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GSA SmartPay® 2010 Conference
Driving Financial Supply Chain Using SmartPay2
Adam Jackson
Vice President/Citi Global Transaction Services
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House Rules
Driving Financial Supply Chain Using GSA SmartPay2
All Audiences
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This course is designed to assist you in achieving the following objectives:
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Using SmartPay2 to optimize your agency’s financial supply chain
Goals & Objectives All Audiences
Driving Financial Supply Chain Using GSA SmartPay2
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1.
Financial Supply Chain Management
2.
Get reacquainted with the SmartPay2 Contract
3.
Concepts to Consider for SmartPay2a.
Inter/intra-Government Servicesb.
Grants Management
Agenda All Audiences
Driving Financial Supply Chain Using GSA SmartPay2
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Driving Financial Supply Chain Using GSA SmartPay2
What is Financial Supply Chain Management (FSCM)?
The Financial Supply Chain refers to:
End-to-end trade processes between buyers and sellers that depend on supporting financial information to effectively manage accounting, cash and fulfillment –
Buyer’s perspective, this involves the full procurement-to-payment process. –
For the seller, it is the order-to-cash cycle.
The trade cycle involves a number of different types of parties needing to exchange information and a variety of contractual documents in a timely manner
A supply chain finance solution is a combination of technology (platform), services, applications, content, contractual agreements and finance deployment
Financial Supply Chain Management All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Why is FSCM Important to the Federal Government?
Continuous vigor around federal financial management:–
Accountability, Risk Management–
Transparency to the public–
Optimizing transaction value
Inherent partnership: Federal Procurement and Financial Offices
Tracking federal obligation life cycle through multiple recipients–
Visibility into the transaction life cycle is paramount
Large orders are usually complex
Varying relationships between government trading partners
Financial Supply Chain Management All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
The Government continues to focus on improving quality of its payment systems and tools:
Noteworthy payments statistics in 2010–
Agencies delivered more than $98 billion in improper payments in
2009 $26 billion increase
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OMB Comptroller Danny Werfel calls improper payments biggest government problem
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Federal Financial Statements in 2009 demonstrated room for improvement in accounting for high payment flow areas such as intragovernmental
transactions
Financial Supply Chain Management All Audiences
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2. Get Reacquainted with the SmartPay2 Contract
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Driving Financial Supply Chain Using GSA SmartPay2
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Driving Financial Supply Chain Using GSA SmartPay2
Remembering some of the key themes:
Streamline ordering, procurement, payment, administrative processes
Reduce fraud, waste and abuse
Strategic Sourcing
Streamline the dispute process
Improve accountability and performance reporting
Platform to serve multiple government functions and processes
Improve government cash management practices
Provide convenience
State-of-the-art technology and innovation
Getting Reacquainted with the SmartPay2 Contract All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Intergovernmental Transactions (IGTs)
Federal agencies conduct business with each other, resulting in an exchange of revenue, expenses, assets, liabilities and/or transfer transactions.
Three primary types:1.
Management of funds/borrowings by one agency on behalf of another
2.
Transfer of funds between agencies by agreement or statute
3.
Buying and selling of goods and/or services between agencies
FMS reports over $8 trillion moves monthly between federal agencies via IPAC–
Critical Source of Federal Financial Management challenge
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Managing IGTs
Today
Currently, agencies use several different procedures to process the majority of interagency transactions including:–
Paper-based, manual SF 1081: Voucher and Schedule of Withdrawals and Credits
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Paper-based, manual SF 1080: Voucher for Transfers Between Appropriations and/or Funds
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The Internet-based electronic IPAC System–
Treasury checks–
Government PCard
Agencies are advised to use IPAC by Treasury FMS to achieve a more electronic and collaborative approach to accounting for IGTs - Not Required
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Challenges with Managing IGTs
Estimated $20-$30 billion in imbalances annually
The majority of IGTs flow through Treasury/IPAC–
Built for masses–
Limitations with transaction detail–
Minimal collaboration
Ability to reflect accurate accounting in financial statements
Buyer/Seller reconciliation differences due to varying systems, processes, accounting and technology–
Visibility into transaction detail
Inconsistent and/or limited auditing records
Budget management
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Intergovernmental Payment and Collection (IPAC)
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Provides a standardized interagency fund transfer mechanism for Federal Program Agencies (FPAs).
