Payment Practices

Electronic Funds Transfer (EFT)

The Omnibus Consolidated Rescissions and Appropriations Act of 1996 mandated the use of EFT. It requires all government payments, other than tax refunds, to be made electronically. The Department closely monitors its monthly EFT performance, and submits consolidated monthly EFT activity reports to OMB, as part of the Department’s Performance Metrics data.

OMB has increased its performance goal for vendor EFT payments from 90 percent in FY 2004 to 96 percent in FY 2005. Although the Department’s FY 2005 EFT vendor payments of 93 percent was lower than OMB’s goal, the Department achieved a green status in this category in September 2005. The Department also increased its overall EFT percentage to 98 percent in FY 2005. The Department is focusing on improving its EFT percentage for vendor payments by working closely with its bureaus to identify opportunities for new business processes. The Department believes this and other efforts will lead to increased EFT percentages in the future for vendor payments. The Department’s achievements in this area are illustrated in the table below:

Bankcards

The Department is committed to the use of bankcards (purchase cards) as a means of streamlining Departmental procurements. However, bankcard usage is closely monitored, and those that are no longer needed are promptly closed. This has resulted in an overall decrease, over the past four fiscal years, in the number of bankcards in use, from 6,405 in FY 2001 to 6,028 in FY 2005. The Department’s emphasis on EFT-compliant payment methods has contributed to an overall increase, over the past four fiscal years, in bankcard purchases, from $131.6 million in FY 2001 to $159.5 million in FY 2005. The Department continues to monitor the internal controls surrounding bankcard purchases to ensure that all such purchases are legal and proper. As of September 30, 2005, the Department had an overall zero percent bankcard delinquency rate.

Prompt Payment

The Prompt Payment Act of 1982 requires agencies to pay their bills to vendors on a timely basis, and to pay interest penalties when payments are made late. The Department closely monitors its prompt payment performance, and submits consolidated monthly prompt payment activity reports to OMB, as part of the Department’s Performance Metrics data.

The Department has improved its prompt payment performance from 94 percent in FY 2004 to 96 percent in FY 2005. Furthermore, the number of invoices with late-payment interest penalties decreased significantly, from 15,631 in FY 2004 to 8,974 in FY 2005. At the same time, OMB has increased the government-wide prompt payment percentage goal from 95 percent in FY 2004 to 98 percent in FY 2005. The Department moved closer to OMB’s new goal in September 2005, and continues to focus on improving the prompt payment percentage by working closely with its bureaus to identify opportunities for new business processes.