NO: 96-18-OMB

ORIGINATING AGENCY: OFFICE OF MANAGEMENT AND BUDGET

EFF DATE: Immediately

EXP DATE: Indefinite

SUPERSEDES: 94-15-0MB

SUBJECT: Payments to Vendors

ATTENTION: Directors of Administration and Chief Fiscal Officers

FOR INFORMATION CONTACT: Harry Fisher
PHONE: 609-292-1962

I. VENDOR INVOICES AND DISCOUNT POLICIES

The State of New Jersey functions as a business enterprise as well as a
governmental entity. An essential aspect of that operation is that vendor
invoices be processed by State agencies in a manner that will ensure their
timely and efficient payment.

Inefficient processing of vendor invoices for payment can prove costly to the
State in terms of lost discounts, imposition of penalties for violating the
prompt payment statute, as well as possible damaged vendor relations. It is
of utmost importance, therefore, that agency personnel understand and comply
with the method by which cash discounts are to be calculated.

A. Discount Start Date

The discount period is the number of days specified by the vendor during which
a payment qualifies to take advantage of the discount offered. The discount
start date is the date from which the calculation of the discount period
begins and is defined as the later of: (1) the next business day after the
date an agency receives a properly signed and executed state payment voucher
or, (2) the day that the goods or services are accepted by the agency.
Agencies should establish procedures to ensure that all payment vouchers are
date stamped as they are received and that the date the vouchers are received
is entered on the relevant MACS-E or NJCFS record. Likewise, delivery dates
of all goods received must be routinely recorded. This will facilitate the
accurate identification and recording of discount start dates by agency
staffs.

In instances where disputes with vendors exist as a result of dissatisfaction
with goods or services, the start date of the discount period should be
delayed until the dispute has been satisfactorily settled. Once the problem
has been resolved, agencies should re-set the discount start date in MACS-E.

B. Start Date for Multiple Deliveries

In cases where there are to be multiple deliveries to be paid with a single
payment, e.g., fuel purchases or laundry services, agencies should identify
the discount start date as the date on which the last installment of the
deliveries has been accepted by them.

If a signed and executed State payment voucher is received after the last
delivery in a series of multiple deliveries, that date should be recorded.
The discount start date will be the next business day after the receipt of the
payment voucher.

Agencies are reminded that, in instances where each segment of a contract has
a delivery and a state payment voucher it should be treated as a separate
transaction and the discount period calculation should be made based on each
segment's delivery date and each voucher.

C. Monitoring Performance for "Lost Discounts"

To ensure that the State's payment process takes maximum advantage of
discounts offered by vendors, each agency's management should develop a
reporting mechanism which will permit review of their agency's efforts in this
area.

The Management and Internal Audit Unit (MIAU) of OMB will be preparing
quarterly reports, identifying vendor invoices which offer discounts and
measuring each agency's effectiveness in capturing those reductions in prices.
The MIAU will distribute these reports to the appropriate agencies; contact
the unit if additional customized reports are needed concerning the monitoring
of discounts.

II. PAYMENT PRIOR TO DELIVERY OF MATERIAL OR SERVICE

Due to special circumstances, payment is sometimes required in advance of the
delivery of materials or services by certain vendors. This is an exception to
the rule and should not be a standard procedure. Only in cases where
materials or services cannot be obtained from any other source at comparable
price will use of the prepayment procedure be considered.

III. PROMPT PAYMENT ACT

A. Introduction

In accordance with the New Jersey Prompt Payment Act, interest must be paid to
any business concern that does not receive payment within sixty days from the
date the State (1) received goods or services or (2) received a properly
executed state payment voucher, whichever is later. Where a signed contract
exists between the State and a business concern, payment must be made within
sixty days of the payment date specified in the contract.

B. Business Concern

"Business concern" is defined to mean any person engaged in a trade or
business, including private non-profit entities operating as independent
contractors, providing goods or services directly to a using agency or to a
designated third party, and operating pursuant to a State contract which
requires either a single or multiple payments.

C. Processing Requirements

Unless otherwise provided for in the contract, the using agency shall have 35
calendar days from the receipt of a properly executed State payment voucher or
35 calendar days from the receipt and acceptance of delivery of goods and
services, whichever is later, to submit the request for payment to the Office
of Management and Budget. OMB shall have 25 calendar days from the date the
request for payment is received from the using agency to make the required
payment for those payments that require OMB approval.

The using agency shall notify the business concerns within 30 calendar days of
any defect or impropriety in any payment voucher submitted for goods or
services provided, which would prevent the calculation of prompt payment
interest.

D. Exemptions

Public utilities as defined under Section 1 of P.L. 1946, c. 219
(NJSA 48:2-13) are exempt from receiving interest under the Prompt Payment
Act.

Governmental entities and State employees are also exempt.

E. Interest Due

No interest charge required by the Prompt Payment Act shall become a debt of
the State until it exceeds $5.

F. Reporting Requirements

For each calendar year, the Office of Management and Budget shall submit a
report to the Legislature indicating the number, amounts and frequency of
interest payments, as well as reasons the interest penalty payments were not
avoided. Departments should refer to PPRE (Prompt Payment Reason Table) in
NJCFS for a list of the most common reasons for prompt payment interest. The
appropriate reason will then be indicated on the draft Prompt Payment Report
that is submitted to OMB.