Procedure 7.3.3 Purchasing Cards

System Procedures
Chapter 7 - General Finance Provisions

Part 1. Purpose
Purchasing cards provide the college, university, or system office with a cost-effective, convenient, and streamlined method of purchasing items, thereby reducing the volume of individual vendor payments processed by the institution. Reports on cardholder activity enable the institution to capture information necessary to better manage institutional purchasing activities.

Part 2. Definitions

Cardholder
A current state employee, who has been provided an individual card, or use of an institution or fleet card, agrees to adhere to this procedure and any supplementary procedures established by the issuing college, university, or system office.

Card administrator or coordinator
The individual within the college, university, or system office who coordinates the Purchasing Card program for the institution and acts as the institution’s intermediary in correspondence with the card issuer.

Period of inactivity
The duration during which a purchasing card remains unused. If no transactions occur within a six-month period, the card or account is considered inactive.

Purchasing card
One of the following types of cards defined below.

Individual card
A purchasing card in the name of a college, university, or system office and in the name of a state employee for which the institution is liable to the card issuer for all charges made in connection with the purchasing card issued to the named individual.

Institution Card
A purchasing card also known as a virtual card or ghost account is a type of payment method assigned to a college, university, or system office, used in the context of business purchasing. Unlike a physical purchasing card, an institution card is not a tangible object and exists only as a virtual set of payment credentials.

Fleet card
A purchasing card designed specifically for colleges, universities, and the system office to operate a fleet of vehicles. Fleet cards are issued in the name of a college, university, or system office assigned to a specific state-owned or -leased vehicle in which the institution/system office is liable to the card issuer for all charges made in connection with the purchasing card.

Third party finance servicer transactions
For the purpose of this procedure, one who uses an intermediary financial servicer such as PayPal, Square, or Venmo.

Part 3. Procedures for Obtaining a Purchasing Card

Subpart A. Authorized cardholders
A college, university, or system office may establish a purchasing card in the name of the college, university, or system office with a financial institution provider (card issuer) for official college, university, or system office business use only. No retail store or vendor-specific cards are permitted. The college, university, or system office must receive monthly statements from the financial institution provider.
Contractors, contract employees, and student workers are not eligible to possess individual cards, but they may be authorized to utilize fleet cards.

Each college, university, or system office using a financial institution provider shall establish procedures and forms for implementing and monitoring a purchasing card program that includes, but is not limited to, the following:

A dollar limitation on the purchasing card;

A dollar limitation of purchasing authority per assigned cardholder per transaction made with the individual purchasing card;

A dollar limitation of purchasing authority per assigned cardholder for the total of all charges made during each monthly billing cycle;

Merchant category blocking.

Subpart B. Encumbrance
The financial responsibility of each college, university, and the system office for setting aside funds in advance to cover their purchasing card transactions. It is mandatory to have funds encumbered before making any purchases to ensure sufficient resources are available. Additionally, in the e-procurement system, institutions have the option to allocate funds annually for the purchasing card program.

Subpart C. Delegation of Authority
Each cardholder must be specifically delegated the authority to obligate the issuing college, university, or system office to a specified dollar limit for the purchasing card. This delegation must be in writing and must require ongoing compliance with applicable statutes, rules, and board policies. See System Procedure 1A.2.2 Delegation of Authority.

Part 4. Authorized Card Use
Purchasing cards may be used to purchase eligible merchandise or services required in association with the duties or responsibilities of the cardholder or fleet card user at the college, university, or system office. Unauthorized and inappropriate card use is addressed in Part 5 of this procedure.

A purchase made with a purchasing card may be made in-store, by U.S. mail, or by electronic means such as telephone, fax or internet.

In adherence to System Procedure 7.3.6 Capital Assets, Part 3, Subpart A.7, a select group of authorized purchasing card holders within each college, university, or system office may utilize their cards for acquiring electronic equipment, such as computers and projectors. However, it is essential to establish a documented process for adding the purchased equipment to the inventory module as mandated by the aforementioned procedure.

Part 5. Prohibited Card Use and Expenses Requiring Additional Approvals or Controls
Purchasing cards must not be used to purchase items for personal use or for non-college, non-university, or non-system office purposes, even if the cardholder or fleet card user intends to reimburse the college, university, or system office.

A cardholder or fleet card user who makes an unauthorized purchase with the purchasing card or uses the purchasing card in an inappropriate manner may be subject to disciplinary action, up to and including termination, as well as revocation of the purchasing card, criminal prosecution, and restitution of the unauthorized use.

