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DATE: November 14, 1997
TO: Agency Addressed
FROM: William O. Monroe, Director
Division of Accounting and Auditing
Office of State Comptroller
 
SUBJECT: TIMING OF PAYMENTS ON DEFERRED PAYMENT CONTRACTS

During post-audit reviews of deferred payment contracts, we have noted several problems regarding the timing of installment payments. In some instances, agencies are paying significantly earlier than required while in other cases the payments are being made late. These payments should be made in accordance with the amortization schedule approved for the particular deferred payment contract. For example, if the amortization schedule shows that a payment is to be made on May 1, then the payment is due to the vendor on that date. This requires that an agency submit a voucher for payment approximately 7-10 days prior to the due date. This should allow enough time for the payment to be processed and the vendor to receive the payment on or slightly before its due date.

We are aware that some agencies are requiring vendors to invoice them for payments on these contracts with the understanding that when the invoice is received that they still have 40 days to make the payment. This is incorrect. Please note that the approved amortization schedule received at the inception of the contract serves as the invoice for the entire term covered by the deferred payment contract. This schedule should be submitted to the Comptroller's Office each time a payment is made with the applicable payment date highlighted. If an agency is invoiced periodically for the payments on a deferred payment contract, the date that an invoice is received does not take precedence over the original amortization schedule. The suggested method for handling these payments is to set up a "tickler file" for all deferred payment contracts and note the date on which the payments are to be vouchered. This will help serve as a reminder to make the payments each month or quarter without having to rely on a vendor invoice.

In summary, timing of the payments is critical to insure that the State does not lose interest by paying too early, and it does not incur late charges as a result of paying late. The Comptroller's Office will closely monitor these payments to ensure that economic prudence is maintained.

Thank you for your cooperation. If you have any questions regarding these instructions or if we can be of additional assistance, please feel free to call Kevin Thompson at 414-1829 (SC 994-1829) or Mark Hammett at 414-1828 (SC 994-1828).