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Innovation In Action

For State of West Virginia

The Client: State of West Virginia State Auditor's Office

The Challenge
Upon conducting an extensive review of the procurement process used across the State of West Virginia, the State determined that the costs and inefficiencies of its paper-based payment systems were resulting in millions of dollars of unnecessary annual expenses. In addition to the significant resources expended on audits and administrative support for paper-based purchases, the State also faced challenges negotiating vendor contracts. Because many suppliers were unwilling to accept check payments (due to delayed cash flows, administrative burdens, increased costs, etc.), many agencies across West Virginia did not receive the volume of supplier bids necessary to conduct competitive negotiations for vendor contracts.

To address this problem, West Virginia implemented a State Purchasing Card Program in 1996 to enhance accountability for purchases, improve relations with vendors and drive cost savings. However, gaining program momentum and engaging card use throughout the agencies, boards and commissions across the State proved to be a significant challenge.

While the State Auditor's Office is responsible for administering the card program, it requires the support of State agencies and higher education institutions to implement these programs. This support is driven through the Purchasing Card Advisory Committee (PCAC). Accordingly, the State Auditor's Office sought a Commercial Card issuer with the knowledge, experience, vision and capabilities to influence PCAC to promote cards as the primary payment tool for small purchases throughout West Virginia.

The Solution
Citi's vast experience, unparalleled technological expertise and commitment as an active partner in implementation and cardholder training have been critical to the success of this program. Citi partnered with the State Auditor's Office and PCAC to broaden awareness of this solution and has successfully executed card program implementation throughout all agencies across the State.

In addition, Citi executed a spend-optimization analysis to estimate growth potential for this program. The analysis identified vendors that accept commercial card payments, but are currently being paid by check. It also pinpointed high-volume vendors that were not accepting Commercial Card payments so the State could negotiate discounts and request that they become card-accepting merchants.

Solution Roll-out
The State of West Virginia implemented the Citi Purchasing Card Program in 2006. Since then, the number of annual transactions has nearly doubled (from 367,718 to 613,162) and the total annual spend has tripled (from $100 million to $320 million).

The Department of Transportation (DOT) was the first State Agency to recognize the benefits of the Commercial Card program. The DOT relied on Citi's partnership to gain support from the agency's senior management, increase vendor acceptance and facilitate cardholder participation. The optimization analysis helped punctuate the efficiencies, cost savings and improved vendor relationships for the DOT. The West Virginia Department of Transportation's progressive approach to executing this program has made it a model for agencies across West Virginia to follow.

The Result
Today, nearly half of all DOT purchases are made with the Purchasing Card. Additionally, as a result of the expansion of this program across State Agencies, the number of check payments made by the State has reduced by 500,000 annually — which has contributed to several million dollars in cost savings. The State Purchasing Card Program has also provided the State with increased accountability for purchases, improved reporting of purchasing activity and enhanced fraud prevention.

One of the most significant benefits of the State Purchasing Card Program has been its profound effect on the State's business relationships. The Purchasing Card Program has successfully improved the State's reputation with vendors. Prior to the implementation of this program, the average wait for a vendor to receive payment was 70 days. The Purchasing Card has allowed vendors to receive payment in two to three days. Consequently, this prompt and efficient method of payment has allowed the State to diversify its business partners and negotiate better discounts on the cost of goods and services.

Higher education institutions and more recently, the West Virginia Division of Banking, have been authorized to use the State Purchasing Card for both in and out-of-state travel. To enhance the efficiency of this program, the State has added travel functionality to the Purchase Card Program. This one-card program will allow the cardholder to use one card for both types of purchases, eliminating the confusion that might occur with separate purchase and travel cards. The additional functionality is expected to add $20 million to $25 million of annual spend to the program.

"The partnership demonstrated with the roll-out of this solution was critical to the success of this program. Citi's analysis of the State's existing program allowed us to capitalize on our strengths and improve our weaknesses. As a result, we have elevated the card program to new levels of efficiency and now run one of the most progressive, successful payment programs in the country." — Glen B. Gainer III, State Auditor State of West Virginia