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SALT LAKE CITY — Utah could save over $77,000 per year if more agencies joined a statewide cooperative contract for credit card processing that the Division of Payment negotiated with Chase Paymentech, according to a legislative audit released Tuesday.
Currently, only executive branch agencies in Utah are required to participate in the contract.
"The logic behind this requirement is that the state as a whole can negotiate more favorable terms and rates than individual agencies, based in its collective buying power," the audit states. "Public agencies that are not members of the executive branch may choose to opt-in to the state negotiated contract and receive the same rates."
These public agencies include local education agencies, Utah System of Higher Education institutions and counties and municipalities.
The audit found that right now, many local education agencies and Utah System of Higher Education institutions don't participate in the state contract, instead opting into individual contracts with higher rates.
So, why aren't these entities joining the state contract?
The audit says the lack of participation mainly boils down to low awareness of the contract, with most local education agencies and Utah System of Higher Education institutions being unaware of the contract and their eligibility to participate.
"Neither the Division of Purchasing nor the Division of Finance have taken part in any major advertising of the existence of this contract nor its availability beyond the executive branch," said the audit.
In fact, out of 31 survey respondents and interviewees, only nine stated that they were aware of the contract. Breaking it down even further, only four of the nine entities aware of the contract opted to participate.
The audit recommends that the Division of Finance and the Division of Purchasing engage in outreach to make entities aware of their eligibility to participate in the cooperative contract.
However, the Utah State Board of Education's website includes multiple cooperative contracts but doesn't mention the availability of the Chase Paymentech contract, prompting the audit to recommend the board — along with Utah System of Higher Education — to also conduct outreach to raise awareness of entities' eligibility to participate in the cooperative contract.
Even though many local education agencies and Utah System of Higher Education institutions are unaware of the contract, several of the agencies contacted expressed additional reasons aside from cost as to why they contract with a different processor.
"Eleven of the 31 LEAs and USHE institutions that we reviewed cited integration with receipting or accounting software as a factor they considered in their decision to contract with their current processor. Five stated that their credit card processing is done through their financial institution," said the audit. "Other reasons included ease of online payments and integration with other nonprocessing software that interfaces with student information systems."
Additionally, the audit found some processors offer education-specific benefits to schools, such as preloaded school lunch money accounts for local education agencies.
To this end, the audit recommends the Legislature consider adding language to statute to create exemptions for Utah System of Higher Education and local education agencies to pass through credit card processing fees, regardless of the terms of the state contract.
But how exactly will joining the contract save the state money?
The state's contract with Paymentech has two tiers specific to the credit card processing fee. Tier 1 is 3 cents per transaction, while the Tier 2 is 2.5 cents per transaction. So, based on data from executive branch agencies alone, adding agencies could push the state to Tier 2 levels, saving the state over $77,000 annually, according to the audit.
"Non-executive branch agencies currently utilizing the contract, like many municipalities and special service districts, would also experience savings associated with Tier 2 status, although without data, we cannot calculate an amount," said the audit. "In general, the state of Utah would collectively experience savings throughout both local and state government."
