CASH MANAGEMENT POLICIES AND PROCEDURES HANDBOOK

# APPENDIX F. PROMPT PAYMENT REQUIREMENTS

[Section 1.0 General]{.underline}

This appendix to the Handbook establishes Department of Commerce
policies and procedures for timely payment of bills, as well as for the
payment of interest and penalties (if any) when payments are made late.
Such late payment penalties apply only to those contracts covered by the
[Prompt Payment Act (P. L.
97-177](http://www.whitehouse.gov/omb/financial/offm_legislation.html),
as amended by [P. L.
100-496).](http://uscode.house.gov/download/pls/31C39.txt)

## [Section 2.0 Policy Intent and Authority]{.underline}

> .01 Intent
>
> Purchase activities should be conducted in a manner that will achieve
> the lowest possible cost while maintaining good business relationships
> with suppliers. To achieve this objective, organization unit finance
> offices shall observe the following principles. Pay bills by the
> established due date, but not earlier than seven days prior to the
> payment due date \-- unless earlier payment will result in a discount
> or rebate.
>
> Base payment on receipt of Proper Invoices and satisfactory
> performance of contract terms. Exception: accelerated payment to a
> vendor is permitted prior to verification that merchandise has been
> received, under certain circumstances, such as the maximization of
> rebates. Automatically pay interest and late penalties (if any) on
> bills that are paid late and that are subject to the Prompt Payment
> Act, without payees requesting these payments.
>
> Take advantage of cash discounts, consistent with applicable Treasury
> guidelines, and in compliance with the Prompt Payment Act. [Public Law
> 105-362](http://www.gpoaccess.gov/plaws/105publ.html), enacted the
> "*Federal Reports Elimination Act*" that repealed 31 U.S.C. 3906, the
> "*Prompt Pay Reporting Requirement*". Agencies are no longer required
> to submit "Prompt Pay" statistics to Treasury's Financial Management
> Service (FMS).
>
> However, the Department of Commerce is still tracking Prompt Pay
> interest and penalty payments as well as other related information for
> internal use and for use in any other consolidated reports that may be
> required by law. Bureaus are therefore asked to continue to maintain
> Prompt Pay information and a system to assemble and transmit such
> information.
>
> .02 Authority
>
> Department policies and procedures comply with the requirements of:

1.  [5CFR Part
    1315](http://www.whitehouse.gov/omb/fedreg/ppa1010revfinal4.html),
    "*Prompt Payment".*

2.  [Public Law
    105-362](http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=105_cong_public_laws&docid=f:publ262.105),
    *"The Federal Reports Elimination Act of 1998".*

3.  [Prompt Payment Act](http://www.fms.treas.gov/tfm/vol1/v1p6c800.txt)
    (P. L. 97-177, as amended by P. L. 100-496).

4.  Disbursement requirements contained in Treasury Financial Manual
    (TFM),

5.  [Volume I, Part 6, Chapter
    8000](http://www.fms.treas.gov/tfm/vol1/v1p6c800.txt); and

6.  [31 USC Chapter 39 B "*Prompt
    Payment*](http://www.whitehouse.gov/omb/fedreg/ppa1010revfinal4.html)"

> The Director for Financial Management (OFM) is responsible for
> ensuring that: These policies and procedures are effectively
> implemented Department wide; and that Individual finance offices
> develop and maintain internal operating procedures to ensure timely
> payment of bills.
>
> Each organization unit Finance Officer is specifically responsible
> for: Ensuring timely payment of bills and the payment of interest and
> penalties when required; as well as determining the causes of any
> unacceptable level of interest penalties incurred, and taking
> necessary corrective or disciplinary action(s).
>
> To ensure compliance with the Prompt Payment Act, each Finance Officer
> (or designee) will:

1.  Designate an individual(s) who will be responsible for developing,
    implementing, and maintaining Prompt Payment procedures;

2.  Establish timely bill payment as a criterion in the performance
    appraisals of each designated employee responsible for overseeing
    prompt payment of bills;

3.  Make certain that internal operating procedures are developed and
    effectively maintained and that particular emphasis is placed on
    ensuring that individual large dollar payments are made on time and
    that appropriate cash discounts are taken;

4.  Work closely with appropriate organization unit offices to ensure
    that Receiving Reports are promptly forwarded to payment office(s);
    and

5.  Implement (an) effective Quality Control Program(s) within each
    payment office as described in [5CFR Section
    1315.3](http://www.whitehouse.gov/omb/fedreg/ppa1010revfinal4.html),
    *"Payment Payment*".

