DIRECTIVE 126-6 

PROMPT PAY 

I. Purpose

Establish Federal Emergency Management Agency (FEMA) standards, procedures, and 

responsibilities for the timely payment of commercial obligations and for the payment of 

interest penalties when payments are late.

II. Scope

This Directive applies to all FEMA personnel. 

III. Policy and Procedures

A. The Prompt Payment Act ensures the timely payment of vendors by Federal agencies. A 

timely payment is generally considered to be within 30 days of the specified agency’s 

receipt of an invoice that is considered proper for payment. Payments will be based on 

the receipt of a proper invoice and satisfactory contract performance. For an invoice to 

be determined or considered proper, it must include (at a minimum) the following:

1. Name of vendor;

2. Invoice date;

3. Government contract number or other authorization for delivery of goods and 

services;

4. Vendor invoice number, account number, and/or any other identifying number 

agreed to by contract; 

5. Description (including contract line/sub-line number), price, and quantity of 

goods and services rendered; 

6. Shipping and payment terms, unless mutually agreed that this information is only 

required in the contract; 

7. Taxpayer Identifying Number (TIN), unless FEMA procedures provide otherwise;

8. Banking information, unless FEMA procedures provide otherwise, or except in 

situations where the electronic funds transfer (EFT) requirement is waived under 

31 Code of Federal Regulation (CFR) 208.4;

9. Contact name (where practicable), title, and telephone number; and

10. Other substantiating documentation or information required by the contract.

B. FEMA’s policy is to ensure prompt payments for goods and services that are covered by 

the Prompt Payment Act, in accordance with the provisions of Title 5 CFR Part 1315.
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C. FEMA offices must make payments under contracts as prescribed in the Prompt 

Payment Act, but not later than the due date in the contract or, if appropriate, the 

discount date. Payment must be based on receipt of proper invoices and satisfactory 

performance of contract terms.

1. FEMA will only take discounts when payments are made on or before the discount 

date. If FEMA offices take discounts after the discount date, or if FEMA fails to make 

timely payment, interest penalties must be paid to the contractor.

2. Checks must be mailed prior to the payment date and electronic fund transfers 

made on the payment date.

3. FEMA offices must pay interest penalties automatically, without waiting for a 

contractor’s request, and must absorb the cost of interest penalty payments from 

funds available for the administration of the program for which the penalty was 

incurred. Temporary unavailability of funds does not relieve FEMA offices of the 

obligation to pay interest penalties when funds become available. FEMA may be 

required to pay an additional penalty under specified circumstances. 

4. FEMA’s implementation must be consistent with sound cash management practices, 

related Treasury regulations (Treasury Financial Manual, I TFM 6-8000, Section 

8040), and the Federal Acquisition Regulation (FAR) (Title 48 CFR Subpart 32.9 and 

Title 48 CFR § 52.232).

D. The U.S. Department of Homeland Security (DHS) Acquisition Manual (3032.7001), 

dated October 2009; provides that: 

It is the policy of DHS to perform an in-depth review of all invoices and vouchers 

submitted by contractors under contracts. Contracting Officers (COs) are 

ultimately responsible for the review and approval of each invoice and/or voucher 

submitted by the contractor. However, the Contracting Officer may delegate to a 

representative the authority to review and approve invoices submitted for 

payment. Throughout FEMA, Contracting Officers delegate authority to 

(Contracting Officer’s Technical Representatives - COTRs), or Approving Officials

to review and approve vendor invoices for a specific contract. This is done in the 

form of an appointment letter that describes the COTRs’ or the Approving Official's

assigned responsibilities. For specific FEMA acquisition policies and procedures, 

please refer to the FEMA Guide of the Acquisition Process Version 1.0, issued 

March 2010. A Guide to the FEMA Acquisition Process, can be found on the Office 

of the Chief Procurement Officer (OCPO) home page at:

http://online.fema.net/mgmt_acquisition/doc/FEMA-Acquisition-Guide.pdf. 

E. Payment Documentation and Process:

1. Invoices should be forwarded to the FEMA Finance Center (FFC) or other designated 

payment office(s) for payment. 

