of the goods and the signature of
the person receiving the goods;
(3) The form shall include the date the purchase was
initiated;
(4) For any transaction requiring competitive bids, any shipping charges shall be listed separately from the itemized costs
and the total of all costs for the transaction;
(5) The required form may be generated by electronic means or
a permanent paper copy, but each form shall bear the signature of
both the responsible purchasing cardholder and an authorized
supervisor or manager, within the cardholder's management
structure, who is in a position to be knowledgeable of whether the
purchase is in the best interest of the spending unit and the
state. The purchasing card coordinator shall designate, in
writing, those supervisors or managers who are authorized to
approve purchasing card transaction reports;
(6) If the form used is capable of capturing the required
data, this same document may also be used to fulfill the
requirements of section ten-f of this article, relating to
receiving reports;
(7) The original copy of any receipt or packing slip
associated with the purchase shall be retained by the purchaser and
attached to any permanent paper copy, or cross-referenced to any
electronic form;
(8) If competitive bids are not required, the purchaser shall
attach to the paper form or cross reference to the electronic form
an itemized, clearly legible receipt, with unit pricing, which
clearly communicates to anyone reviewing the transaction what goods
or services were purchased. The person receiving the goods shall sign the receipt and state in writing the date the goods or
services were received. An itemized list of items purchased,
captured electronically, which includes the required data, is also
acceptable. In the event neither is available, the purchaser shall
create, either in paper or electronic form, an itemized list which
satisfies the requirements set forth in this subsection. The
purchaser's signature shall be affixed to the form, inclusive of
the date the goods were received, along with whatever receipt is
available.
(l) The division of purchasing shall annually provide the
auditor's office and legislative auditor's office with six hours of
training regarding purchasing laws, rules, policies, procedures and
relevant issues.
(m) In accordance with article three, chapter twenty-nine-a of
this code, the auditor may propose for legislative approval rules
establishing special criteria for the use of a purchasing card
during a period of officially declared emergencies or disasters.
§12-3-10b. Fraudulent or unauthorized use of purchasing card
prohibited; criminal penalties; restitution; set
off of pension benefits and potential disciplinary
action.
Unless otherwise provided, it is unlawful for any person to
use a state
purchase purchasing card, issued in accordance with the
provisions of section ten-a of this article, to make any
purchase of payment for goods or services in a manner which is contrary to
the provisions of section ten-a of this article,
of article three,
chapter five-a of this code, of any other provision of this code
governing the purchase of goods or services or the rules
promulgated pursuant to
that section those provisions. Any person
who violates the provisions of this section or applicable rules is
guilty of a
felony, misdemeanor and, upon conviction thereof, shall
be
confined in the penitentiary not less than one nor more than
five years, or fined no more than five thousand dollars fined no
more than two thousand dollars or confined in jail no more than one
year, or both fined and imprisoned:
Provided, That a person who
violates provisions of section ten-a of this article, article
three, chapter five of this code or subsection (c), section nine,
article five, chapter eighteen-b of said code and thereby receives
goods or services for personal use or benefit in an amount in
excess of one thousand dollars is guilty of a felony and, upon
conviction thereof, shall be fined not more than ten thousand
dollars or imprisoned in a state correctional facility not less
than one nor more than ten years, or both fined and imprisoned.
Any person who violates section ten-a or applicable rules and who
thereby receives goods or services for personal use or benefit
shall pay restitution to the state in the amount of the cost of the
goods or services. Notwithstanding any other provision to the
contrary, upon determination by the state auditor that a person has received goods or services for personal use through misuse of a
purchasing card, the employer has the right of set off and
attachment of the person's pension benefits. Employers shall
consider an employee's violation of this article or the rules
promulgated under this article and take appropriate disciplinary
action.
§12-3-10c. Penalty fees; special fees; disposition of fees.
(a) In order to promote and enhance the use of the state
purchasing card program established by the provisions of section
ten-a of this article and in order to maintain and develop the
fiscal operations and accounting systems of the state, the auditor
and the treasurer may
jointly assess
joint transaction fees for
all
each financial
documents document that will be processed on the
central accounting system.
The transaction fee is one dollar per
transaction which shall be assessed against spending units of state
government for every transaction received, electronically or
otherwise, by the auditor from the centralized accounting system.
Such transaction fees Additional procedures shall be prescribed by
legislative rule proposed in accordance with article three, chapter
twenty-nine-a of this code and may include:
the following
(1) A penalty fee
to of two dollars may be assessed against
spending units of state government who submit claims for payment of
goods and services when those claims are authorized to be paid by
use of a state purchasing card and the spending unit has failed to
utilize use the state purchasing card.
and
(2) A transaction fee to be assessed against spending units of
state government for every transaction received, electronically or
otherwise, by the auditor from the centralized accounting system.
