Federal Acquisition Service U.S. General Services Administration GSA SmartPay2 Basic Charge Card Payment Reconciliation Perry Hampton Bradley Forrestel

Federal Acquisition Service

U.S. General Services Administration

GSA SmartPay2 Basic Charge Card Payment Reconciliation

GSA SmartPay2 Basic Charge Card Payment Reconciliation

Perry HamptonBradley ForrestelOffice of Charge Card Management (OCCM)

12th Annual GSA SmartPay Training ConferenceAugust 10 – 12, 2010

Perry HamptonBradley ForrestelOffice of Charge Card Management (OCCM)

12th Annual GSA SmartPay Training ConferenceAugust 10 – 12, 2010


Agenda Program Background & Basics

The Importance of Payment Reconciliation

General Payment Reconciliation Step-by-Step Process

General Payment Reconciliation Best Practices

Resources

Questions

2


Value to the customerAfter this course, participants should be able to:

Identify ways to improve payment reconciliation processes at your agency/organization

Understand how to apply payment reconciliation best practices to your charge card program

Collaborate with payment reconciliation experts who provide information/tools for enhancing payment reconciliation

3


Program Background & Basics


Polling the Audience How many audience members are:

A. Level 1 A/OPCs

B. Level 2 A/OPCs

C. Level 3 A/OPCs

D. I’m not an A/OPC

E. Unsure

Is your role as an A/OPC your:

A. Primary Duty

B. Collateral Duty

C. Not Applicable

?5


Polling the Audience How many audience members are new to the

GSA SmartPay Training Conference this year?

A. Yes, this is my first year

B. No, I have attended before

What business line are you affiliated with?

A. Purchase

B. Travel

C. Fleet

D. All

E. Unsure

?6


GSA SmartPay2 Program Overview

Enables over 350 Federal agencies/organizations to obtain charge card products and services through master contracts that GSA established with three banks: Citibank, JPMorgan Chase, and U.S. Bank

Agencies/organizations issued task orders against these master contracts to obtain charge card products and services

Agencies/organizations pay no direct fees to use the program

Period of performance for existing contracts is through 2018

DID YOU KNOW…$943 was spent using Federal charge cards every second in FY09

7


Office of Charge Card Management

Provide a comprehensive and flexible master contract

Offer strong customer orientation and frequent customer contact/support through:

Test and share best practices

Engage in continuous market research and regular meetings with industry

Deliver “Beyond Plastics” strategy and conferences

Provide balanced customer advocacy and program leadership

Training workshops, guides and GSA SmartPay Annual Training Conference

GetSmart quarterly newsletters

Monthly meetings

Agency POCs

Strong web presence

Ad hoc working groups

Customer satisfaction surveys

Social Networking exploration

8


The Importance of Payment Reconciliation


Benefits of Payment ReconciliationWhy Reconcile?...especially if the invoice/payment Is automated?

Avoid out of balance conditions between agencies/ organizations and issuers

Maximize refunds by ensuring payments are accurate and timely

Identify problems quickly and act upon them

Avoid hidden delinquencies

Frequent reconciliations lead to smooth program close-out

Reconciling frequently is a best practice

10


Reconciliation Issues

Payment made to the wrong account

Checks recorded as a lesser or greater amountthan what was presented to the bank

Balance transferred to the wrong account

Payments taken from the bank account without the agency’s/organization’s knowledge

Rolling balances – payment is applied to oldest balance first

Documentation is not retained, or lost

Payments posting to the transaction account versus the central account

11


Payment Reconciliation step-by-step process


Traditional Payment Reconciliation Process Flow Account management and reconciliation process flows vary among

agencies/ organizations due to different organizational structures, roles/responsibilities, and established policies/procedures

Payment Reconciliation Process

Des

igna

ted

Pay

men

t O

ffice

(D

PO

)

SP

2 C

ontr

acto

r B

ank

AO

PC

/Des

igna

ted

Bill

ing

Offi

cer

(DB

O)

Send signed bill summary

report to Payment

Office

Forward dispute to contractor

bank

Review invoice

Are transactions valid?

Prepare invoice to

each account

Transaction

NO

Print and sign bill payment summary report, add invoice

to receipt date

YES

Verify and certify transactions

Receive payment

Certify summary report and make

payment

Receive invoice from contractor

bank

Receive dispute form

13


Polling the Audience

How does your agency/organization perform payment reconciliation?

A. Through an automated system

B. Through a manual system

C. Through a system that is automated, but includes manual components

D. I don’t know ?14



For those who use a manual system, how long (on average) does it take for your agency/organization to perform payment reconciliation?

