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Audit: state payment contract competitive; committee opens bill file to help schools and local agencies evaluate joining
Summary
A legislative audit found the state’s cooperative credit‑card processing contract is generally competitive and could save money if more entities opt in; the Government Operations Interim Committee voted to open a bill file to consider statutory changes and promote participation by school districts and higher‑education institutions.
A legislative audit presented to Utah’s Government Operations Interim Committee concluded the state’s cooperative credit‑card processing contract likely offers among the lower effective rates available to public agencies, but many local education agencies and higher‑education campuses are not using it.
Brian Dean, legislative deputy auditor general, said the state received four bids and that the cooperative contract awarded to Chase Paymentech scored highest, including on cost. The auditors calculated “effective rates” for standard transaction examples and found the state contract compared favorably to alternatives they reviewed.
The report noted two-tier pricing in the state contract: if transaction volume reaches a higher threshold the processing rate drops (an example cited was a drop from 3¢ to 2.5¢ per transaction), and the auditor estimated executive‑branch agencies alone could save roughly $77,000 a year if tier‑two thresholds are met.
But auditors also found low awareness and adoption. Only about 40% of school districts and Utah System of Higher Education institutions the auditors contacted were aware of the contract. Reasons not to opt in included software compatibility, contract terms that disallow passing fees to cardholders, and preexisting vendor relationships required by other institutional systems.
Executive Director Marvin Dodge of the Department of Government Operations told the committee his office will incorporate the audit findings into purchasing outreach and that IT work is underway to provide more robust reporting from the vendor. Nate Talley, deputy commissioner for the Utah System of Higher Education, said USHE will pursue a cost‑benefit analysis over the interim.
The audit recommended the Legislature consider allowing school districts and institutions of higher education the same statutory ability to pass through card fees that municipalities and counties have, and recommended promoting the existing state cooperative contract. Representative Jeff Burton moved that the committee open a bill file to address the audit findings and possible statutory adjustments; the motion passed unanimously.
Committee staff were directed to work with the Department of Government Operations, Utah State Board of Education and the Utah System of Higher Education to analyze barriers to adoption, refine reporting on current usage and draft options for statutory change.
