State of Texas User Conference A P Cards And

State of Texas User Conference A/P Cards And Other Non-traditional Card Uses Audrey Flood November 2006

Agenda Definitions A/P Cards Vendor Specific/Ghost Cards Department Cards Keys to Success Questions & Answer © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 2

State of Texas User Conference Definitions

Definitions A/P Cards · Card issued to Accounts Payable Clerk to pay invoices via Purchase Card rather than submitting check request Vendor Specific Card/Ghost Card · Card number reserved for use with a single vendor or a few like vendors. · Physical card is not used during the transaction Department Card · Card issued in the name of a department and used by multiple employees © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 4

State of Texas User Conference A/P Cards

A/P Cards Keeps Existing Purchasing Controls in Place · Ability to place larger transactions on a card, taking advantage of the processing efficiencies of card transactions, and still maintaining the same oversight of those transactions · Purchase orders are still processed in the same manner · Only change in procedure is the method of payment · Generates up to 60 days additional float on your funds · Eliminates check payments and costs associated with issuing checks · Ability to capture smaller dollar transactions that should have been placed on the card at the point of purchase · Recurring transactions lend themselves well to this type of payment © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 6

A/P Cards Process Flow · Accounting receives invoice approved for payment · Accounting contacts the vendor to arrange for payment with the card · Payment is flagged in the system as paid via card so no check will be issued ― This may require the use of “wash” accounts or a special mapper to flag the transaction as paid and remove the encumbrances · Detailed records are maintained and forwarded to an approver · Approver reviews the transactions online daily and compares to the transaction documentation provided by accounting · Approver is responsible for allocating the transactions © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 7

A/P Cards Impact on Business · Process is quick and easy · Reduces number of calls inquiring about payment · Very useful for vendors who have difficulty applying payments correctly Card Management · Cards are issued in an individual’s name for security · Cards have very high limits so that large dollar purchases can be accommodated · Due to high limits, plastic should be stored in a secure place or destroyed · Posted transactions should be reviewed daily © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 8

A/P Cards Pitfalls and Challenges · Identifying which vendors will accept commercial card payment ― JPMC can provide a vendor match · Liquidating encumbrances · Persuading vendors not to send invoice ― Could result in double payment ― If they send invoice it should be marked “PAID” or show a zero balance due © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 9

State of Texas User Conference Vendor Specific/Ghost Cards

Vendor/Ghost Cards Manage Purchases with High Volume Vendors · Ability to capture and monitor transactions with high volume vendors and recurring transactions · Reconciliation is less tedious · Recommended for Level 2 and 3 vendors that are able to pass cost center or other required accounting information in the Point of Sale field. This allows transactions to be automatically allocated to appropriate unit or cost center when using online reconciliation · Level 3 vendors provide invoice level detail · Simplify audits · Reduction of compromising card numbers · Cards are restricted to use at the particular vendor reducing exposure to external fraud © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 11

Vendor/Ghost Cards Process Flow · Setup card number · Provide number to vendor · Ordering process is established between vendor and entity · Purchase is made and card is charged by vendor · Employee receives goods and purchase documentation · Purchase documentation is funneled to central location for reconciliation © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 12

Vendor/Ghost Cards Process Flow · Scenario #1 ― An order is placed directly with the vendor by the employee either in person, via phone or internet as previously established with the vendor ― The vendor obtains the required POS code at the time the order is placed or the employee enters it into the website ― The order is filled, the vendor charges the card and inputs the POS code ― The transaction posts to the account and allocation occurs automatically based on the POS code ― Types of vendors: office supply companies, copy and printing services, local vendors that don’t take P. O. s, overnight delivery, equipment or parts stores, plumbing supply, travel agents © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 13

Vendor/Ghost Cards Process Flow · Scenario #2 ― A Purchaser is assigned to the manage the vendor transactions ― Orders are placed by the employee via the P. O. system ― The Purchaser contacts the vendor, places the order, authorizes payment and receives documentation ― Goods are delivered to the requestor ― Purchaser reconciles the account ― Types of vendors: Contract Vendors © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 14

Vendor/Ghost Cards Process Flow · Scenario #3 ― Recurring transactions are placed on the card ― This follows the A/P card process flow ― Can be auto-debit or used as an A/P card ― Card reconciliation occurs according to the A/P process ― Types of vendors: telecom, cell phone and pagers, water department, waste management, security systems © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 15

Vendor/Ghost Cards Card Management · Cards are issued in the name of employee for security ― Cards can be issued in the name of the vendor but your dispute rights are limited · Card Controls need to be set on the card appropriate to the usage ― Vendor specific or MCC specific ― Appropriate monthly limit – possibly declining balance limits ― Single transaction limit ― Number of transactions per day and month · Due to high limits, card should be locked in a secure place or destroyed © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 16

Vendor/Ghost Cards Pitfalls and Challenges · Vendor must pass Level 2 or Level 3 information for automated account allocation · Invalid information can be passed · Identifying which vendors will accept commercial card payment ― JPMC can provide a vendor match · Persuading vendors not to send invoice © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 17

State of Texas User Conference Department Cards

Department Cards Allows Capture of Missed Card Spend · Cards are issued in the name of a department · Ideal for locations with high turnover as it lessens the amount of time spent on card management · Works well for departments with low volume users · Minimizes the number of cards issued · Reconciliation is done by a “card manager” so there are less people to train on reconciliation procedures © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 19

Department Cards Process Flow · Department Card is issued to a designated “Card Manager” · Card use authorization process is defined · Card is checked out by employee following authorization process · Log is maintained by Card Manager to document date, time and person using the card · Both employee and Card Manager sign the log upon card check-out and check-in · Employee makes purchase · Employee returns card along with purchase documentation · Card manager reconciles the account © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 20

Department Cards Card Management · Cards are issued in the Department Name and delivered to the designated Card Manager · Address on the invoice or memo statement should contain the name of the Card Manager · Cards have same controls as named cards · Cards need to be kept in a secure locked location accessible only to designated Card Managers · Reconciliation needs to be done no less than weekly as to quickly identify any unauthorized transactions © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 21

Department Cards Pitfalls and Challenges · Higher risk of unauthorized transactions · Limited charge-back rights · No employee misuse protection under Master. Coverage · Making sure you have enough cards to accommodate usage · Keeping track of the physical cards © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 22

Keys to Success · Administrative support · Positive attitude toward change · Time © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 23

State of Texas User Conference Questions and Answers

Contacts JPMC Program Coordinator Team: Nicole Sirianni and Melissa Johnson Phone: 888 -508 -9758 Email: CCS-Public. Sector@jpmchase. com JPMorgan Chase Relationship Managers: Toinette Miller, VP Audrey Flood, AVP Laura Miles, VP JPMC Relationship Manager JPMC Co-Op Relationship Manager JPMC Relationship Manager Phone: 972 -377 -8132 Phone: 512 -246 -9204 Phone: 972 -529 -9455 Email: toinette. a. miller@jpmchase. com Email: audrey. e. flood@jpmchase. com Email: laura. s. miles@jpmchase. com © 2005 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N. A. Member FDIC. 25