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IPAC facilitates the intragovernmental
transfer of funds, with descriptive data from one FPA to another
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Web-based technology
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Generally more useful for larger transactions that require less transaction level detail reporting
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
IPAC Transaction -
Process Flow Diagram1.0 Purchase 2.0 Fulfillment / Invoice3.0 Acceptance4.0 Payment / Collection5.0 Agency Accounting6.0 Central Accounting7.0 Reconciliation
Total Cost of Transaction is estimated at $125-$200
Transaction detail rolls up at high level
Manual and paper based reconciliation still exists
Agency financial systems are challenged
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
SmartPay2 Encourages Providers to Offer an IGT Solution
C.2.12 Value Added Product and Service Offerings (Tier 2)
C.2.12.4 Inter/Intra-Governmental Services:
Support spontaneous, pre-negotiated, recurring transactions
Provide sufficient auditing detail
Manage risk
Provide required federal reporting
Adhere to government cash management principles
Transactions must be identified as inter/intragovernmental
Flat transaction fee
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Acceptance Considerations for Using a Card for IGT
C.1.22 GOVERNMENT TO GOVERNMENT TRANSACTIONS
Merchant category code 9399–
Considered low risk
Cost of acceptance should be considered for large transactions
Cards are used today for select purchases
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Accepting Cards for IGTs
FMS Acquiring Terms to Accept IGTs:
Must have a dedicated terminal or PC software for IGT use–
Should not use the same site to accept collections from the public
Must not engage in accepting IGTs unless indicated on the agency application and allowing for subsequent approval in writing by FMS
Agency will be solely responsible for all charges for IGT collections
The Agency will pay with appropriated funds within 30 days of the receipt of the invoice
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Rules on Non-Interchange Transactions
PCard is not the only application–
Closed loop solutions may also be of value in the case of large ticket purchases
B.4.5 NON INTERCHANGE BASED TRANSACTIONS
Examples given include G2G and Large Ticket
Not required to produce refunds
Considered Closed-Loop System
Allowed to be priced as flat fee transactions
IFF rate is $0.56 per transaction
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Where are IGT Solutions Included in the Contract?
VALUE ADDED PRODUCT AND SERVICE OFFERINGS TIER 2 REQUIREMENTS (Base Period)
Description CLIN
Purchase Inter/Intragovernment Services VP.0001(d)
Travel Inter/Intragovernmental Services VT.0001(e)
Fleet Inter/Intragovernmental Services VF.0001(e)
Integrated Inter/Intragovernmental Services VI.0001(e)
Concepts to Consider for SmartPay2 All Audiences
Description CLIN
PurchaseInter/Intragovernmental Services VP.0001(d)
TravelInter/Intragovernmental Services
VT.0001(e)
FleetInter/Intragovernmental Services VF.0001(e)
IntegratedInter/Intragovernmental Services VI.0001(e)
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Driving Financial Supply Chain Using GSA SmartPay2
IGT Solutions Using SmartPay2 –
Citi Purchasing Card
Acceptance infrastructure already exists today within the federal government
Transaction detail supports audit and controls, prevents discrepancies
Robust reporting through the current Purchasing Card EAS
Leverage data for auditing while supporting strategic sourcing
Drive refunds, increasing monetary value of the transaction to the government
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
IGT Solutions Using SmartPay2 –
Citi Virtual Card Accounts -
Overview
Replace a real card account with a virtual card account (VCA) for card-not-present transactions
Clients request virtual card numbers (VCN’s) in real-time, set authorization controls and receive live virtual card account numbers
Authorization controls include:–
Single or multiple use–
Individual and aggregate transaction amounts–
Date and time ranges–
Individual merchant or merchant group
Transparent to the merchant at the point-of-sale–
16-digit account number, expiration date, 3-digit security code
Multiple client interface modes–
Web interface, batch file, real-time API
Robust reconcilement–
30 custom data fields
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
IGT Solutions Using SmartPay2 –
Citi Virtual Card Accounts –
Process Flow
Transactions flow through the authorization and control processes, and post with robust reference data1. Request and receive VCA via web site, file or API with unique purchase controls2. Provide VCA for transaction3. Submit transaction (receive auth message) 4. Authorize and
validate transaction against controls in the VCA platform5. Authorization and clearing message6. Reporting with VCN reconciliation and billing/payment against real card account
Concepts to Consider for SmartPay2 All Audiences
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2. Provide VCA for transaction MerchantMerchant
3. Submit transaction (receive auth message)
6. Reporting with VCN reconciliation and billing/payment against real card account
5. Authorization and clearing message AcquirerAcquirer
ClientClient1. Request and receive VCA via web site, file or API with unique purchase controls
VCA
Platform
Auth
and
Clearing
Reports
VCN
and Controls
4. Authorize and validate transaction against controls in the VCA platform