2. The FFC or other designated payment office(s) will:

a. Immediately clock/date-stamp all invoices immediately upon receipt.

b. Promptly forward all invoices to the appropriate COTR or Approving Official for 

signature, date, and assignment of the appropriate financial management code.
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c. Pay interest (upon presentation of a proper invoice) on any invoiced amount 

which is not paid by the due date.

d. Take all cost-effective discounts offered.

3. Late Payment Interest Calculation: 

a. The FFC or other designated payment office(s) calculates interest at the interest 

rate applicable on the day after the due date (i.e., the date FEMA incurred an 

obligation to pay an interest penalty). The following calculation will apply:

i. Compute interest from the day after the due date through payment date.

ii. Adjust any errors made in calculating interest.

iii. Add any interest penalties unpaid for a 30-day period to the principal. 

Interest accrues monthly on the total principal and previously accrued 

interest.

iv. Calculate interest using a 360-day year.

b. Interest penalties cease accruing after the filing of a claim for penalties or after

one year.

c. Interest is paid only after acceptance has occurred.

d. Interest penalties will be paid whether or not the contractor has requested 

payment of a penalty.

e. If funds are not available to pay an invoice, FEMA remains liable for the principal 

and any interest penalties that may accrue, once funds become available. 

f. Each payment for a late payment interest penalty will be accompanied by a 

notice stating the amount of the interest penalty included in the payment. The 

contract number and any invoice number assigned by the contractor will also be 

included in the notice to assist the contractor in reconciling the payment.

4. Limitations on Discount Payments

a. The Treasury Financial Manual (Section 6-8040.30, “Cash Management, 

Disbursements for Goods and Services”) provides guidance on determining costeffective discounts.

b. FEMA will only take discounts when payments are made on or before the 

discount date specified in the contract or invoice and when the discount is costeffective to the Government.

c. If FEMA takes the discount after the specified time and does not repay it before 

the due date, the interest payment will be calculated on the amount of the 

discount taken for the period beginning the day after the specified discount date 

through the payment date.

5. Exclusions/Qualifications to Timely Interest Penalty Payments

a. Interest payments of less than $1.00 need not be paid. 
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b. Interest payments may be delayed because of a disagreement between FEMA 

and a contractor over the amount of the payment or other issues concerning 

compliance with the terms of the contract.

c. Interest payments are not required when made solely for financing purposes, or 

in advance, except for interest payments required under 31 United States Code 

(U.S.C.) § 3902 (h)(1) and (h)(2).

d. Interest payments may be temporarily withheld per the terms of the contract.

6. Exemptions – The following are exempt from the provisions of the Prompt Payment 

Act:

a. Contract financing payments. 

b. Payments related to certain declared state of emergencies directing any Federal 

agency to utilize its resources in support of State and local disaster assistance 

efforts, as defined in the Disaster Relief Act of 1974 (P.L. 93-288). 

7. Additional Interest Penalties. A contractor is entitled to additional penalties under 

the following conditions:

a. The contractor is owed a late interest penalty by FEMA.

b. The contractor received payment after the due date and a required interest 

penalty was not included. The amount of the penalty doubles the amount due on 

the late payment of the invoice. 

c. The contractor is not paid the interest penalty by FEMA within ten days of the 

date on which the payment is made.

d. The contractor made a written request which was received 40 days or less after 

the date the payment was made. The request must include the following:

i. A statement indicating late payment interest is due under a specific invoice.

ii. A request for payment of all overdue late payment interest penalties and 

additional penalties to which they are entitled.

iii. A copy of the invoice on which late payment interest was due but unpaid, 

certification that payment for the principal had been received, and the date of 

the receipt.

iv. A valid request from the contractor postmarked by the 40th day.

e. The additional penalty paid to the contractor will be equal to 100% of the 

original late payment.

f. An additional penalty cannot be greater than $5,000, or less than $25. Late 

payment interest penalties cease to accrue at the end of one year. Additional 

penalties may continue to accrue, and will be calculated as described in Section 

III.E.3.a. For the purpose of determining the maximum and minimum penalty, 

the test shall be the interest due on each separate payment made for each 

separate contract. Penalties will not be based on individual invoices unless the 

invoices are paid by separate payment. Where payments are consolidated for 

disbursing purposes, penalty determinations will be made separately for each 
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contract. 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.

