Puerto Rico

case studies
puerto rico
efficiency optimization

Purchasing cards empower schools and enhance services

Puerto Rico Department of Education program results in exemplary school budget management

The challenge

Puerto Rico Department of Education (PRDE) manages the public schools in Puerto Rico. It is the largest education entity in the country, with a USD3 billion annual budget and over 68,000 staff, including 38,000 teachers serving close to 500,000 students. PRDE is financially supported by the Central Government of Puerto Rico and the US Government and its spending is monitored and audited by local and federal authorities which demand transparent, efficient and auditable administration of funds. Federal funding was at risk due to lack of proper oversight.

PRDE's previous purchase process was dense, funds usage was difficult to trace, and cumbersome, with 30 buyers purchasing on behalf of 1,523 schools. The school directors were not closely involved in the purchase process or the allocation of resources within their school budget. Orders were physically delivered directly to vendors without the intervention of the school director and the subsequent payment and disbursement process was centrally managed. The time from ordering to delivery of materials at the schools was often months, many times leaving schools short of resources to operate efficiently.

The Special Education program which offers services to students with special needs also experienced considerable delays in the supply of goods. Typically a disadvantaged student would have to wait months to receive access to critical equipment such as hearing aids, and other medical-related goods and services (i.e. wheelchairs, therapies, etc). Emergency purchases were particularly difficult to handle since there was no effective mechanism in place to speed up the purchase and delivery processes.

Often vendors lingered unpaid for months and therefore their attention and service level to the schools was poor, other vendors were reluctant to do business with PRDE for having the reputation of paying late. Despite being the biggest buyer in Puerto Rico, the PRDE was not able to leverage its scale and reduce the typical suppliers' mark-up.

The solution

Citi offered two purchasing card programs for the PRDE; a School Program which allows school directors to perform regular and emergency purchases and the Special Education Program which provides school facilitators direct access to funds destined to cover medical-related goods for disadvantaged students.

As part of the re-engineering performed by the PRDE, within the new purchase process, the school directors and facilitators are the only authorized cardholders. Card limits are approved by the Secretary of Education and are based on school population and budget considerations. The new purchase process provides greater flexibility, improves budgetary control and offers robust audit trails of funds usage.

Orders can be placed remotely but payment must be made in person with the card. This requirement is not challenging as PRDE requires all vendors — which must be registered — to have wireless terminals for payment processing at school locations. Payments are not processed until the merchandise is delivered to the school. All card activity is available online, providing complete transparency for audit purposes. This visibility is reinforced by the use of Merchant Category Codes controlling the type of spend allowed in each program as well as a system of regular school checkups by program monitors.

The result

School directors' direct involvement with the purchase process has resulted in exemplary school budget management by making the best use of funds received according to their needs. Special Education students currently receive an unsurpassed treatment and their necessities are addressed in a sensible manner. The purchase process has been greatly simplified and since suppliers receive their payment immediately, their service level and attention to the schools have been dramatically improved.

The purchase process reengineering and the use of purchasing cards have given the PRDE the flexibility, transparency and controls needed to achieve a commendable administration of funds. It has also drastically changed the ability of schools to obtain appropriate access to materials and services fundamental to support their ultimate goal of educating Puerto Rico's children.