Digital wallets bring specific advantages around compliance to public fund distribution.
Navigating Fund Management Challenges
Efficient and compliant management of public funds is crucial for government programs and school districts, particularly when urgent distribution is required. For instance, during emergencies like the COVID-19 pandemic, families needed support in the form of public funds to transition to distance learning pretty much overnight. While payment cards often referred to as "P-cards" are an option, they lack stringent oversight. Digital wallets provide a better solution by enabling rapid, controlled fund distribution with enhanced oversight, ensuring funds are used precisely as intended. This is essential for maintaining the high standards of compliance required and effectively addressing the immediate needs of fund recipients.
Understanding Digital Wallets: Enhanced Control and Security
A digital wallet is more than just a tool for transactions; it’s a comprehensive solution for managing public funds with enhanced oversight. Some of the advantages of digital wallets include:
- Facilitation of rule-based purchases
- Real-time tracking and reporting
- Automated compliance
- Automating tasks like receipt collection, reconciliation, approvals, and payment
- Enhanced security
- Reduced opportunities for fraud
All of these features not only provide time savings, but provide other benefits like peace of mind, reduced risk, and increased transparency of how public funds are being spent.
The Limitations of P-Cards
Purchase cards typically offer less oversight in fund management, particularly in the granularity of purchases. The Association of Certified Fraud Examiners 2024 report found the following regarding fraud and prohibited purchases:
- 43 percent of fraudulent transactions that hit financial institutions are authorized
- The median loss per fraud case is $145,000
- Average loss per case is $1.7 million
- 84 percent of fraudsters displayed at least one behavioral red flag
Unlike digital wallets, P-cards do not provide the ability to approve transactions down to the specific item being purchased, making it difficult for administrators to ensure that every purchase complies with program guidelines.
Comparative Analysis: Control and Compliance
Digital wallets provide more control over spending by allowing administrators to set up pre-approved vendors and automate approval workflows. They are designed to generate audit-ready reports and map invoices to outstanding payables. This level of detail and control is crucial for maintaining compliance and transparency in public fund management.
Digital Wallets For Public Funds In Action
Several school districts have seen significant improvements by implementing digital wallets. Toledo Public School District and Alachua County Public School District have utilized ClassWallet to manage funds more efficiently and compliantly. These districts have benefited from operational efficiencies, cost savings, and enhanced compliance.
In Virginia, $68 million was distributed to families through a digital wallet for the Learning Acceleration Grant Program. Over 30,000 students benefited from more than 300,000 hours of tutoring and educational therapies and their families were able to easily access the funds. Meanwhile, public leaders and their constituents knew it was spent compliantly because of the audit-ready reports the digital wallet system was able to provide.
Embracing Digital Wallets for Better Fund Management
Digital wallets offer superior benefits over P-cards in terms of control, compliance, and operational efficiency. For those who prefer the ease of swiping a card, solutions like ClassWallet can offer cards too, but with the balance managed within the rules-based digital wallet system, offering the best of both worlds.
Public sector leaders should consider these advantages when evaluating fund management solutions. While there might be some change management involved in adopting digital wallet technology, they can ensure more secure, transparent, and efficient management of public funds, setting them up for the long-term success of publicly-funded programs.
Are you a public leader ready to explore digital wallets for public fund distribution? Schedule a demo with ClassWallet.
The post Digital Wallets vs. Purchasing Cards for Public Funds: What to Know appeared first on ClassWallet.