(b) All fees collected under this section shall be deposited
into the "Technology Support and Acquisition Fund"
which is hereby
created in the state treasury to be administered by the auditor.
The auditor and treasurer shall use moneys deposited in the fund to
maintain and develop the state purchasing card program, support the
fiscal operations of the state, including the state centralized
accounting system and the centralized payroll system, and to
acquire and improve the technology required to support these
functions:
Provided, That expenditures from the fund are
not
authorized from collections and are to be made only in accordance
with an appropriation by the Legislature and in accordance with the
provision of article three of this chapter and upon fulfillment of
the provisions set forth in article two, chapter five-a of this
code:
Provided, however, That for the fiscal year ending the
thirtieth day of June, one thousand nine hundred ninety-eight,
expenditures from the fund may be made from collections: Provided
further, That the Legislature is exempt from any fees imposed under
this section.
If revenues accruing to the technology support and
acquisition fund are not adequate to cover the cost associated with
this mandate, those funds in the purchasing card administration fund, accrued pursuant to section ten-d of this article, may also
be used for this purpose. The auditor may transfer up to fifty
percent of the money deposited in the fund to the treasurer for
uses provided for in this section.
(c) Notwithstanding any provision of this article or
legislative rule to the contrary, in the event the authority of a
spending unit or subdivision of a spending unit to use the state
purchasing card is suspended pursuant to guidelines set forth by
legislative rule, the auditor may assess a special suspension fee
equal to the amount of two times the penalty fee. The auditor
shall impose the suspension fee upon each transaction of the
spending unit or subdivision thereof for the duration of the
suspension. Special suspension fees shall be deposited in the
purchasing card administration fund created pursuant to section
ten-d of this article.
§12-3-10d. Purchasing card fund created; expenditures.
(a) All money received by the state pursuant to any agreement
with vendors providing purchasing charge cards and any interest or
other return earned on the money shall be deposited in a special
revenue revolving fund, designated the "Purchasing Card
Administration Fund", in the state treasury to be administered by
the auditor. All expenses by the auditor in the implementation,
and operation
and ongoing monitoring of the purchasing card program
or arising from the auditor's post audit responsibilities shall be paid from the fund.
If revenues accruing to the purchasing card
administration fund are not adequate to cover the costs associated
with this mandate, those funds in the technology support and
acquisition fund accrued pursuant to section ten-c of this article
may also be used for this purpose. Expenditures from the fund
are
not authorized from collections and shall be made
only in
accordance with appropriations by the Legislature pursuant to the
provisions of article three
chapter twelve of this code of this
chapter and upon fulfillment of the provisions of article two,
chapter five-a of this code.
(b) The auditor may conduct an audit or review of every
spending unit exercising the purchasing card authority granted
pursuant to this article and shall quarterly provide the
legislative auditor's office with a schedule of planned audits or
reviews.
§12-3-10e. Purchasing card advisory committee created; purpose;
membership; expenses.
There is
created continued a purchasing card advisory
committee to enhance the development and implementation of the
purchasing card program. The committee shall solicit input from
state agencies and make recommendations to improve the performance
of the purchasing card program. The committee consists of
eleven
twelve members to be appointed as follows:
(1) The auditor shall serve as chairperson of the committee and shall appoint three members from the state college system of
West Virginia and the university system of West Virginia, one
member from the department of health and human resources and one
member from the division of highways;
(2) The secretary of the department of administration shall
appoint one member from the information services and communications
division and one member from the financial accounting and reporting
section and one member from the purchasing division;
(3) The secretary of the department of tax and revenue shall
appoint one member from the department of tax and revenue;
(4) The state treasurer shall appoint one member from that
office;
and
(5) The secretary of the department of military affairs and
public safety shall appoint one member from that department.
Committee members shall be appointed for a term of one year,
commencing on the first day of July.
one thousand nine hundred
ninety-eight Committee members shall receive reimbursement for
expenses actually incurred in the performance of their duties on
the committee.
§12-3-10g. Effective date; emergency rules.
The amendments to sections ten-a, ten-b, ten-c and ten-d of
this article, passed in the year two thousand four, are effective
the first day of July, two thousand four. The state auditor shall
implement these changes by promulgating emergency rules to become effective the thirtieth day of June, two thousand four.
_______
(NOTE: The purpose of this bill is to provide for additional
internal controls and procedures for the purchase card program.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§12-3-10g is new; therefore, strike-throughs and underscoring
have been omitted.)
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