Senate Bill No. 407
(By Senator Tomblin, Mr. President)
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[Introduced January 30, 2004; referred to the Committee on
Finance.]
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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; changing the name to payment card program; and
providing for additional internal controls and procedures.
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. Payment 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, hereinafter designated and to be known as
the state payment card program, authorized by the provisions of
this section. Any reference in this code to the purchasing card
program shall be considered a reference to the payment card
program. The auditor, in cooperation with the secretary of the
department of administration, may establish a shall continue the
state purchasing payment card program for the purpose of
authorizing all spending units of state government to use a
purchasing payment card as an alternative payment method when
making small dollar purchases. The purchasing payment 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 payment charge cards to purchase goods and services. The
procurement process used by the spending unit for purchases of
goods and services using a payment card shall be identical to the
procurement process used for all nonpayment-card transactions.
A
purchaser using a payment card shall make all purchases in
compliance with all applicable statutes, rules, policies and
procedures governing the purchase.
The auditor and the director of
the division of purchasing in the department of administration
shall biennially review the levels of use and the practices of
cardholders and shall establish criteria for termination of those
payment cards not efficiently used. The auditor shall also
biennially analyze the number of payment cards held by each agency and establish limits on that number when appropriate and shall
provide a written report to the Legislature's joint committee on
government and finance no later than the fifteenth day of November,
two thousand four, regarding the progress of the review. The
amount of any one purchase made with the purchase payment 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 approved in
accordance with the provisions of article three, chapter
twenty-nine-a of this code: Provided, That purchasing payment
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 payment 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 payment 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 payment charge cards. Purchase Payment 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 in accordance with the provisions of article three,
chapter twenty-nine-a of this code to govern the implementation of
the purchase payment card program.
(b) For purposes of the payment 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
payment card program or his or her designee shall designate one or
more payment card coordinators and one or more payment card
reconciliation officers to serve the spending unit or subdivisions
of the spending unit. The appointees shall attend annual training
consisting of not less than eight classroom hours conducted by the
auditor and the director of purchasing. It is the duty of payment
card coordinators and reconciliation officers to assure that
cardholders comply with all relevant statutes, rules, policies and
procedures. No payment card may be issued to or used by a payment
card coordinator or reconciliation officer.
(c) Each payment 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 payment card
coordinators in a sufficient number to allow thorough and timely performance of their responsibilities. Payment card coordinators
shall occupy a supervisory or managerial position senior to that of
the card holders subject to the coordinator's oversight authority.
Authority to approve payment card monthly master invoices resides
with the payment card coordinator.
(d) The head of a spending unit or designee shall appoint
payment card reconciliation officers in a sufficient number to
allow thorough and timely performance of their responsibilities.
Each payment card reconciliation officer must possess accounting
expertise consistent with the size of the respective spending unit
or subdivision thereof and the aggregate amount of payment card
transactions to be reconciled each month. A payment card
reconciliation officer shall reconcile all transactions which
appear on the officer's spending unit's monthly master invoice as
received from the payment card provider. The officer shall insure
that all the transactions were accomplished in compliance with
existing statutes, rules, policies and procedures related to the
payment card program. Upon completion of the reconciliation
process, the reconciliation officer shall report results to the
payment card coordinator. With the exception of agencies having
five or fewer employees, no agency may allow a payment card
reconciliation officer to approve a monthly master invoice for
payment or assume any of the duties of the payment card
coordinator.
(e) Before an employee may be issued a payment card, the employee must have successfully completed a training session
specifically designed for new cardholders. All cardholders are
required to complete three hours of training annually which shall
be conducted annually by the auditor and the director of
purchasing: 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 payment card
coordinator. The auditor and the director of purchasing jointly
shall approve the format for all training.
(f) (1) The auditor and the director of the division of
purchasing 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 payment card. These rules shall set forth graduated
penalties for misuse. These penalties shall include, but not be
limited to, the following: The director shall impose a suspension
of payment card authority of a spending unit or subdivision thereof
for the remainder of the month of notification and three calendar
months thereafter, upon determination by the auditor or director of
the division of purchasing that the head of the spending unit has
failed or refused to take corrective action as recommended by the
auditor, the director of the division of purchasing, 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 payment card by
engaging in unlawful conduct related to the payment card, or that
the spending unit has engaged in a prohibited practice related to
the use of the payment card. 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 payment card
transactions;
(D) Purchasing goods or services the acquisition of which with
a payment 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.
(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 director of the division
of purchasing may limit the suspension to one or more subdivisions
of the spending unit in the event the abuse of payment 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 payment card program is reinstated subsequent to
an initial suspension, and the spending unit or subdivision is
found by the director of the division of purchasing to be eligible for suspension a second time within a period of twelve months
following the date of reinstatement, the director 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 thereof
to participate in the payment card program is reinstated subsequent
to a second suspension, and the spending unit or subdivision is
found by the director of the division of purchasing to have
committed acts within twenty-four months following the date of
reinstatement which would again require suspension, the director
shall impose a suspension for the remainder of the month of
notification of the violation and for thirty-six calendar months
thereafter. The auditor and director of purchasing jointly 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
payment card privileges of a spending unit shall not apply in those
instances wherein a spending unit discovered any of the above
enumerated violations internally and promptly took meaningful
corrective action to prevent future reoccurrences. Meaningful
corrective action shall include written notification by the head of
the spending unit directed to the auditor, the director of the
purchasing division, the director of the legislative post audit
division and the director of the commission on special investigations
, reporting the nature of the violation(s), 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.
(6) In the event a vendor participating in the payment card
program is found by the auditor or the director of the purchasing
division, 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 thereof, 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 vendor so affected 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 payment card program.