IV. Responsibilities

A. The Office of the Chief Financial Officer (OCFO)

1. Establish Agency-wide financial policies and procedures. 

shall (directly or through delegation): 

2. Ensure that effective internal control systems are established and maintained as 

required by Office of Management and Budget (OMB) Circular A-123, “Internal 

Control Systems,” to provide reasonable assurance that the requirements of Title 5 

CFR Part 1315 are effectively and efficiently carried out within FEMA.

3. Ensure that payments are made in accordance with OMB Circular A-123, “Internal 

Control Systems”.

4. Develop and issue internal procedures to implement this Directive.

5. Establish a quality control program to assess performance of payment systems and 

provide a reliable way to estimate payment performance. 

6. Monitor the causes of interest penalties and take corrective action. 

7. Provide prompt payment data and reports to all payment offices describing how 

well their office is complying with the Prompt Payment Act, and identify any 

required corrective actions.

8. Assemble and analyze the reasons for the incurrence of payment penalties; 

document discussions with the payment section and programs/components to 

determine the root cause of the interest payments; and recommend any revisions to 

policy/procedures, as appropriate. 

9. Conduct internal audits as needed.

10.Report in a timely and accurate manner to DHS, which includes the annual 

requirement to report, no later than November 30, information on FEMA’s agencywide invoice paying performance for, and improvements made over, the prior fiscal 

year.

B. The FFC or Designated Payment Offices

1. Oversee and manage all aspects of payments.

shall:

2. Ensure that contracts include the correct FFC or other designated payment office 

address for forwarding invoices by the contractor.

3. Immediately clock/date-stamp all invoices upon receipt. 

4. Log and sort all incoming invoices before they are sent to the respective COTR or 

Approving Official for approval. 
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5. Track the return of invoices from the COTR or Approving Official and report to the 

Contracting Officer any invoices not returned within seven days after receipt by the 

FFC or other designated payment office. 

6. Ensure that all invoices processed for payment have the approval, signature, and 

date of the COTR or the Approving Official and the appropriate financial accounting 

code.

7. Take all cost-effective discounts offered. 

8. Pay interest on a properly invoiced amount which is not paid by the due date.

9. Assist the Agency with resolving any critical items and manage the long-term 

performance of payments and certification. 

10.Enter the information from invoices into the Agency’s finance system. 

11.Ensure that proper payment documentation is maintained to support all 

transactions recorded in the financial system. 

12.Maintain accurate supporting documentation for all files for a minimum of seven 

calendar years from the date of the transaction. The documentation must be 

sufficient for external audit purposes.

C. The Office of the Chief Procurement Officer (OCPO)

1. Ensure that the Contracting Officer delegates a COTR or an Approving Official on 

every contract to approve invoices. 

shall:

2. Ensure an active and consistently updated list of all COTRs and Approving Officials 

per contract number is available for the FFC or other designated payment office. 

3. Ensure that FEMA contracts include the correct payment address for sending of 

invoices by the contractor.

4. Require each vendor or contractor to indicate whether an invoice is for partial, 

progress, advance, provisional, or final payment.

5. Include the criteria required for a proper invoice in every contract. 

6. Include the appropriate articles specified in internal OCPO directives, to include the 

due dates for payment. 

7. Include, when necessary, a stated inspection period to begin upon delivery of 

property and services. 

8. Ensure that the appropriate payment terms are included in all contracts, in 

accordance with Title 5 CFR Part 1315 and the FAR. 

9. Include a due date for each separate item in any contract which provides for 

separate payment for partial delivery of property and services. 

10.Ensure that award and modification documents are forwarded to the FFC or other 

designated payment office within seven working days of execution.

11.Ensure invoices are returned back to the FFC or other designated payment office 

within seven days after receipt. 
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D. Program Offices

1. Ensure that all goods/services have been received prior to submitting invoices to 

the FFC for payment. 

shall:

2. Ensure that all invoices forwarded for payment have the appropriate approval, 

signature, date, and appropriate financial accounting code. 

3. Ensure that contracts include the correct address for the forwarding of the invoices 

by the contractor. 

4. Ensure that invoices are quickly forwarded to the FFC or other designated payment 

office. 

5. Ensure that funds are obligated to permit prompt payment of invoices and, if 

necessary, fund any late payments.

