Defense Agencies' Compliance with Prompt Payment Procedures

Abstract

The Prompt Payment Act, dated May 21, 1982, and amended on October 17, 1988, requires Federal agencies to make payments on time, pay interest penalties when payments are late, and take discounts only when payments are made within the discount period. On December 12, 1989, the Director of the Office of Management and Budget (OMB) revised the implementing regulations in OMB Circular A-125, "Prompt Payment." Chapter 98 of DoD Manual 7220.9-M, the "DoD Accounting Manual," issued by the Comptroller of the Department of Defense on August 31, 1990, implemented the reporting requirements in OMB Circular A-125. This audit was requested by the Comptroller of the Department of Defense and was made as part of a DoD-wide audit of DoD's implementation of the Prompt Payment Act. The objectives of the audit were: to determine whether DoD Components were paying bills in accordance with the provisions of the Prompt Payment Act, OMB Circular A-125, and the DoD Accounting Manual; to evaluate whether the prompt payment reports submitted by DoD Components were accurate, and whether economically advantageous discounts were taken; and to evaluate the effectiveness of internal controls over prompt payment procedures. Audit The audit showed that the Defense agencies were not complying with the Prompt Payment Act. Between October 1, 1989, and March 31, 1990, quarterly prompt payment reports submitted to the Comptroller, DoD, were overstated by $16 billion and understated by $627.9 million. These overstatements and understatements consisted primarily of reported payments subject to the Prompt Payment Act, invoices paid late and early, and interest penalties due (Finding A). $2.6 billion was paid early or late, but not within the time frame specified for payment for supplies and services (Finding B).

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Document Details

Document Type
Technical Report
Publication Date
May 08, 1992
Accession Number
ADA377078

Entities

People

  • Nancy L. Hendricks
  • Raymond D. Kidd
  • Richard A. Levine
  • Sheela M. Javeri
  • Yung K. Chen

Organizations

  • Office of the Inspector General, U.S. Department of Defense

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  • Department Of Defense
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Readers

  • Defense Financial Management and Audit.
  • Government Contracting/Procurement.