## [Section 3.0 Standards for Prompt Payment]{.underline}

> .01 Determining the Payment Due Date
>
> The period available to make a timely payment without incurring an
> interest penalty begins on the date of receipt of a Proper Invoice.
>
> An Invoice is deemed to be received on the later of:

-   The date a Proper Invoice is received by an agency if the agency
    annotates the invoice with the date of receipt; or

-   The seventh day after the date in which goods are delivered or
    services completed, unless acceptance occurs earlier or if a longer
    acceptance period is specified in the contract.

-   If the agency fails to annotate an Invoice with the date of its
    receipt, the date placed on the Invoice by the contractor is used to
    determine the start date for the payment period.

> Unless otherwise specified, payment is due:

-   In accordance with the date specified in the contract;

-   In accordance with discount terms when discounts are offered and
    taken;

-   In accordance with Accelerated Payment Methods; or

-   30 days after the start of a payment period, when a Proper Invoice
    is received.

> .02 Misdirection of the Invoice by the Vendor to an Office Other Than
> The Designated Agency Office
>
> The payment period does not begin until the date the invoice is
> received by the designated agency office. "Agency Office" is defined
> as the office designated by the Purchase Order, Agreement, or Contract
> to first receive and review Invoices. The Agency Office may be
> different from the office issuing the payment.
>
> .03 The Treatment of Holidays and Weekends In Determining the Payment
> Due Date
>
> When calculating the Payment Due Date, \"day\" means a calendar day
> including weekends and holidays. However, when the Payment Due Date
> itself (including discount due dates, falls on a weekend or Federal
> Holiday) payment may be made on the following business day.
>
> .04 Accelerated Payment Methods
>
> The Prompt Payment rule expands the options for making early payments
> in certain circumstances if doing so is in the best interest of the
> government. Agencies may accelerate payments for:

-   Single invoices under \$2,500;

-   Payments to small businesses; or

-   Payments related to emergencies, disasters, and military
    deployments.

> .05 Interagency Payments
>
> Prompt Payment late interest penalties do not apply to interagency
> payments. However, agencies are required to use electronic payment
> methods for interagency payments and to include advance billing and
> other payment terms in Interagency Agreements to ensure timely
> payments.
>
> **.**06 Late Interest Penalties Regulated by State, Local, or Foreign
> Governments vs, Prompt Payment Late Interest Penalties
>
> Late payment rates for utility services issued by state, local, or
> foreign governments take precedence over the Prompt Payment late
> interest penalties for determining the amount of interest due for late
> payments.
>
> .07 Federal Government Vendors Failing to Make Prompt Payment to their
> Subcontractors
>
> The Prompt Payment rule does not generally provide for late interest
> penalties for payments made to subcontractors. Under construction
> contracts, however, an agency may withhold payment from a prime vendor
> if they learn that the prime vendor has failed to pay their
> subcontractor in accordance to the terms of their contract.
>
> .08 Travel Reimbursements to Federal Employees
>
> Although the Prompt Payment rule does not cover travel reimbursements
> to Federal employees, the Federal Travel Regulation interim rule ([*41
> CFR Parts 301-51, "Arranging for Travel Services";* 52, "*Claiming
> Reimbursement"*; 54, "*Collection of Undisputed Delinquent Amounts
> Owed To The Individually Billed Travel Charge Card"*; 70, "*Internal
> Policy and Procedure Requirements"*; and 76 "*Collection of Undisputed
> Delinquent Amount Owed to the Contractor Issuing the Individually
> Billed Travel Charge*
> *Card*".*)*](http://www.access.gpo.gov/nara/cfr/waisidx_01/41cfrv4_01.html)
> requires agencies to reimburse an employee within 30 days after the
> employee submits a proper travel voucher to the approving official.
>
> Late payments are subject to an interest penalty based on the Prompt
> Payment interest rate in effect. When the payee is an employee
> entitled to reimbursement for travel expenses:

-   The Agency must reimburse the employee within 30 calendar days of
    submission of a Proper Travel Voucher to the Approving Official;

-   The Agency must notify the employee within seven days of receipt of
    a Travel Voucher of any error therein that would prevent payment
    within 30 calendar days of submission; and

-   The Agency should not hold payments due on Travel Vouchers (to
    utilize the 30-day period allowed). Payments should be made
    as-soon-as-possible to the employees. In the event of late payment,
    the Agency will pay the employee a Late Payment Fee in addition to
    the amount due.

