Govt to block unauthorised credit payments

'Unsuitable merchants' blocked from public purse.

Federal Government agencies will be required to automatically block unauthorised payments to escort agencies, casinos or other "unsuitable" merchants under changes to whole-of-government travel service arrangements.

The reforms, which iTnews first flagged last November, has seen the Australian Government appoint Diners Club as the sole provider of all MasterCard credit cards for government travel services.

Diners Club was expected to provide cards branded as “Australian Government‟, as well as unbranded cards where necessary, while working with individual agencies to develop and implement action plans by June 30 next year.

An updated implementation strategy paper this week (pdf) also called for Diners Club to supply a new expense management system to any agencies that either do not have one, or want to upgrade to a full suite of expense capabilities.

The scheme would provide “timely, accurate and reliable” transactional data feeds for all card expenditure to agency finance or expense systems, allowing agencies to understand the nature of their travel expenditure, due to the “comprehensive data” that will be provided by all the travel suppliers.

Smaller spending agencies may not require such systems though any expense management system provided to an agency would not lock into one particular card, according to the Department of Finance and Deregulation's strategy.

Blocking 'unsuitable merchant types'

Diners Club would also be required to allow agencies to automatically block “unsuitable merchant types” as part of the transition.

Chris Hamilton, chief executive of the Australian Payments Clearing Association, told iTnews it was technically possible to enable this capability, but the capability relied on the specific card issuer’s systems.

“It’s a good thing that the Government is open and transparent about its requirements,” Hamilton said.

It is understood Diners Club is capable of fulfilling this requirement but only in cases where the merchant was identified as a particular company.

A source close to the arrangements told iTnews it would be difficult to police such blocking.

Agencies would effectively be required to list individual companies and merchants to block transactions rather than catch-all categories such as "prostitution" or "escorts".

'General purchasing' and virtual cards

The business case for the scheme relies on mandatory participation from government agencies in order to drive down travel costs involved in using credit cards for booking arrangements.

However, no estimates of savings were included in the paper.

While the scheme is intended for travel services, it allows the cards to be used for “general purchasing” as well as accessing cash advances.

Furthermore, as noted by iTnews last November, public servants need not even have a card but can use a virtual card by quoting its number for flights, accommodation and car rental.

The virtual card can be provided at each agency’s discretion for meals and incidentals expenditure, and general purchasing.

Previous history with official credit cards has been instructive but more cautious about such schemes.

In 1994, the Public Accounts Committee embarrassed the Department of Finance for encouraging what it regarded as the uncontrolled use of the cards — some with monthly limits as high as $100,000 — to public servants with little training.

An audit of 419 settlement accounts during May 1993 showed that up to 75 percent were out of balance after the month's sweeping cycle.

The committee recommended credit cards be used for travel-related purposes only.

It criticised Finance for the lack of information provided to agencies to inform them of their credit card usage, and devolving the administration of the system to the agencies.