The public sector needs more mindfulness around credit cards

By Bill Tsouvalas

March 28, 2021

credit cards
Virtual credit cards and digital wallets will soon become the norm. (Image: Adobe/ eyewave)

On 27 March 2020, the Western Australia Auditor General’s office handed down its final report into Controls Over Purchasing Cards in the public sector.

It showed a “general improvement” in controls compared to the last report in 2017, but Auditor General Caroline Spencer stated that “[e]ntities still need to improve their policies, the monitoring of purchasing card use, and better manage transaction limits.”

The Australian National Audit Office report into three government departments’ Credit Card use in 2017. These were Australian Public Service Commission, the Fair Work Ombudsman and the Department of Immigration and Border Protection (now The Department of Home Affairs) reflected why controls around credit card use was so important:

“Credit cards offer a transparent, flexible and efficient way for Australian Government officials to obtain cash, goods or services to meet business needs. The misuse of credit cards can expose an entity to risks such as waste and fraud. Instances of misuse and weaknesses in relevant entity controls attract considerable parliamentary and public interest and cause reputational damage to affected entities and the Australian Government.”

They aren’t wrong: misuse of public funds by politicians has long been fodder for the press gallery. In 2019, Nationals deputy leader Bridget McKenzie was given a shellacking in the media for racking up $12,550 in travel bills per week. I’m sure you as a reader can think of a few off the top of your head.

If the public sector isn’t careful, this could happen more often as we transition toward digital wallets.

Virtual credit cards and digital wallets will soon become the norm. Savvy Finance conducted a survey about sentiments toward how people transact – and 47% said they prefer paying via digital wallet. Digital wallets and virtual credit cards will become as ubiquitous as the smartphones they reside on.

Credit cards are not created equal – some have different interest rates, interest-free days, and of course, rewards programs. So, who is benefiting from those?

It’s not just about purchases

We as taxpayers understand that there’s a lot of travel and expenses involved in government. Travelling to conduct inspections, attending meetings in Canberra or a state capital, reviews, representing the government at forums, and what have you. It is unreasonable to think the government will simply “shift over to Zoom” and never spend a cent on travel again. The WA Department of Primary Industries and Regional Development spent almost $20 million on credit cards (2018-19). WA is a big place; no one will dispute that travel will eat up a lot of resources. Purchases and their regulation isn’t the problem.

In the ANAO report, it found:

“Each of the entities used online workflows which required pre-approval for travel and purchasing. The majority (94% or more) of transactions tested had been appropriately authorised, were supported by evidence of acquittal (such as a receipt or tax invoice) and had been verified and approved consistent with entity requirements. Goods and services purchased were reasonable in light of the entities’ business needs and credit card policies.”

Having proper documentation in place is part of having a transparent and accountable public service. One of the recommendations in the WA Auditor General’s report was to:

“periodically review the use of purchasing cards within the entity to identify and act on any shortcomings, such as whether there are too many cards within the entity, or that they are not being utilised to their full advantage.”

Information is scarce as to whether the objective of the public service is to maximise value from the use of credit cards via choosing charge or credit cards with the lowest possible interest rate or highest amount of interest free days, or to use platinum or gold rewards to their fullest to reduce expenditure on travel and accommodation. This is in concert with the Australian government framework for using credit cards:

“in deciding whether to use a Commonwealth credit card or credit voucher, you must consider whether it would be the most cost-effective payment option in the circumstances[.]”

But is the public service using the most cost-effective cards? How are we, the public, to know? What happens when a “tap and go” culture becomes the default?

Switching to lower-cost alternatives to credit cards as part of a review process

At current, there is one provider of credit or charge cards for travel and accommodation. It’s mandatory for non-corporate government entities to use a Diners Club card, but optional for Procurement Payment Services.

The Whole of Australian Government (WoAG) procurement arrangements encompass: “domestic and international air services; travel management services; accommodation program management services; travel and card related services and car rental services. Under the Arrangements it is mandatory for entities to make payment for flights, domestic accommodation and car rental through a Diners Club account.”

Processes and procedures exist to reconcile accounts, minimise fraud, confirm individual responsibility, and recall unused or expired cards.

Periodic reviews of processes and procedures is the standard for any government department. However, factoring in whether the card is cost-effective under all circumstances should also be considered. It should be able to figure out if it’s compliant with the WoAG standards; balances low interest rates with longer interest free days; if insurance and other extras are offset by the interest rate or annual fees; and if rewards points are simply being tallied for the sake of being tallied. Rewards points could be used effectively if monitored and governed by proper procedures and processes.

This would capture the spirit and the letter of WA Auditor General’s first recommendation:

“have appropriate [policies] and administrative systems in place for the use of government purchasing cards.”

In my view, using the market of credit cards in a regular review process would further cement trust and faith in the public sector when using public funds.

Now that government employees are increasingly accessing credit and charge cards on their phone, making them as cost-effective as possible should be the new priority when reviewing processes.


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