V. Definitions

A. Acceptance - Acknowledgment by an authorized FEMA official that property and 

services received conform to the requirements of the particular contract involved.

B. Approving Official - A representative delegated by a Contracting Officer to approve 

invoices for payment under the Simplified Acquisition Threshold. 

C. Agency Payment Office - The FEMA office responsible for scheduling invoices for 

payment.

D. Applicable Interest Rate - The interest rate established by the Secretary of the 

Treasury for interest payments under Section 12 of the Contract Disputes Act of 1978 

(41 U.S.C. § 611) that is in effect on the day after the due date. The Prompt Payment Act 

Interest Rate is published semi-annually in the Federal Register, on or about January 1 

and July 1.

E. Contract - An enforceable agreement, including rental and lease agreements, purchase 

orders, delivery orders (including obligations under Federal Supply Schedule 

contracts), requirements-type (open-ended) service contracts, and blanket purchase 

agreements, between an agency and a contractor for the acquisition of property or 

services and agreements entered into under the Agricultural Act of 1949.

F. Contract Financing Payments - Authorized disbursements of monies prior to 

acceptance of supplies or services including advance payments, progress payments 

based on costs, progress payments (other than under construction contracts or 

architect engineer contracts) based on percentage or stage of completion, and interim 

payments on cost-type contracts. Contract financing payments do not include invoice 

payments or payments for partial deliveries.

G. Contracting Officer (CO) - A warranted Federal employee with the authority to 

negotiate, enter into, administer, modify, and terminate contracts on behalf of the 

Government. The CO is the Federal procurement Subject Matter Expert (SME). 

H. Contracting Officer's Technical Representative (COTR) - A Federal employee, 

designated in writing by the CO, appointed to furnish technical administration and 

direction within the confines or the contract. The primary role of the COTR is to 
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support the CO with administering the contract although the CO maintains lead 

responsibility for contract administration. 

I. Contractor - Any person, organization, or business concern engaged in a profession, 

trade, or business and any not-for-profit entity operating as a contractor (including 

State and local governments but excluding Federal entities).

J. Day - A calendar day, including weekends and holidays, unless otherwise indicated.

K. Designated Payment Office –The payment office designated in the contract.

L. Discount Date - The date by which, if payment is made, a specified invoice payment 

reduction, or discount, can be taken.

M. Due Date - The date on which Federal payments should be made. Unless otherwise 

specified, the payment is due either on the date(s) specified in the contract or if a 

payment due date is not specified in the contract, 30 days after the start of the payment 

period.

N. FEMA Finance Center - The primary designated payment office within the OCFO 

responsible for scheduling invoices for payments. 

O. Invoice - A bill or written request for payment provided by a contractor for property or 

services rendered. In this instruction, the term bill is synonymous with the term 

“invoice.”

P. Payment Date - The date of a check for payment or the date of an EFT payment 

(settlement date). Payments made by EFT mechanism will be made so as to be received 

by the contractor's financial institution by the established due date.

Q. Receipt of Invoice - The method used for purposes of determining a payment due date 

and the date on which interest will begin to accrue.

R. Receiving Report - Written evidence of acceptance of property or services by a FEMA 

official. If receiving reports are not used, authorized FEMA approving officials (i.e., 

COTRs) will sign and date the invoice indicating that the invoice is “approved for 

payment”.

VI. Authorities

A. The Prompt Payment Act, Chapter 39 of Title 31, U.S.C. 

B. Part 1315 of Title 5, CFR, “Prompt Payment.”

C. Contract Disputes Act of 1978, Sections 6 and 12.

VII. Responsible Office

Office of the Chief Financial Officer
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VIII. Supersession

This Directive supersedes FEMA Instruction 2600.1, dated November 1, 1991, and Interim 

CFO Directive 2600-10, dated June 30, 2009.

IX. References

A. OMB Circular A-123, “Internal Control Systems”.

B. U.S. Treasury Financial Manual, Section 6-8040, “Disbursements for Goods and Services”.

C. FAR, Chapter 1 of Title 48, CFR. 

X. Questions

All questions or concerns regarding this Directive shall be addressed to the FEMA Director

of Financial Management at (202) 646-4146.

Date: 4/14/2011