55 Chapters
Medium 9781567262438

Chapter 11: Calculating Due Dates

Arnold, William G. Berrett-Koehler Publishers ePub

One of the major problems found by auditors regarding Prompt Payment operations is improper calculation of payment due dates. An incorrect due date may result in interest overpayment, underpayment, or nonpayment. Calculating the proper due date for payment of an invoice is difficult to do manually or by computer because many variables are involved, and the seemingly arcane rules are likely to be misinterpreted.

143. The payment system I use automatically calculates the due date for every invoice. Why do I need to know how the due date is calculated?

Computer systems rely on human input of information. It is possible, even likely, that the data input to your system is sometimes faulty. It is a good idea to manually check a batch of invoices from time to time to see if data input is accurate. That’s exactly what auditors do when they come into organizations to audit Prompt Payment performance.

Auditors have found financial systems that were improperly programmed, producing the wrong results for certain invoices. The incorrect programming may have been attributable to an insufficient understanding of the Prompt Payment rules. Reviewing your transactions, especially those that are not routine, might reveal such a shortfall.

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Medium 9781567262445

Chapter 6 - 31 USC 1517—Obligation or Disbursement in Advance or Excess of Apportionment

Arnold, William G. Berrett-Koehler Publishers ePub

Chapter 4 discussed in detail the first part of the Antideficiency Act (ADA), the restriction against obligating or disbursing in advance or excess of an appropriation (31 USC 1341). This chapter explores 31 USC 1517, which applies the same restrictions to apportionments and other administrative subdivisions of funds (31 USC 1514). While these violations are more easily fixed by the agency or the Office of Management and Budget (OMB) than are violations of 1341, they are violations of the act nevertheless and carry the same reporting requirements.

Apportionment is a process by which, as the name suggests, appropriated funds are distributed to agencies in portions over the period of availability. OMB apportions funds for executive branch agencies. Appropriations for the legislative branch, the judiciary, the District of Columbia, and the International Trade Commission are apportioned by officials having administrative control of those funds.1 The term apportionment is officially defined as follows:

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Medium 9781567264029

CHAPTER 2: Availability: Purpose

Arnold, William G. Berrett-Koehler Publishers ePub

Comptroller general decisions are often stated in terms of whether appropriated funds are legally available for a given obligation or expenditure. This is just another way of saying that a given item is or is not a legal expenditure. Legal availability depends on three factors:

1. The purpose of the obligation or expenditure must be authorized.

2. The obligation must occur within the time limits applicable to the appropriation.

3. The obligation and expenditure must be within the amounts Congress has established.1

These three elements—purpose, time, and amount—control availability. All three must be met for a transaction to be legal. This chapter discusses availability in terms of purpose; Chapters 3 and 4 cover time and amount.

The most fundamental definition of purpose is found in the so-called “purpose law,” at 31 U.S.C. 1301(a):

Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law.2

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Chapter 3: The Final Rule (5 CFR 1315)

Arnold, William G. Berrett-Koehler Publishers ePub

This chapter deals with the Final Rule on the Prompt Payment Act codified in 5 CFR 1315. The document details the exact procedures agencies and vendors are expected to follow. How the Final Rule came to be and how it is used are the focus of this chapter.

16. hortly after Congress passed the Prompt Payment Act,OMB published Circular A-125 to implement its provisions. What prompted OMB to replace Circular A-125 with the Final Rule?

In 1996, Congress passed the Debt Collection Improvement Act, which required some changes in the Prompt Payment rules. At about the same time, increasing use of electronic commerce, such as electronic payment systems and electronic funds transfer, by the federal government and the private sector required additional rules changes to accommodate this new way of doing business. A major rewrite of the rules was necessary, so OMB decided to ask for public comment on its proposed revisions, then adopted them as codified regulations in the Code of Federal Regulations.

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Chapter 2: The History of the Act

Arnold, William G. Berrett-Koehler Publishers ePub

The Prompt Payment Act, originally passed in 1982, was updated several times during its first years of existence. The Office of Management and Budget (OMB) published Circular A-125 to implement its requirements, supplanted by the Final Rule on Prompt Payment in 1999. This chapter documents the history of the Prompt Payment Act and its evolution.

1. Why did Congress pass the Prompt Payment Act?

Prior to enactment of the Prompt Payment Act, there was considerable dissatisfaction among government contractors about the timeliness of government payments. A 1978 report issued by the General Accounting Office (GAO; now called the Government Accountability Office) stated that 39 percent of all bills paid by the government were paid late.1 Con gress passed the Prompt Payment Act to force federal agencies to pay commercial vendors in accordance with contract provisions. Prior to the Prompt Payment Act, it was not unusual for agencies to routinely pay bills due in 30 days in 60, 90, or even 120 days instead.

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