Subpart A. Prohibited use
Cards must not be used for purchases in the following categories:

Food and beverages for an individual employee

Alcoholic beverages, except for academic course work

Cash or cash advances

Items for personal use

Employee relocation expenses

Expenses required to be reimbursed under System Procedure 5.19.3, Travel Management (including gasoline for personal vehicles)

Sensitive items as defined in System Procedure 7.3.6 Capital Assets, except as provided in Part 4 above

Weapons of any kind

Professional and technical service 1099 reportable expenses, which include but are not limited to, various services such as professional and technical services, maintenance and repair services, trainers, speakers, and entertainers. Additionally, royalties, including those related to software, and notary fees are also considered as 1099 reportable expenses

Purchases from foreign suppliers

Items for non-college, non-university, non-system office purposes

Subpart B. Travel, conferences, meetings, and expenses requiring additional controls
Cardholders may execute purchases listed in this subpart that comply with applicable system procedures and any applicable grant agreement. Cardholders must follow applicable system or institutional policy and procedure requirements for special expenses, conferences, and travel.

Employee travel, conferences, and meetings

Travel-related expenses by cardholder. An authorized purchasing card may be used for all travel-related expenses of the cardholder except food and beverages. Examples of allowable expenses include: airfare, room, and related taxes, vehicle rental, gasoline for a rented vehicle, and parking while in travel status.

Travel-related expenses for persons other than cardholder. Authorized cardholders may plan for transportation or lodging for another individual or group of individuals.

Conference and seminar registration

Food and nonalcoholic beverages for business meetings. Parameters for food and beverages at business meetings are set out in system procedure 5.20.1 Special Expenses and Chancellor / Presidential Expense Allowances.

Student activities and athletics

Food and nonalcoholic beverages for members of athletic teams.

Food and nonalcoholic beverages for student activities, including travel, in compliance with system and institution procedures.

Entertainment and recreation. Use of purchasing cards for entertainment and recreation is prohibited except for entertainment and recreation purchases for student and academic activities.

Purchases requiring additional controls:

Third Party financial servicer transactions. The use of a third-party financial servicer, such as PayPal or Venmo, is discouraged and should only be used in cases where it is the only means to make a valid, authorized state business purchase. These purchasing card transactions:

must be for the exact amount of the purchase price from the vendor,

must be for a single purchase and only at the time you make the purchase, and

must be documented by a receipt from both the financial servicer and from the merchant providing the product. Both receipts must be kept together and with the purchasing card log.

Alcoholic beverages used in academic coursework

Cash equivalents. Cash equivalents include, but are not limited to gift cards, bus passes, and parking vouchers. Such purchases must be pre-approved, and distribution of cash equivalent items must be documented.

Subpart C. Gasoline and vehicle-related expense
A fleet card may be used only to pay for vehicle expenses related to the specific state-owned or -leased vehicle to which it is assigned. All merchant types other than service stations must be blocked from card use. No personal use is permitted. Each institution shall establish a control method to track vehicle use and fleet card use. A driver or pilot authorized to use a fleet card is personally liable for any unauthorized use of the fleet card made during the time the driver or pilot is authorized to use the vehicle. Vendor-specific gasoline cards are prohibited. Use of a fleet card program which manages all tax exemptions is encouraged.

Subpart D. Late fees and finance charges
Late fees which occur because the cardholder did not submit a monthly statement and required documentation to the business office in a timely manner are the responsibility of the cardholder. The cardholder must reimburse the institution within one billing cycle from the date of the late fee or finance charge. Reimbursement may be made by cash or personal check to the business office. If payment is not received within one billing cycle, the card will be inactivated until the fees and finance charges have been repaid in full.

Part 6. Responsibility and Accountability

Subpart A. Purchasing and fleet card users
Each individual cardholder or fleet card user has the following responsibilities:

Safeguard the purchasing card and card account number at all times; lost or stolen purchasing cards must be reported immediately in accordance with college, university, or system procedure.

Keep purchasing card in a secure location at all times.

Do not allow anyone else to use the purchasing card or card account number.

Obtain and retain itemized receipts in an acceptable form for goods and services purchased. Examples of acceptable forms include: itemized receipts and or order confirmations delivered to the employee electronically, copies, faxes, or original paper receipts. Copies of purchasing card bills are not acceptable forms of receipts. A card user may be allowed to file an affidavit in lieu of a receipt if the receipt is lost or not obtained. Use of affidavits in lieu of a receipt is discouraged. All credits, including returns, must be documented with itemized receipts referencing the original purchase and purchase date. For internet purchases, the printout of the order confirmation showing the details, the email confirmation, or the shipping document outlining what was purchased, the quantity and the price paid shall suffice as an acceptable form of an itemized receipt.