Transactions flow through the authorization and control processes, and post with robust reference data
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Driving Financial Supply Chain Using GSA SmartPay2
IGT Solutions Using SmartPay2 –
Citi Virtual Card Accounts –
BenefitsPayment efficiency with increased security and enhanced reconciliation
Security
The real card account number is never shared
Set controls on each virtual card number to ensure it is utilized for a specific transaction
Safeguard against fraud
Efficiency
The real card account number is never shared
Set controls on each virtual card number to ensure it is utilized for a specific transaction
Safeguard against fraud
Control
Customize and pre-set authorization parameters
Set up hierarchy approvals to increase control over spend and reduce unauthorized transactions
Execute larger transactions
Concepts to Consider for SmartPay2 All Audiences
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Payment efficiency with increased security and enhanced reconciliation
Security
Efficiency
Control
The real card account number is never sharedSet controls on each virtual card number to ensure it is utilized for a specific transactionSafeguard against fraud
The real card account number is never sharedSet controls on each virtual card number to ensure it is utilized for a specific transactionSafeguard against fraud
Customize and pre-set authorization parametersSet up hierarchy approvals to increase control over spend and reduce unauthorized transactionsExecute larger transactions
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Driving Financial Supply Chain Using GSA SmartPay2
IGT Solutions Using SmartPay2 –
Closed Loop Applications
Brand Network Tools
Business Service Agreements between agencies with high trading volume
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Relevant FSMC Concepts Under SmartPay2
Intergovernmental Transactions
Grant Management
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Grant Management Context
26+ agencies manage annually over 900 grant programs, outlaying over $650 billion in federal spending to recipients–
Unique business rules and processes exist according to grant type for payment, tracking and reporting
Federal authorities are seeking to increase controls, auditing efficiency and overall transparency and accountability to grant management–
$ billions in funding are lost to misuse or mismanaged accounting
FFATA seeks transparency and accountability by requiring grantors and grantees to work collaboratively to improve grant data collection and reporting. –
Technology is at the heart of such data tracking
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Federal Funding Accountability and Transparency Act
Provides greater insight into use of taxpayer dollars
Focuses on reporting, data quality and integrity
Raised bar for financial data collection and reconciliation
Increased demands on federal legacy systems
Drives greater collaboration with recipients
Concepts to Consider for SmartPay2 All Audiences
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Organizational chart outlining Types of Grants including Mandatory (e.g. Entitlement, Block, Formula) and Discretionary (e.g. Education, Research, Non-Research)
Driving Financial Supply Chain Using GSA SmartPay2
Grants Management All Audiences
Types of GrantsGrant to
Federal Agency
Grant to
Federal Agency
Mandatory
non-competitive*
Mandatory
non-competitive*
Discretionary
Competitive**
Discretionary
Competitive**
Entitlement
e.g. Medicaid, Food Stamps
Entitlement
e.g. Medicaid, Food Stamps
Block
e.g. Housing
Block
e.g. Housing
Formula
e.g., Highway Construction
Formula
e.g., Highway Construction
EducationEducation ResearchResearch Non- research
Non- research
Substantial portion administered
by State & Local entities
Est. 2008: $348.2 billion
Substantial portion administered
by States, Universities and Non-profits
Est. 2008: $57 billion (excludes individuals and for-profits)
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Driving Financial Supply Chain Using GSA SmartPay2
The Grants Process: Grantor & Grantee Relationship
Grants Management All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Observations
Payment systems exist today that electronically transfer grant funds to federal agencies and primary recipients.–
HHS; Payment Management System (PMS)–
Treasury; Automated Standard Application for Payments (ASAP)
Under the Grants Management Line of Business (GMLoB):–
HHS, Education and NSF all provide grant management capabilities, with limited functionality around the post-award process
Agencies still lack automated and collaborative tools to consistently track use of grant funds down to a transaction level, while collecting all required data elements as required under FFATA legislation
Concepts to Consider for SmartPay2 All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
Grant Payment Life cycle
Announcement, Application, Award, Post-Award, Close-Out
Addressable Grantee “Pain points”
Post Award: Payment Processing, Grant Monitoring, Regulatory Compliance, Adherence to predetermined program requirements/benchmarks Clost-Out:
Financial reconciliation, Preparation and delivery of final reports
Grant Management All Audiences
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Announcement Application Award Post-Award Close-Out
Front End Back End
Grantor Grantee
• Software providers (e.g. Grantium)
• Consultants (e.g. BAH, McKinsey)
• P.L. 106-107 progress
• Grants.gov focus
Back End•Oracle
