The District of Columbia Can Pay More Vendors on Time

GGD-83-38: Published: Apr 1, 1983. Publicly Released: Apr 1, 1983.

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GAO identified problems that the District of Columbia experiences in making timely payments to vendors. GAO also estimated costs to both the District and its vendors resulting from untimely payments.

GAO estimated that, in fiscal year 1981, only 28 percent of the District's vendor payments were paid within 30 days which resulted in a loss of about $383,000 in purchase discounts. Late payments also cost vendors an estimated $612,000 for lost investment income or borrowing expenses. GAO believes that late payments damage the District's reputation, erode its competitive base, and may result in higher prices, poorer quality goods and services, and fewer discounts. Although the District eliminated late utility bill payments by centralizing the payment function in the Department of General Services, this created lost investment earnings due to early payments, which were estimated at about $204,000 over a 1-year period.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The District passed D.C. Law S-164, the Quick Payment Act, which outlines time standards for payment of various vendors. Reports are available on timeliness of payments and the amount of interest paid on late payments, but the system does not trace discounts lost or taken.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to develop time standards for the payment process, generate Financial Management System reports on the timeliness of payments and on prompt payment discounts lost and taken, and monitor and report on the billpaying performance of individual agencies.

    Agency Affected: District of Columbia

  2. Status: Closed - Not Implemented

    Comments: Although the development of a comprehensive manual consolidating policies, procedures, and documents relating to the District's payment process is of concern within the Controller's Office, such development is not intended at present. Until a manual is developed, agencies are required to follow guidelines set out in other mayoral documents, Disctrict laws, and regulations.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to standardize all policies, procedures, and documents relating to the payment process and consolidate them in a single, comprehensive manual.

    Agency Affected: District of Columbia

  3. Status: Closed - Implemented

    Comments: The Controller highlighted the importance of prompt payment when discounts are involved. This is done on a case-by-case basis, with those payment's involving discounts being processed on a priority basis, because of the mandatory 17-day hold. Until the hold is lifted, some discounts will be lost because individuals do not always process the discount-related payments on a priority basis.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to emphasize the importance of agencies' processing payments quickly so bills can be paid on time and require priority handling of payments to vendors offering purchase discounts.

    Agency Affected: District of Columbia

  4. Status: Closed - Implemented

    Comments: The Controller's Office has implemented the planned vendor information subsystem within the District's Financial Management System. The subsystem is fully operational and a manual has been developed describing, explaining, and illustrating the subsystem.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to proceed with implementation of a vendor information subsystem in the Financial Management System.

    Agency Affected: District of Columbia

  5. Status: Closed - Implemented

    Comments: The Deputy Mayor for Finance assigned responsibility to the Controller to improve vendor payment performance. Vendor payments/discount-taking are subjects of monthly meetings between the District Controller's staff and departmental controllers. A financial management seminar was devoted to vendor payments.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to perform postaudits to ensure compliance with established procedures, policies, and internal controls.

    Agency Affected: District of Columbia

  6. Status: Closed - Not Implemented

    Comments: The District advises that its liquidity problem still persists and, therefore, it is not yet able to afford to eliminate the cash management policy delay.

    Recommendation: The Mayor, District of Columbia, should assign responsibility to the Office of the Controller for improving Districtwide vendor payment performance and require the Controller to develop a plan to eliminate the delay caused by the cash management policy and replace it with a system that calculates due dates and schedules payments to be made when due. The plan could be implemented over a period of time to minimize the impact of cash flow.

    Agency Affected: District of Columbia

 

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