Prompt Payment:

State and Federal Payment-Timing Practices Are Similar

AFMD-89-91: Published: Sep 26, 1989. Publicly Released: Oct 27, 1989.

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Pursuant to a congressional request, GAO reviewed states' payment timing practices, focusing on: (1) whether states complied with their established payment timing criteria; (2) how state practices differed from Prompt Payment Act requirements; and (3) how additional federal requirements might affect state operations.

GAO found that: (1) many of the 44 state governments administratively supplemented their prompt-payment requirements, resulting in even closer conformance with federal provisions; (2) states tended to use a 30-day payment period, even if their laws provided for different payment periods; (3) 37 of 44 governments provided for interest on late payments for most goods and services, but 20 states required that vendors request interest on late payments; (4) states timely paid 73 percent of the 271 payments reviewed, 19 percent after the due dates, and did not have timing criteria for 8 percent; (5) although 11 of the 12 states reviewed paid some interest on late payments during 1988, there was no evidence that they paid any interest on the late payments examined; (6) most states applied timing and interest penalty criteria to interim payments on construction projects, but applied different criteria to final payments that usually allowed longer periods for late payments; (7) at least 24 states had timing criteria for payments to subcontractors and 10 states implemented the provisions through contract clauses, but none of the states enforced or monitored contractor compliance with those provisions; (8) most states processed invoices as soon as they received supporting documents, rather than precisely controlling payment timing; (9) although 7 of the 12 states had either developed systems, enacted laws, or issued administrative guidance discouraging early payments, many agencies did not adhere to the criteria; (10) states paid 41 percent of the 271 invoices more than 7 days before the due dates; and (11) the impact of requiring states to apply federally imposed criteria would vary depending on the level of detail.

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