Prompt Payment Act Compliance - Virginia Department of Accounts

Complying withVirginia’s PromptPayment RequirementsFiscal FundamentalsPhoto by Karl Steinbrenner

“Prompt Payment Act” HistoryEnacted in the 1980s, the “Prompt PaymentAct” no longer exists as a separate statute. In2001, Virginia’s codification process embeddedprompt payment requirements into the VirginiaPublic Procurement Act (§ 2.2-4347 through §2.2-4356).The term “Prompt Payment Act” remains inpopular use for referring to related portions ofthe Virginia Public Procurement Act.9/10/2008 Financial Reporting 2

Prompt Payment RequirementsThe law requires agencies to pay for deliveredgoods and services by the “required” duedate.The “required” due date is established by theterms of the contract.If the contract includes no payment terms,then 30 calendar days after receipt of aproper invoice, or 30 days after receipt of thegoods or services, whichever is later.9/10/2008 Financial Reporting 3

Prompt Payment RequirementsVirginia law requires 100% prompt paymentcompliance.DOA calculates agency compliance rates eachmonth. Compliance rate = (number of latepayments made) divided by (total number ofpayments made).Payments without due dates and interagencytransfers are not considered.Agencies or institutions with compliance < 95%appear in DOA’s quarterly Report on StatewideFinancial Management and Compliance.9/10/2008 Financial Reporting 4

Agency Role in ComplianceAgencies should have appropriate writtenpolicies and procedures.Agencies should review CARS reportsroutinely.A “no exceptions” policy applies to PromptPayment Act compliance.9/10/2008 Financial Reporting 5

DOA’s Role in ComplianceMonitor prompt payment monthlyPrepare Quarterly Report performancestatisticsSend statistics to agencies and institutionsquarterlyAssist agencies9/10/2008 Financial Reporting 6

Allowing enough processing timeCommon Problems (1 of 3)– 7 work days for non-decentralized agencies(allows for pre-audit reviews, CDS, checkwriting, and payment by mail or EDI)– 4 work days for decentralized agencies(allows for all of the above, except pre-auditreviews)9/10/2008 Financial Reporting 7

Common Problems (2 of 3)Keying correct calendar year on paymentsThoroughly reviewing payments beforereleaseClearing the CARS error file quickly9/10/2008 Financial Reporting 8

Common Problems (3 of 3)Anticipating payments with weekend orholiday due dates, which are paid on thelast business day prior to weekend orholidayProcessing payments up to CARS closingdate (for example, if CARS February closeis on March 8, payments processed up toMarch 8 are included in February)9/10/2008 Financial Reporting 9

Internal ControlsEnsure receiving report and purchase ordermatch vendor invoice before approvalCalculate the required payment due dateDocument unacceptable materials andincomplete services on receiving report andtake corrective actionFile original payment processing documentsfor auditReview CARS reports for prompt paycompliance9/10/2008 Financial Reporting 10

ReferencesCAPP Manual Topics– 20315, Prompt Payment– 20310, ExpendituresCode of Virginia– Virginia Public Procurement Act, § 2.2-4347through § 2.2-4356.9/10/2008 Financial Reporting 11

Contactspromptpay@doa.virginia.gov804-225-3804 – voice804-225-2430 – facsimileU. S. Mail:Financial Reporting – Prompt PaymentVirginia Department of AccountsP. O. Box 1971Richmond, VA 23218-19719/10/2008 Financial Reporting 12