> Notes:
>
> Late Payment Fees are calculated using the prevailing "Prompt Payment
> Act Interest Rate beginning upon the 31st day after the required
> Payment Date and ending upon the day the payment is made.
>
> In addition to the Late Payment Fee, the Agency must also pay the
> employee the equivalent of any Late Payment Charge that the Card
> Contractor would have been able to levy upon the employee.
>
> .09 Late Payment Interest Penalties B Determining the Amount of the
> Penalty
>
> Interest is calculated from the day after payment was due until the
> day payment is made. The interest rate in effect on the day after the
> payment due date is used to calculate the interest penalty. (See
> Section 10 for additional guidance.)

-   The following formula can be used to determine simple daily
    interest: P(r/360\*d)

> Key:

-   P is the amount of principal; r equals the Prompt Payment interest
    rate; and equals the number of days for which interest is being
    calculated.

-   The following formula can be used to determine monthly compounding
    interest: P(1+r/12)n \* (1+(r/360\*d)) -P

> Additional information on the calculation of late interest penalties
> including examples can be accessed on the Prompt Pay website at:
>
> <http://www.fms.treas.gov/prompt/index.html>
>
> .10 Payment Due in One Fiscal Year, but Paid After the Payment Due
> Date in a New Fiscal Year
>
> An agency must pay an interest penalty out of amounts made available
> to carry out the program for which the penalty is incurred. The
> interest payment is charged to the fiscal year of the day after the
> invoice payment due date (which is the day the agency incurred the
> obligation to pay interest). Therefore, if the product or service in
> support of this program was purchased in FY 1999, it should be paid
> from FY 1999 funds.

## [Section 4.0 Purchase Orders and Contracts]{.underline}

A copy of each Purchase Order or Contract along with a "Notice", or
cover sheet (that clearly states whether or not the agreement is covered
by the Prompt Payment Act) will be furnished promptly after issuance to
the Finance Office responsible for making payment. Upon receipt of each
Purchase Order or Contract, the Finance Office will review its
provisions to determine whether the document contains all of the
information needed to make a timely and accurate payment(s). If the
provisions are found to be deficient, the Finance Office will notify the
Contracting or Procurement Office immediately and request that the
necessary modification(s) be made to the document.

[Section 5.0 Invoices]{.underline}

> .01 Proper Invoice
>
> The following correct information constitutes a Proper Invoice and is
> required as payment documentation:

1.  Name of payee and Invoice date (vendors/contractors are encouraged
    to date

2.  Invoices as close as possible to the date of mailing or
    transmission);

3.  Taxpayer Identification Number (TIN), if not previously provided;

4.  Contract number, Purchase Order Number, or other authorization for
    delivery of property or services;

5.  Description, price, and quantity of property and services actually
    delivered or rendered;

6.  Shipping and payment terms;

7.  Name (where practicable), title, telephone number along with
    complete mailing address of responsible official to whom payment is
    to be sent; and

8.  Other substantiating documentation or information as required by the
    contract.

9.  EFT information, if not previously provided.

> Note: The Invoice should be date-stamped by the Payment Office with
> the date of receipt. Otherwise, the date placed on the Invoice by the
> contractor/vendor will be used to calculate the payment due date.
> Invoices for Citibank Purchase Card services are considered "received"
> on the date that they are received by the Commerce Bankcard Center.
> Invoices for Citibank centrally billed travel accounts are considered
> received when both the Citibank bill and the reconciling information
> from the Travel Management Center are received.
>
> .02 Required Notices to Contractor/Vendor Payees
>
> Submission by a contractor/vendor of an Invoice that is not a Proper
> Invoice is no submission at all. When an organization unit determines
> that an Invoice is not proper, it must be returned to the Payee
> **within seven days**. Failure to do so reduces the number of days
> available (30) by the number of days past seven it took to return the
> defective Invoice to the Payee to make the necessary payment without
> incurring an interest penalty payment. Copies of improper Invoices,
> with notations of the date returned to the Payee, should be kept in a
> central file for reference.
>
> .03 Summary Invoice
>
> The vendor or contractor will submit a Summary Invoice monthly or
> within 60 days after expiration of the Blanket Purchase Agreement
> (BPA), whichever occurs first, for all deliveries made during the
> month. All Delivery Tickets covered should be identified, with the
> total dollar value stated, and supported by receipted copies of the
> Delivery Tickets.
>
> Vendors or contractors not submitting monthly summary billings, as
> required under the BPA, will be paid per call order. Billings received
> between the first and last day of the month will be paid within 30
> days from the last day of the month.

