Actions To Improve Timeliness of Bill Paying by the Federal Government Could Save Hundreds of Millions of Dollars

AFMD-82-1: Published: Oct 8, 1981. Publicly Released: Oct 8, 1981.

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GAO assessed proposed legislation which would require that Federal agencies pay interest on overdue payments made to private contractors and determined if previous GAO recommendations for monitoring the Government's bill payment performance, for developing payment due-date standards, and for including specific payment terms in contracts and purchase orders have been implemented.

Although GAO made specific recommendations more than 3 years ago for bill payment monitoring and changes in procurement regulations, little has been done in these areas. GAO noted continued ineffective monitoring of Federal bill payment practices and failure to provide appropriate guidance to Federal agencies on bill paying requirements. Contractors continue to complain that the Government is not paying its debts when due, a situation that has been made more critical by high interest rates. Furthermore, GAO saw indications that Government agencies, while paying some bills late, are still paying others too early. Both late payments and early payments are costly. Together, late payments cost contractors and early payments cost the Government possibly hundreds of millions of dollars annually. Early bill payment costs the Government interest and causes some contractors to stop offering discounts. The Treasury monitoring of Federal bill payment practices has been ineffective, and responsible agency headquarters offices apparently do little payment performance monitoring themselves. Payment due-date standards for the major types of goods and services have not yet been developed, and contract documents generally still do not include specific payment due dates. As a result, the Office of Management and Budget, the Treasury, and responsible agency headquarters do not know how good the Government's current bill payment performance is. More specific guidance for agency monitoring and reporting is needed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Treasury should revise cash management regulations to require each agency to submit, as part of the already mandated annual report on cash management practices, information on: (1) actions completed, underway, or planned to strengthen bill payment procedures; (2) the number and dollar total of bills paid on time, bills paid late, and bills paid early; (3) the range of time for payments made early and late; and (4) the reasons for early and late payments. The Secretary should establish and implement monitoring and evaluating procedures to ensure that agencies comply with the above annual reporting and that agencies not paying bills when due are identified continually. As part of its monitoring effort, Treasury should facilitate the exchange of information among Federal payment centers to promote efficient payment procedures and techniques.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Director of the Office of Management and Budget (OMB) should direct the Administrator of the Office of Federal Procurement Policy to: (1) develop payment due-date standards for the major types of goods and services procured by Federal agencies; (2) incorporate these payment due-date standards in the Federal Acquisition Regulation that is currently being developed; and (3) include in the Federal Acquisition Regulation a provision requiring agencies to specify, when possible, in each contract and purchase order the date when payment is due. If implementation of the Federal Acquisition Regulation is delayed, the Director of OMB should ensure that, in the interim, the applicable Defense Acquisition Regulation and the Federal Procurement Regulations are revised accordingly.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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