A. 1 – 7 Days

B. 7 – 14 Days

C. 14 – 30 Days

D. 30+ Days

D. I don’t know

?15


Polling the Audience For those who use an automated system,

how long (on average) does it take for your agency/organization to perform payment reconciliation?

A. 1 – 7 Days

B. 7 – 14 Days

C. 14 – 30 Days

D. 30+ Days

D. I don’t know

Depending on A/OPC diligence, automated processes generally takes less time than a manual process (several days to several weeks, rather than months)

?

16


Sample Timeline - Payment Reconciliation Process Flow (Manual)

SP2 Contractor Bank Sends invoice to

A/OPC

A/OPC Reviews bank invoice

A/OPC Reconciles and

verifies transactions

A/OPC Sends invoice report to Payment Office for

payment

Payment OfficeCertifies report and

makes payment

Notification Day 1

Review 2-5 Days

Reconciliation 4-6 Days

Transmission 3-10 Days

Payment 2-8 Days

Send transaction statements to cardholders.

Stamps date of receipt (date serves as the prompt payment start date) with 30 days to make payment.

Reconciles transaction invoices against bank statements.

Verifies all matched transactions.

Prepares packets containing transaction invoices and bank statements and mails to Payment Office.

Certifies all documents and makes payments to the bank.

Sam

ple

ti

mel

ine

Sample TOTAL TIME: 12 - 30 days

Manual reconciliation process takes several weeks up to a month or more

Manual processing for payment reconciliation is a common practice and can be cumbersome by nature

Potential risk of human error in manual processing could delay payments 17


Sample Timeline - Payment Reconciliation Process Flow (Automated)

SP2 Contractor Bank Sends invoice to

A/OPC

A/OPC Reviews bank invoice in automated system and sends to Payment Office for payment

Payment OfficeCertifies report and

makes payment

Sam

ple

ti

mel

ine

Notification Day 1

Review 1-3 Days

Reconciliation 1-3 Days

Transmission 1-3 Days

Payment 2-8 Days

Sends transaction statements to cardholders.

System acknowledges date of receipt (date serves as the prompt payment start date) with 30 days to make payment.

System reconciles transaction invoices against bank statements.

Verifies all matched transactions.

System automatically submits transaction invoices and bank statements to Payment Office.

Certifies all documents and make payments to the bank.

Sample TOTAL Time: 6 – 18 days Depending on A/OPC diligence, automated processes generally takes less

time than a manual process ( 6 – 18 days versus 12 – 30 days) System automation and increased training helps to improve and streamline

the payment reconciliation process Success is highly dependent on the diligence of individual A/OPCs and

availability of time devoted to payment reconciliation 18



True or False: there are penalties for delinquent accounts that are not paid on time.

A. True

B. False

ANSWER:

TRUE. According to the Prompt Payment Penalty Act (PL 97-177), there are penalty implications for not reconciling in a timely manner, which can lead to delinquent accounts.

Did you know…The frequency of payment reconciliation greatly reduces the risk of delinquencies.

?

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Penalties

The Prompt Payment Penalty Act (PL 97-177) states that interest penalty must be paid if payment is not made within 30 days of receiving a proper invoice

Agencies/organizations are required to pay the interest rate under criteria established by the Renegotiation Act (PL 92-41)

There are penalties for delinquent accounts, and the frequency of payment reconciliation greatly reduces the risk of delinquencies

20


Late Payment Penalty Letters Required to pay off outstanding balances on government accounts within 30 days

of their due date The date stamping of invoices is a key step in determining the prompt payment status

of an account This largely manual process can be inconsistently practiced, leading to uncertainty

and/or disputes about when interest payments are due and the period used to calculate interest

When payments are not made in a timely fashion, interest penalty letters and non-payment interest claims may be generated

Interest accrues on accounts starting 31 days past the prompt payment start date based on the Applicable Federal Rate (AFR)*

Interest penalty letters are generated by the bank (timeline for generating interest penalty letters vary depending on agency/organization)

Non-payment can place agencies/organizations at financial and legal risk

*Applicable Federal Rate (AFR) refers to the interest rate published by the US Treasury to calculate imputed interest charges 21



Does your agency/organization have a Prompt Payment Act (PPA) process established?

A. Yes

B. No

C. I don’t know

Did you know…establishing a Prompt Payment Act (PPA) process at your agency/organization is a best practice.