## [Section 6.0 "Receiving Reports"]{.underline}

The following information is required on a proper "Receiving Report":

1.  Contract or other authorization number;

2.  Product or service description;

3.  Quantities received, if applicable;

4.  Date(s) property or service was delivered and accepted;

5.  Signature (or electronic alternative when supported by appropriate
    internal controls);

6.  Printed name, title, telephone number, mailing address, and E mail
    address of the receiving official. Taxpayer Identification Number
    (TIN) if available.

Organization units will ensure that receipt and acceptance are executed
as promptly as possible, or before expiration of the permitted
acceptance period, if such a period is specifically stated in the
Contract or "Purchase Order". "Receiving Reports" must be sent in time
to be received by the payment center by the **fifth business day** after
receipt or acceptance of goods or services. Since the late receipt of
these reports is the primary reason for late payments, it is incumbent
upon the payment offices to work closely with appropriate offices
throughout their organization unit to ensure that Receiving Reports are
forwarded in a timely manner. Designated receiving and payment offices
must date-stamp "Receiving Reports" and Invoices as they are received in
that office. Where performance does not satisfy the provisions of the
contract, the payee will be notified as soon as possible by the
responsible purchasing or contracting office.

## [Section 7.0 Timing Considerations in the Payment of Invoices]{.underline}

The "Timely Payment Period" starts with receipt of a "Proper Invoice"
and ends with the "Payment Due Date." The "Timely Payment Period" is the
period available for making a payment without incurring interest.

Exceptions:

-   Invoices for Citibank Purchase Card services are considered
    "received" on the date that they are received by the Commerce
    Bankcard Center (CBC).

-   Invoices for Citibank centrally billed travel accounts are
    considered received when both the Citibank bill and the reconciling
    information from the Travel Management Center (TMC) are received.

> .01 Determining Payment Due Dates
>
> Basically, unless otherwise specified, payment is due either:

-   On the date specified in the contract; or

-   If a Payment Due Date is not specified in the contract, it will fall
    30 days after the start of the Timely Payment Period.

> .02 Exceptions Under Which Due Dates Can Vary
>
> a\. Payment Due Dates vary for different food commodities (e.g., meat
> or meat food products, perishable agricultural commodities, or dairy
> products), refer to:

1.  Perishable Agricultural Commodities Act of 1930 ([7 U.S.C.
    499](http://www.thefederalregister.com/d.p/2002-12-16-02-31583) a(4)
    for meats;

2.  or Dairy Production Stabilization Act of 1983 ([7 U.S.C. 4502
    (e)](http://www.ams.usda.gov/dairy/ndbact.htm) for dairy.

3.  For specific products, contractual Payment Due Dates should be
    determined by prevailing industry practices.

> b\. When Invoices containing items with different payment periods are
> received,
>
> organization units:

1.  Should pay in accordance with the payment provisions of the
    Contract;

2.  Must pay an interest penalty if some items are paid for after their
    due dates;

3.  May split payments, making payment by the due date applicable to
    each category;

4.  May, take discounts for partial deliveries, if offered, when payment
    is made within the discount period;

5.  May not require contractors to submit multiple Invoices for payment
    of individual orders by the organization unit; and

6.  May encourage, but may not require contractors to submit separate
    Invoices for categories of products with different payment periods.

## [Section 8.0 Purchase Discounts and Rebates]{.underline}

Vendors offer a variety of price reductions (discounts): volume
discounts, payment-by-cash discounts, time discounts, etc. Vendors may
also offer rebates, which are refunds of part of the sales price or fee
in consideration for early payment. This section is primarily concerned
with "Time Discounts" for early payments as they relate to the Prompt
Payment Act.