Review individual card transactions to ensure accuracy, authenticity, and compliance with system, college, and university policies and procedures. Reviews must occur within five days of issuance of the monthly cardholder statement. Proper documentation must be attached to the monthly statement or transaction. The authorized user must sign or electronically approve the goods or service have been received

Identify potential fraudulent charges (at minimum, monthly, upon review of the cardholder statement) and immediately contact the card issuer per card issuer’s instructions. Also notify the supervisor, or card administrator or coordinator of the suspected fraudulent transaction(s).

Submit the individual card statement and documentation to the employee’s supervisor or authorized reviewer for approval. For fleet cards, complete necessary purchase documentation log or submit receipts in accordance with institutional policy.

Surrender the individual card and corresponding support documentation to the card administrator or coordinator prior to separation from the college, university, or system office or as otherwise requested. For fleet cards, ensure card is returned or stored in accordance with institutional procedure.

Take any other steps necessary to ensure the purchasing card is used only for authorized purposes.

Subpart B. Returns of items and services purchased using a purchasing card (P-Card)
Any items or services purchased using a P-Card that require returning must be credited back to the same P-Card used for the original transaction. Under no circumstances should a return be credited to a different card, cash, check, or any other form of reimbursement unless the vendor insists the refund must be by cash or check. In such cases, the funds must be deposited immediately with the college, university, or system office. If a refund is issued in the form of a check, the check must be payable to the institution.

In the event of a return, cardholders are responsible for:

Returning the item directly to the vendor as per the vendor's return policy.

Ensuring that the credit for the returned item is received and properly applied to the P-Card account.

Retaining all documentation related to the return transaction, including original purchase receipts, return receipts, and credit transaction confirmations.

Reporting the return and the credit in their P-Card transaction log or report, as required by Minnesota State procedures.

Failure to comply may result in revocation of P-Card privileges and possible disciplinary action in accordance with Minnesota State policies and procedures.

Subpart C. Supervisors or authorized reviewers
A supervisor or authorized reviewer of a cardholder is responsible for reviewing cardholder expenses and ensuring compliance with this procedure and any applicable college, university, or system office procedures. Duties include:

Approving employees for participation in the purchasing card program.

Reviewing purchases to ensure they meet objectives, are within restrictions placed on the card, and are deemed necessary.

Verifying purchases to prevent unauthorized or inappropriate card usage.

Promptly reporting any suspected fraudulent charges to the card issuer..

Identifying and tracking cash equivalents purchased with purchasing cards, as well as notification regarding any misuse. Cash equivalents include but are not limited to gift cards, bus passes and parking vouchers.

Addressing any misuse of the card by cardholder, including notification to Office of Internal Auditing, as required by Board Policy 1C.2 Fraudulent and Other Dishonest Acts

Ensuring closure of purchasing card at the time of the employee’s separation from employment or removal of purchasing card authority

Timely submission of individual card statement and supporting documentation with evidence of review to the business office for payment processing. For fleet cards, complete necessary purchase documentation log or submit receipts in accordance with institutional policy

Subpart D. The chief financial officer or designee (employee supervisor)
The chief financial officer or designee at a college, university, or the system office is responsible for reviewing cardholder expenses and ensuring compliance with this procedure and any applicable college, university, or system office procedures. Duties include:

Review submitted statements to ensure accuracy and appropriate approvals,

Identify additions to equipment or inventory records,

Review purchasing card users, at a minimum every six months, to ensure only current employees have purchasing cards, and

Review purchasing card activity, at a minimum every six months, to monitor for periods of inactivity indicating a cardholder no longer needs the card. Freeze or close purchasing accounts as needed.

Subpart E. Audit
The college, university, or system office shall establish written procedures to conduct periodic reviews at least annually for proper card use. Purchasing card records are subject to audit from time to time.

Subpart F. Records Retention
Colleges, universities, and the system office must maintain purchasing card records in accordance with record retention schedules and other applicable requirements.

Procedure History:

Date of Adoption: 01/18/02
Date of Implementation: 1/18/02
Date of Last Review: 12/23/24

Date & Subject of Amendments:

12/23/24 – Full review. Verified all amendments made in response to audit findings related to monitoring for cardholders no longer with college, university, or system office

3/10/15 - Periodic review completed. Amendments made throughout to reflect changes in MMB guidance regarding allowable receipts; align the procedure with current practices and industry standards relating to third party financers; to clearly define and delineate between user and supervisor responsibilities; and to include a records retention section.

Additional HISTORY

Procedure 7.3.3 Purchasing Cards

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Procedure History: