B-212976, FEB 27, 1985

B-212976, FEB 27, 1985

PAYMENTS - PROMPT PAYMENT ACT - DATE OF PAYMENT DIGEST: REPLYING TO CRITICISMS BY OMB OF 63 COMP.GEN. 391 (1984), IN WHICH AGENCIES WERE COUNSELED, IN CONFORMANCE WITH THE PROMPT PAYMENT ACT, NOT TO DATE AND MAIL PAYMENTS RIGHT ON THE DUE DATE BECAUSE NORMAL MAIL DELAYS WOULD GENERALLY RESULT IN PAYMENTS ARRIVING LATE, GAO POINTS OUT THAT ITS ADVICE IS WHOLLY CONSISTENT WITH OMB CIRCULAR A-125 AND THE TREASURY FISCAL REQUIREMENTS MANUAL, AS PRESENTLY CONSTITUTED.

THE HONORABLE JOHN J. LORDAN: DEPUTY ASSOCIATE DIRECTOR FOR FINANCIAL MANAGEMENT OFFICE OF MANAGEMENT AND BUDGET

DEAR MR. LORDAN:

WITH REGARD TO YOUR LETTER OF FEBRUARY 5, 1985 CONCERNING PAYMENT DUE DATES UNDER THE PROMPT PAYMENT ACT, I THINK IT IMPORTANT FOR YOU TO BE AWARE THAT OUR DECISION 63 COMP.GEN. 391 (B-212976, JUNE 6, 1984), IS THOROUGHLY CONSISTENT WITH OMB AND TREASURY INSTRUCTIONS TO AGENCIES.

AS YOU CORRECTLY OBSERVED, WE DID RELY ON SENATE REPORT 97-302, DECEMBER 14, 1981, IN CONCLUDING THAT THE GOVERNMENT SHOULD NOT "ROUTINELY DATE AND MAIL ITS PAYMENT CHECKS TO CONTRACTORS ON THE DAY PAYMENT IS DUE, WHICH WOULD RESULT IN LATE PAYMENTS IN EVERY CASE BECAUSE OF NORMAL MAIL DELIVERY DELAYS." WE WERE NOT UNMINDFUL OF THE FACT THAT THE HOUSE BILL (H.R. 4709, MAY 11, 1982) PROVIDED FOR AN INTEREST FREE "GRACE PERIOD" OF 15 DAYS (WITH A FEW EXCEPTIONS).

WE DO NOT AGREE, HOWEVER, THAT THE GRACE PERIOD WAS INTENDED TO OBVIATE THE NEED EXPRESSED IN THE SENATE REPORT TO MAIL AGENCY PAYMENTS SUFFICIENTLY IN ADVANCE FOR THEM TO BE RECEIVED BY THE PAYEE ON TIME. THE PURPOSE OF THE GRACE PERIOD, AS EXPLAINED IN THE HOUSE COMMITTEE REPORT WHERE THE PROVISION ORIGINATED, WAS TO ELIMINATE THE ADMINISTRATIVE BURDEN OF PROCESSING RELATIVELY SMALL INTEREST PENALTIES, BUT NOT, AS YOU SUGGEST, TO TAKE CARE OF "MAIL TIME." IN FACT, THE COMMITTEE STATES EXPRESSLY: "THE INTENT OF THE COMMITTEE THAT AGENCIES PAY THEIR BILLS BY THE REQUIRED DUE DATE IS IN NO WAY DIMINISHED BY INCLUSION OF PROVISIONS AUTHORIZING GRACE PERIODS." HOUSE REPT. NO. 97-461, MARCH 23, 1982, P. 10. THIS COULD ONLY BE A REFERENCE TO THE THEN-EXISTING REQUIREMENT THAT CHECKS MAILED IN SUFFICIENT TIME TO BE RECEIVED WHEN DUE.

MOREOVER, IT IS HARD TO READ THE ADMONITION IN YOUR CIRCULAR A-125 THAT "AGENCIES WILL MAKE PAYMENTS AS CLOSE AS POSSIBLE TO, BUT NOT LATER THAN THE DUE DATE" AS MEANING "ON THE SAME DAY AS THE DUE DATE," IN VIEW OF THE FACT THAT THE CIRCULAR ADDS TO THAT CLAUSE, "CONSISTENT WITH THE TREASURY REGULATIONS (1 TREASURY FISCAL REQUIREMENTS MANUAL 6 8040.20)." WHEN WE TURN TO SEC. 8040.20 OF THE MANUAL, WE FIND THE FOLLOWING INSTRUCTION:

"TIMELINESS OF DISBURSEMENTS. AN AGENCY'S PAYMENT SYSTEM MUST BE DESIGNED TO PROVIDE FOR SCHEDULING THE ISSUING AND MAILING OF CHECKS FOR RECEIPT BY THE PAYEE AS CLOSE AS ADMINISTRATIVELY POSSIBLE TO BUT NO LATER THAN THE DUE DATE. ***"

HOW CAN ONE REASONABLY SCHEDULE THE MAILING OF A CHECK IN TIME FOR IT TO BE RECEIVED BY THE PAYEE "NO LATER THAN THE DUE DATE" UNLESS IT IS MAILED AT LEAST A FEW DAYS IN ADVANCE TO ALLOW FOR MAIL TIME?

I THINK THE "CONFUSION" AND "FURTHER MISUNDERSTANDING ON THIS ISSUE," TO WHICH YOU REFER MAY BE ATTRIBUTABLE TO SOME DISCREPANCY BETWEEN THE WRITTEN GUIDANCE PROVIDED TO THE AGENCIES BY THE CIRCULAR AND TREASURY MANUAL AND THE ADVICE WHICH MAY HAVE BEEN PROVIDED ORALLY. I SUGGEST THAT AS THE AGENCY CHARGED WITH IMPLEMENTING THE PROMPT PAYMENT ACT YOU RECONSIDER THE POSITION YOU WISH TO TAKE, IN LIGHT OF THE AFOREMENTIONED LEGISLATIVE HISTORY, AND THEN ASSURE THAT THE WRITTEN GUIDANCE IS CONSISTENT WITH THAT POSITION. AS THINGS NOW STAND, IT IS DIFFICULT TO SEE HOW WE COULD INTERPRET THE VARIOUS PROVISIONS OF LAW AND IMPLEMENTING GUIDANCE DIFFERENTLY THAN WE HAVE IN 63 COMP.GEN. 391. IF, HOWEVER, YOU AND TREASURY CHANGE THE WRITTEN GUIDANCE, WE WOULD, OF COURSE, ACKNOWLEDGE THE CHANGES IN ANY SUBSEQUENT DECISIONS WE MIGHT ISSUE AND RULE ACCORDINGLY. IN ANY EVENT, WE WILL LET YOU KNOW SHOULD WE RECEIVE ANY FURTHER QUESTIONS ON THE SUBJECT, AND WE WOULD WELCOME YOUR THOUGHTS AT THAT TIME.