Economically justified discounts should be taken within the "Discount
Period" whenever offered by the contract document or Invoice. Normally,
discounts B even Prompt Payment Discounts may be taken only after
acceptance of goods or services has occurred except where a lawful
agreement provides otherwise.

Payment officers must maintain a record of all lost economically
justified discounts for reporting purposes. Organization unit payment
systems are to include procedures that take advantage of cash discounts
as a matter of routine. Such procedures should expedite the handling of
Invoices offering cash discounts. For further guidance on taking
cost-effective discounts, see [TFM
6-8040.40](http://www.fms.treas.gov/cvfr/index.html), \"*Cash
Discounts*.\"

Organization units should continuously review ways for improving early
identification of Invoices involving discounts. These procedural and
operational reviews should include:

1.  Determining which discounts are economically justified for early
    payment;

2.  Placing appropriate Invoices on a \"fast pay track\"; and

3.  Immediate follow-up to obtain the "Receiving Report" where such
    special handling is warranted.

4.  Such action must be cost-effective in terms of the discount
    involved.

> .01 Time Considerations in Taking Discounts
>
> For an organization unit to accept the offered discount, the unit need
> only properly send payment. The date of mailing the check is
> controlling, not the date of receipt by the payee. Electronic Funds
> Transfer (EFT) is encouraged. If the time provided by the Contract is
> given as a certain number of days, the word \"days\" refers to
> calendar days and not working days, unless otherwise stated. On
> Saturdays, Sundays, and legal holidays, when Government offices are
> closed and Government business is not expected to be conducted,
> payments falling due may be scheduled for the next business day
> without losing the discount.
>
> When a cost-effective cash discount is offered, the applicable Invoice
> must be processed promptly to avoid loss of discount. Disbursing
> Vouchers for Invoices with cash discounts will be prepared and sent to
> the Department of the Treasury to permit check issuance as close as
> possible to, but no later than, the last day of the discount period. A
> payment made by Electronic Funds Transfer (EFT) will be made on the
> last day of the discount period.
>
> The period for taking a discount, the "Discount Period", is calculated
> from the "Discount Date" placed on the Proper Invoice by the
> contractor. When a Time Discount is taken, payment will be made as
> close as possible to, but not later than, the discount date. However,
> if the contractor has not 'dated' the Invoice, the Discount Period
> will begin on the date a Proper Invoice is actually received by the
> designated Billing Office assuming that the organization unit has
> annotated the Invoice with the date when the item(s) listed on such
> Invoice were received.
>
> .02 Invoice Payments and Compliance with the Prompt Payment Act
>
> a\. Purchase Cards Purchases
>
> Pending Citibank's actions to ensure sufficient information on
> Invoices for processing payments, the following policy applies to
> Purchase Cards:
>
> The Prompt Pay "Clock" starts running with the date printed on the
> Invoice
>
> generated by the Commerce Bankcard Center (CBC).
>
> Note: The date currently used is the Business day after the 21st of
> the month.
>
> The Prompt Pay interest payment should be made as a separate payment.
>
> b\. Centrally-billed Travel Account Purchases
>
> Since detailed travel information has had to flow through Citibank and
> the Travel Management Center (TMC) prior to its receipt by the
> Cardholder:
>
> The Prompt Pay "Clock" does not start running until the Cardholder
> receives both the Hard Copy "Invoice" from Citibank and the reconciled
> travel data from the responsible TMC.
>
> Prompt Pay interest payment should be made in a separate payment.
>
> c\. Accelerated Payments
>
> Accelerated Payments are payments made prior to the verification of
> receipt of merchandise as permitted in certain circumstances, such as
> the taking advantage of
>
> rebates.

## [Section 9.0 Late Payment Interest Penalties]{.underline}

When an organization unit fails to make payments when due, interest
penalties will be paid pursuant to the guidelines provided below.
Organization units will pay such interest penalties without the need for
Payees to request them. Organization units shall pay interest out of
funds made available for the administration or operation of the program
for which the penalty was incurred.

> .01 Conditions Requiring Interest Payment
>
> Interest will be paid when all the following conditions are met:

1.  Contract or Purchase Order with a payee subject to the Prompt
    Payment Act;

2.  A proper Invoice has been received (except where no Invoices are
    required, e.g., some periodic lease payments);

3.  Acceptance of property or services has occurred and there are no
    disputes over quantity, quality, or other contract provisions; and

4.  Payment is made to the payee after the due date.

5.  Payment of interest is also required when an organization unit takes
    a discount after the discount period has expired, and fails to
    correct the underpayment by the payment due date.

> When an organization unit pays a late payment interest penalty, such
> payment must be accompanied by a statement that provides:

1.  The amount of the interest;

2.  The interest rate currently in effect; and

3.  The number of days covered by the penalty payment.

> .02 Situations in which interest penalties need not be paid:

1.  Payments made on time in accordance with the Prompt Payment Act or
    in accordance with the terms of the agreement;

2.  Progress payments made solely for financing purposes where items of
    property or services have not been delivered or performed;

3.  Payment is delayed because of a dispute between an organization unit
    and a payee over the amount of the payment or other issues
    concerning compliance with the terms of a contract while the dispute
    is being settled in accordance with the Contract Disputes Act of
    1978, as amended;

4.  Interest amounts to less than one dollar;

5.  Payments made in advance for such things as rent, tuition,
    subscriptions, etc., unless interest penalty terms are specified in
    the procurement document;

6.  Costs or fees temporarily withheld in accordance with the terms of
    the contract; or

7.  When an organization unit cannot complete transmission of payment to
    a contractor by EFT because of incorrect or incomplete account
    information provided by the contractor. The organization unit is
    exempted from payment of interest penalties for the period between
    the date of attempted transmission and the date on which the Payee
    supplies correct information to the organization unit, provided that
    the Payee has been given notice of the defective account information
    within seven days after the organization unit is notified of the
    defective information.

[Section 10.0 Additional Penalties]{.underline}

.01 Conditions

A payee is entitled to an additional interest penalty payment equal to
one hundred percent (100%) of the original late payment interest amount
when the payee meets all of the following conditions:

1.  Is owed a late interest payment by an organization unit;

2.  Received a payment late that did not include an interest penalty
    that was due;

3.  Was not paid the interest penalty within ten days of such late
    payment; and Makes a written request not later than forty days after
    the payment was made. (The Payee's written request must specifically
    identify the Invoice for which late payment interest is overdue, and
    request payment of all late payment interest penalties and
    additional penalties.)

.02 Limitations of the Penalty Amount

The additional interest penalty is subject to limitations as follows:

1.  The maximum additional penalty shall not be greater than \$5,000.

2.  The minimum additional penalty shall not be less than twenty-five
    dollars regardless of the amount of the late payment interest
    penalty.

3.  Maximum and minimum penalties shall be determined on each separate
    payment made for each separate contract.

.03 Administrative Constraints regarding Additional Interest Penalties

The penalty shall not be based on individual Invoices unless such
Invoices are paid by separate payments. Where payments are consolidated
for disbursing purposes, the penalty determination shall be made
separately for each contract. Additional interest penalties do not cease
to accrue at the end of one year as does the late payment interest
penalties. Additional penalties do not apply to the payment of utility
bills, because late payment penalties for these bills are determined
through the rate-setting process.

## [Section 11.0 Applicable Interest Rate]{.underline}

The interest rate to be used for calculating interest penalties (except
in cases where a different interest rate is prescribed by another
governmental authority) is that which is in effect on the day after the
due date. It is established by the Secretary, Department of the Treasury
and is variously referred to as:

1.  the \"Renegotiation Board Interest Rate,\"

2.  the \"Prompt Payment Act Interest Rate,\" or

3.  the \"Contract Disputes Act Interest Rate.\"

4.  It is published semi-annually in the Federal Register on or about
    January 1 and July 1 and can also be obtained from the following web
    site:

[Government - Prompt Payment Act Interest
Rate](http://www.treasurydirect.gov/govt/rates/tcir/tcir_opdprmt2.htm)

[Section 12.0 Calculation of Interest Penalties]{.underline}

Organization units will adhere to the following guidelines for
calculating interest due on late payments.

The Prompt Payment Act interest rate in effect on the day after the due
date will be the interest rate used in calculating the late payment
interest. Interest will be computed from the day after the due date
(i.e., the thirty-first day) through the expected payment date.
Adjustments will be made for errors in estimating the date of the
payment if requested by the Payee and if the penalty exceeds one dollar.

When an interest penalty that is owed is not paid, interest will accrue
on the unpaid amount until paid (except in cases described in \"g\"
below). Interest penalties remaining unpaid for any thirty-day period
will be added to the principal. Thereafter, subsequent interest will
accrue monthly on the total amount of principal and previously accrued
interest. When an organization unit takes a discount after the discount
period has expired, the interest payment will be calculated on the
amount of the improper discount taken, beginning the day after the end
of the specified discount period through the expected payment date.

When an organization unit fails to notify the Payee within seven days
that an Invoice is improper, the time allowed for payment of the,
subsequently submitted, corrected Proper Invoice will be reduced. The
difference between the seventh day after receipt of the Improper Invoice
and the day notification was actually transmitted to the Payee will be
subtracted. Calculation of interest penalties will be based on an
adjusted due date reflecting the reduced number of days allowable for
payment.

Interest penalties shall not continue to accrue after the filing of a
claim for such penalties under the Contract Disputes Act of 1978, or for
more than one year.

[Section 13.0 Quality Control Program (QC)]{.underline}

Each organization unit must establish a QC program to assess performance
of payment systems, and to provide a reliable way to estimate payment
performance. Such QC programs must fulfill the following requirements:

> .01 Accuracy and Consistency
>
> The QC program must be a systematic performance measurement system
> that provides managers with information about problems and assists in
> targeting corrective action(s) throughout the organization unit. QC
> data must be accurate (within established tolerances) and consistent.
> It will be used in developing annual as well as other reports and
> should be useful in budget development. QC reviewers must use original
> documents and repeat the original calculations.
>
> .02 Currency
>
> Data should be gathered as frequently as needed by managers to
> identify and correct errors. Information must be collected through a
> process at least as thorough as the original payment decision process.
>
> .03 Efficiency
>
> Where the number of payment actions is too numerous to permit a total
> review, data should be gathered on the basis of a statistically valid
> sample sufficient to assure the reliability of QC reviews.
>
> .04 Objectivity
>
> Data must be collected by individuals who are independent of the
> original payment decisions. Supervisory reviews are not to be
> considered QC reviews. Analysis of QC data should result in remedial
> action targeted to correct objectively determined error causes.
>
> .05 Utility
>
> Analysis of QC data should result in remedial action to correct the
> causes of errors. Each organization unit will establish an inquiry
> section(s) within each payment office for answering payee inquiries.
> If formally structured, such formal delegations of responsibility
> should be provided by the Chief Financial Officer of the payment
> office. Each organization unit will submit, to the Director for
> Financial Management, an abbreviated semi annual report to assist
> management in identifying Prompt Payment performance trends (Exhibit
> F-1).

Payment Offices should maintain records containing information such as
the following:

1.  Invoices Paid Subject to Prompt Payment: Dollar Value; and Number.

2.  Invoices Paid Late: Dollar Value, Number, and Relative Frequency.

3.  Late Payment Interest: Dollar Value; Number; and Relative Frequency.
    (Please refer to Exhibit F-1)

It would be helpful also to maintain records with regard to the
following:

1.  Invoices paid eight days or more before the due date, except where
    cash discounts or rebates are taken \-- number, dollar value, and
    relative frequency of invoices that are subject to, as well as those
    not subject to Prompt Pay Requirements.

2.  The Number of Discounts available \-- whether taken or "passed-up"
    due to inadequate economic justification (as well as the reasons for
    same).

3.  Description of the organizational unit's payment practices.

4.  Description of the organizational unit's Quality Control System.

**Exhibit F-1**

Bureau: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date: \_\_\_\_\_\_\_\_\_\_\_

**Fiscal Year 20XX Prompt Payment Report**

1st Half 2d Half Full Fiscal Year

I. Invoices Paid Subject to Prompt Payment Act

-   Dollar Value

-   Number of Invoices

II\. Invoices Paid Late

-   Dollar Value

-   Number of Invoices

-   Relative Frequency

III\. Late Payment Interest Penalties Paid

-   Dollar Value

-   Number of Invoices

-   Relative Frequency

IV\. Certification

I certify the accuracy of the data reported above

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature and Title

Telephone: ( \_\_\_ ) \_\_\_\_\_\_\_\_\_\_\_\_\_\_FAX: ( \_\_ )
\_\_\_\_\_\_\_\_\_\_\_\_

E-mail:\_\_\_\_\_\_\_\_

Office
Location:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**Due Dates** : For 1st Half of Fiscal Year
:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

For 2d Half of Fiscal
Year:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_