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Market needs
analysis is required
Post-AwardPayment processing
Grantor monitoring
Regulatory compliance
Adherence to predetermined program requirements/benchmarks
Close-OutFinancial reconciliation
Preparation and delivery of final reports
Addressable Grantee “Painpoints”
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Driving Financial Supply Chain Using GSA SmartPay2
Challenges for Grantors & Grantees
Grantor Challenges
Accountability for how grantees use funds
Measuring grant results
Timely collection of data and compliance with laws
Grant process automation
Reconciling with financial reports
Reducing improper payments
Over $1 billion in expired funds spread across nine agencies
Reconciling funds and returning unused funds to US Treasury
Lack of definitions and formats for grant documents & online tracking
Grantee Challenges
Lack of standardization of terms
Requirements for grant recipients to submit financial and progress reports
Complying with disparate forms
9 different civilian payment systems
Requirements and policies that vary by agency
Grant Management All Audiences
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Lack of definitions and formats for grant documents & online tracking
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Lack of standardization of terms
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Requirements for grant recipients to submit financial and progress reports
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Complying with disparate forms
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9 different civilian payment systems
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Requirements and policies that vary by agency
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Accountability for how grantees use funds
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Measuring grant results
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Timely collection of data and compliance with laws
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Grant process automation
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Reconciling with financial reports
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Reducing improper payments
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Over $1 billion in expired funds spread across nine agencies
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Reconciling funds and returning unused funds to US Treasury
Grantor Challenges Grantee Challenges
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Driving Financial Supply Chain Using GSA SmartPay2
Recovery Act Reporting, Tracking and Validation
Agencies are to submit accurate, complete and reliable data with multiple recipients of ARRA funds into Recovery.gov However...
Controls and processes must be in place between the funding partners in order to verify data accuracy
All ARRA data collected within the financial supply chain should reconcile with a high degree of accuracy between funding partners
Processes for the data collection should be automated and standardized
Existing financial systems and reporting capabilities for all agencies must be considered
The system should be nimble for flexible and high frequency reporting without losing data integrity
Data collected and processed should be fully auditable
Performance dashboards are only as good as the data
Grant Management All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
SmartPay2 Solutions for Grant Management
Declining Balance Card
Virtual Cards
Closed Loop Applications
Grant Management All Audiences
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Driving Financial Supply Chain Using GSA SmartPay2
The SmartPay2 contract does enable innovation to increase the value within the current Federal financial supply chain–
Especially in the areas of IGTs
and Grants Management
There are enormous opportunities for agencies to drive down transactional costs, while improving data quality to improve auditing and strategic decisions
Solutions are immediately available today through PCard applications currently in use, as well as new technologies that are readily available by Citi
Summary All Audiences
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Thank you for attending!
Visit the Citibank Welcome Center–
Across from Room#B212–
National Industries for the Blind will have a display of products
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Conference Slide Show –
come see yourself shine!
Visit the Citibank One-on-One Lab - B210
Visit the Citibank Mini Sessions – B209
Ask Citi Link – Tell us your thoughts
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Reminders All Audiences
Driving Financial Supply Chain Using SmartPay2
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Interactive Training Events GSA
Citi offers onsite training at no cost for agencies meeting the required minimum participant level of 20 or more as set forth in the GSA SmartPay2 Master Contract.
Please contact your Account or Client Manager if you are interested in setting up a training session. Training can be conducted at a Citi Training Location or On-site at your office.
Regional Citi Training Locations–
Norfolk, VA–
Washington, DC
On-Site at your office–
20 participant minimum
Distance Learning – Computer Based Training is available via the CLASS icon in CitiManager.
Driving Financial Supply Chain Using GSA SmartPay2
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Terms & Disclosures
Tuesday, July 28, 2009
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