by Valerie A. Lindsey
The Defense Finance and Accounting Service-Indianapolis (DFAS-IN), in partnership with the Army, is seeking ways to improve supply management in the 21st century. The General Accounting Office (GAO) designated supply management as a high-risk area and recommended that the Department of Defense (DOD) adopt new supply management tools and practices. GAO found that, while DOD has made "tremendous progress in reducing its inventory since 1989," financial accountability remains weak, and DOD needs to implement more modern commercial practices. One of the practices that DOD is exploring is a Government credit card. Widespread use of a Government credit card will keep cash in the Treasury, eliminate in-transit disbursements and interfund billing, streamline current processes, reduce processing costs, dramatically improve payment to merchants, and help to identify other potential efficiencies.
Charge It!
All of us are familiar with credit cards. By using credit cards, we reduce the amount of cash we carry, become eligible for advance notice of sales or specials, and increase our purchasing power. However, there is a certain amount of risk associated with using a credit card. DOD and the Army can reduce their initial risk by restricting Government credit card use to purchases between agencies.
Many businesses now use a single credit card for all of their purchases. Some of these cards draw on several "purses," such as one for local purchases, one for travel, and one for automated data processing equipment purchases. The DFAS_IN proposal is not quite so far reaching—yet. Initially, we propose that a Government credit card be used only for purchases between Government agencies. This will improve supply requisitioning, eliminate disbursements from the U.S. Department of the Treasury, stop in-transit disbursements, and reduce costs. This first step will promote a cultural change in how agencies operate and lay the groundwork for more comprehensive changes later.
The Government credit card will supplement, not replace, the International Merchant Purchase Authorization Card (IMPAC). Both cards will be used: IMPAC for local purchases and the Government credit card for interagency purchases.
Supply customers will use their Government credit cards to purchase all reparables and consumables. These cards will contain information about the unit holding the card, including its accounting classification. The card can be set up either with a reasonable monthly limit, as most of us have on our personal credit cards, or with a monthly unit budget allowance for supplies (taken from the unit's funding authorization document). The latter is more practicable, because it does not require the current budget process to be changed. A miscellaneous obligation document can be set up at the beginning of the month and disbursements posted against it as purchases are made.
We believe that the best way to associate a unit's accounting classification to the credit card is to use the DOD Activity Address Code (DODAAC) and accounting process code (APC). These codes are used now in systems such as the Standard Army Retail Supply System (SARSS) and the Army Military Command Installation Supply System (AMCISS). The credit card number can be transferred to the billing address to help move billing information through the supply system to the servicing credit card bank.
System Safeguards
The Government credit card will have several built-in safety measures in addition to those already included in the logistics supply system. Only merchant codes of Government suppliers, such as national inventory control points, the General Services Administration (GSA), and the Defense Logistics Agency (DLA), will be loaded onto the card. A cardholder cannot use the unit credit card at local businesses. One-time dollar limitations can be set for each card to prevent unauthorized purchase of high-dollar items. This restriction can be lifted temporarily for authorized exceptions following proper approval by the certifying official or budget officer.
Immediate Account Access
The DFAS-IN plan will give all authorized and concerned parties immediate access to their accounts through the Internet for purposes of review, approval, and correction. Ideally, the certifying officer can review all purchases on line to reduce or eliminate the need for a paper trail. Additionally, credits for damaged or missing requisitions can be processed through the Internet.
The customer will be responsible for knowing his unit's DODAAC and the appropriate APC for the item being requisitioned. This is vital, since the credit card number will be tied to the unit's DODAAC and APC. This minor change will improve the supply requisition process, facilitate more accurate reporting, and save the time spent by accounting personnel in correcting erroneous APC assignments. The supply request will be charged to the unit credit card when the customer exits the supply support activity automated system, SARSS, or AMCISS
Purchase Options
If an item costs less than $2,500 and is authorized for local purchase, the supply clerk initiating the request will use the unit IMPAC card to make the purchase locally. If the item costs more than $2,500 or cannot be obtained from a local vendor, the clerk will use the Government credit card and the requisition will go through a national gateway to the Defense Automated Addressing System (DAAS), which is maintained by the DLA Design Center. (A gateway is a combination of hardware and software that links two different types of networks.) The DAAS data base contains a list of all authorized users of the national supply system, their shipping and billing addresses, and ordering and shipping information for all wholesale merchants and inventory control points. DAAS will forward the requisition with the credit card number to the appropriate source of supply.
The wholesale logistics merchant (for example, DLA, GSA, or an Army national inventory control point) will operate much like a commercial merchant who receives a credit card order. The wholesale merchant will receive the requisition from DAAS, verify the viability of the credit card with the servicing credit card bank, and process a material release confirmation for shipping and billing purposes. The wholesale merchant will pass the billing to the bank servicing the credit card. He should receive payment within 3 working days, which is a significant improvement over the current process that sometimes delays payment for weeks or even months.
The servicing credit card bank will provide a daily summary of charges to the Treasury Department and a detailed bill to the customer and supporting operating location. Also, all transactions will be posted to an Internet site that is available to authorized users through a web browser. There is no firm transaction fee, but it should be no more than 95 cents each.
The servicing operating location and the certifying officer can review the detailed transactions, query the website by merchant or by cardholder, create reports, and so on. The disbursing office can download the summary bill from the website. The servicing operating location will reconcile the detailed accounting information with the original obligation and balance it with the disbursing summary bill. After the certifying officer has approved all charges, the disbursing office will post the disbursement to record the debit made by the Treasury Department. The Treasury Department will process an appropriation transfer to move funds from the customer's appropriation to the wholesale merchant's appropriation. Accounting reports will not be changed significantly.
When the goods are received, the customer will verify that the order is what he requested and process a receipt in the supply system. When the shipment is short or damaged, the customer will notify the appropriate wholesale merchant. If the merchant is unwilling to issue credit before a missing item is received, the certifying official can notify the servicing bank to request that a portion of the charges be withheld or wait until the wholesale supply point receives and accepts the complete shipment.
The servicing credit card bank will use the Treasury Department's automated CA$H_LINK system to pass the charge to the Treasury Department. The Treasury Department will send a summary 810, Cash Verification (an electronic data file), to the servicing finance center. The finance center also will receive detailed accounting information from the servicing bank, and its centralized disbursing office will reconcile the detailed information with the summary bill.
After the bill is reconciled and the customer has approved it, centralized disbursing will send the collection information to the credit card merchant and post the disbursement to the accounting system. The servicing finance center will pass an 821, Positive Cash Verification, or an 812, Adjustment (if there was a credit or adjustment to be made to the payment), to the Treasury Department.
Turn-ins and credits will flow in the opposite direction from purchase charges. The customer and wholesale supply merchant will resolve any discrepancies in the goods received. The wholesale supply merchant will initiate a credit for damaged, returned, or missing goods using the credit card number of the cardholder. The servicing bank will process the credit and charge the merchant a nominal processing fee. Excess turn-ins to the wholesale supply system will be credited by national stock number. It is conceivable that the wholesale merchant will pass the bank credit charge to the customer under this circumstance. Ideally, we will move away from stockpiling and ordering based on "what if."
A Government credit card will provide enhanced and more timely fund accountability and improve the payment process. More importantly, it will enable the logistics and financial communities to concentrate on analysis, forecasting, reduction or elimination of stockpiling, and management of assets instead of micromanaging and error correction. ALOG
Valerie A. Lindsey is an accountant at DFAS-IN. She has a bachelor's degree in accounting and a master's degree in executive development for public service. She is certified in business process engineering and is a certified Government financial manager.