?22


Sample Penalty Letters and Claims Monitoring Process 31 Days

Bank Accrues Interest

61 Days

Account Delinquent

120 Days

Initial Penalty Letter

180 Days

Final Penalty Letter

210 Days

Bank Files Claim

Prompt Payment Act (PPA)

Initial Penalty Letter Final Penalty Letter Claims

PPA starts when the date of receipt is stamped on the bank invoice

At 60 days, SP2 contractor bank sends initial penalty letter to the Contracting Officer and A/OPC

A/OPCs work with bank to resolve penalty letters

Bank sends list of all outstanding penalty letters and claims to A/OPC and Contracting Officer

After about 60 days (at 120 days), bank sends final penalty letter to the Contracting Officer and A/OPC

At 180 days, bank files a non-payment interest claim on the interest penalty letter

Contracting Officer works with Payment Office to resolve claims

Bank terminates delinquent accounts at 210 days

Note: the PPA process can differ among agencies/organizations depending on the established policies and procedures they have with their SP2 contractor bank

Agencies/organizations with a strong PPA process have a greater change of alleviating a non-payment interest claim to the government

23


General Payment Reconciliation Best Practices


Best Practices

Reconcile frequently – ideally weekly, but at least once a month

Reconcile interface files/mappers* to statement invoices

Confirm payment by Designated Billing Office (DBO) and generate invoice status reports

Review payment reconciliations to ensure agency/organization and bank records agree

Notify GSA SmartPay2 contractor bank of disputes as quickly as possible, and monitor the status of disputed transactions

Contact your GSA SmartPay2 contractor bank to learn about the tools they provide you with to assist in the payment reconciliation process

*Mappers are used in JPMorgan Chase’s PaymentNet system and can be customized. For more details, contact your JPMorgan Chase account manager 25


Reconciling interface files/mappers to statement invoices

If paying based on cycle date (once per month), compare mapper file to statement/invoice

• Generate Account Statement and Summary Report

• Notify issuer of any discrepancies

If paying semi-monthly, weekly, daily, etc., reconcile mappers to statement/invoice generated at cycle

• Ensure totals match including dollar amount and transaction counts

• Notify issuer of any discrepancies

Confirming payment

• Generate Invoice Status Report

• Confirm Payment and follow up with Designated Payment Office 26


Managing Disputes

To avoid reconciliation issues when managing disputes, agencies/organizations should allow the dispute process to work as designed:

Under the GSA SmartPay2 Master Contract, cardholders must notify the issuer of dispute within 90 calendar days from the transaction date

The bank provides a temporary provisional credit for a charge that is under dispute while the bank simultaneously researches the dispute; upon resolution:

If dispute is settled in favor of the cardholder the provisional credit(s) remains issued to the account

If dispute is settled in favor of the merchant, the provisional credit(s) is removed and the bank will bill the cardholder by applying a debit transaction

Avoid deducting disputed transactions from the balance due as provisional credit will be or has been issued

Note: refer to your agency/organization policies on the process for reconciling disputed transactions 27


Resources


General Resources

GSA SmartPay Website: www.gsasmartpay.gov

For a listing of definitions as they related to the Master Contract, see section C.1.4 Definitions (available on the GSA SmartPay website)

Federal Acquisition Regulations (FAR): www.acquisition.gov/far

Agency/organization specific policies and established procedures

Bank Contact Info

Citibank: http://www.cards.citidirect.com/welcome.asp 1-800-790-7206 (customer service)

JP Morgan Chase: https://www.paymentnet.com/Login.asp 1-888-297-0781 (customer service)

U.S. Bank: https://access.usbank.com/cpsApp1/index.jsp 1-888-994-6722 (customer service)

29


Other Reconciliation-related Courses being offered at Conference Reconcile Now, Relax Later (JPMorgan Chase)

DTS (Defense Travel System) CBA Reconciliation Module Training (Citibank)

CBA Reconciliation (U.S. Bank)

Department of the Navy (DON) Purchase Card – Managing Delinquencies and Credit Balances (Citibank)

Delinquency and Dispute Management (U.S. Bank)

WEX Online Data Analysis Reporting Tools (Citibank)

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Other GSA SmartPay Courses being offered

GSA SmartPay2 Purchase Card Basics

GSA SmartPay2 Travel Card Basics

GSA SmartPay2 Fleet Card Basics

GSA SmartPay2 Master Contract Basics

GSA SmartPay Program Update

GSA SmartPay in More than One Flavor: Innovative Products & Services

Effective Oversight of Your GSA SmartPay Program

Navigating the GSA SmartPay Website

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Question & Answer Session


Thank you!

Contact Us

Perry Hampton, [email protected] Bradley Forrestel, [email protected]

GSA SmartPay Program Support Phone: (703) 605-2808

E-mail: [email protected]

www.gsasmartpay.gov33

Documents

Federal Acquisition Service U.S. General Services Administration GSA SmartPay2 Basic Charge Card Payment Reconciliation Perry Hampton Bradley Forrestel