(8) The auditor and the director of the division of purchasing
shall report jointly, twice each year, to the Commission on Special
Investigations as to the following: Problems encountered with
individual spending units and with the payment card program as a whole, any suspensions or revocations occurring within the
preceding six months, the total dollar amount and number of
violations as defined within the various categories set forth at
subdivision (1), subsection (f) of this section, and any violations
or unethical conduct on the part of participating vendors. The
report shall include any intent to modify the payment card
transaction limits then in effect.
(g) No payment card vendor may provide a bribe, gratuity, or
kickback in any amount to a payment cardholder or a state spending
unit.
(h) The auditor shall suspend the privilege of a vendor to
participate in the payment card program when the auditor has reason
to believe that the vendor has violated any of the statutes, rules,
policies or procedures concerning the payment card. The auditor
shall use certified mail to notify promptly in writing each vendor
whose privilege to participate has been suspended. Suspension
shall be for at least one month.
(i) Any vendor whose privilege to participate in the payment
card program has been suspended under the authority provided in
this section may submit to the auditor 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.
(j) The auditor shall report twice each year to the commission
on special investigations and the division of purchasing any material payment card audit findings encountered with individual
spending units and with the payment card program as a whole, any
suspensions occurring within the preceding six months, and the
total dollar amount and number of violations as set forth in this
section, including violations by vendors. The reports shall cover
six-month periods beginning the first day of July and the first day
of January of each year, and are due thirty calendar days following
the end of the period covered by the report. The report shall
include any existing plan or any actions taken by the auditor to
address the violations.
(k) The auditor or the director of the division of purchasing
has authority to prohibit uses of the state payment card,
consistent with the best interests of the state.
(l) The auditor and the director of the division of purchasing
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 payment card program. The director of
the division of purchasing shall regularly notify the auditor of
payment card transactions that are in violation of purchasing
statutes, rules, policies or procedures. Payment card
documentation shall be in compliance with the following minimum
criteria, and shall contain no less supporting detail or
documentation than required for a similar transaction paid by
conventional means:
(1) Each payment card transaction shall be documented on an individual payment card transaction report.
(2) Each payment card transaction report shall set forth the
name and address of the vendor, the name and address of the
spending unit or subspending unit, the name and payment card number
of the individual responsible for the transaction, and an itemized
list of each commodity and/or service being purchased.
(3) The report shall include the date initiated, a sequential
number which identifies the entity within the spending unit
requesting or initiating the purchase and cross referencing the
purchase to any internal documentation used to initiate or request
the transaction.
(4) Any shipping charges shall be listed separately from the
itemized costs and the total of all costs for the transaction.
(5) The report shall include sufficient accounting data to
insure the goods or services are charged to the appropriate fund(s)
within the spending unit.
(6) The transaction reports may be generated by electronic
means but a permanent paper copy of each report shall bear the
signature of both the responsible payment 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 payment card coordinator shall designate, in
writing, those supervisors or managers who are authorized to
approve payment card transaction reports.
(7) Provided the format of the permanent paper copy of the
transaction report 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.
(8) The original copy of any invoice and packing slip
associated with the purchase shall be securely attached to the
payment card transaction report. Unless exigent circumstances
justify otherwise, payment card transaction reports shall be
approved by an authorized supervisor in advance of the transaction
taking place.
(m) In accordance with article three, chapter twenty-nine-a of
this code, the auditor, with cooperation of the director of the
division of purchasing, may propose for legislative approval rules
establishing special criteria for the use of a payment card during
a period of officially declared emergencies or disasters.
§12-3-10b. Fraudulent or unauthorized use of payment 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 payment 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 the county or
regional 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, or subsection (c),
section nine, article five, chapter eighteen-b of this 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 payment card, the employer has the right of set off and
attachment of the person's pension benefits.
§12-3-10c. Transaction fees; special fees; disposition of fees.
(a) In order to promote and enhance the use of the state
purchasing payment 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. Such The transaction fees shall be
prescribed by legislative rule proposed in accordance with article
three, chapter twenty-nine-a of this code and may include the
following:
(2) (1) A transaction fee not to exceed one dollar per
transaction to be assessed against spending units of state
government for every transaction received, electronically or
otherwise, by the auditor from the centralized accounting system;
and
(1) (2) A penalty fee not to exceed five times the transaction
fee to 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 payment card
and the spending unit has failed to utilize use the state
purchasing payment card. and
(b) All fees collected under subsections (a) and (b) of 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 payment card program, support the fiscal operations of
the state, including the state centralized accounting 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.
(c) Notwithstanding any provision of this article or
legislative rule to the contrary, in the event the authority of a
spending unit or subdivision thereof to use the state payment card
is suspended pursuant to guidelines set forth by legislative rule,
the auditor shall assess a special suspension fee equal to the
additional cost incurred by the state auditor's office, which the
auditor shall publish on an annual basis. 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 into the state general revenue
fund.
§12-3-10d. Payment from payment card providers; expenditures;
post-audit responsibilities.
All money received by the state pursuant to any agreement with
vendors providing purchasing payment 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" hereafter designated the "Payment Card
Administration Fund," in the state treasury to be administered by
the auditor. All expenses by the auditor in the implementation and
operation of the purchasing payment card program shall be paid from
the fund. 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.
§12-3-10e. Payment card advisory committee created; purpose;
membership; expenses.
There is created continued a purchasing card advisory
committee, hereafter to be known as the payment card advisory
committee, to enhance the development and implementation of the
purchasing payment card program. The committee shall solicit input
from state agencies and make recommendations to improve the
performance of the purchasing payment card program. The committee
consists of eleven twelve members to be appointed as follows:
(1) The auditor and the director of the division of purchasing
shall serve as chairperson co-chairpersons 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 office.
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 and the director of the division of purchasing 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 and
to rename it the payment 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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