Comptroller Fiscal Year Memo Letter Head

To:         Chief Fiscal Officers and MMARS Liaisons

From:     Martin J. Benison, Comptroller

Date:      August 6, 2012

Re:         FY2012 4th Quarter PPD Statistics Reports and FY2013 PPD Opportunities 

Comptroller Memo FY#2013-07


Executive Summary

The purpose of this memo is to provide CFOs and MMARS Liaisons with updated information on the Prompt Payment Discount program and to continue to support departments to pursue further growth in discount earnings being successfully achieved by Departments.  The departments’ utilization of the Commonwealth’s Prompt Payment Discount (PPD) program during FY2012 was excellent with more opportunities for agencies to increase discount earnings in fiscal year 2013.


  FY 08 to FY12 Prompt Payment Discount (PPD) Discount Taken and Discount not Taken Report.  

 

FY08

FY09

FY10

FY11

FY12

Discounts Taken

$3,373,000

$4,099,000

$4,655,000

$5,526,000

$6,973,832

Discounts Not Taken

$1,824,000

$1,645,000

$1,519,000

$1,972,000

$1,874,287

The prompt payment discount savings reached almost $7 million in FY2012.  The Comptroller’s Office (CTR) and departments are working closely to ensure that the success of the PPD program continues to grow into future fiscal years.  Many departments have taken full advantage of discounts by processing payments consistent with discount terms that increase their spending power.  The entire FY12 savings of $7 million were credited back to the departments that earned the discount.

Vendors who are not offering discounts should be approached and asked to enroll in the PPD Program.  With tight budgets and a tight credit market, PPD is a sensible way for departments to save money and to provide a timely cash flow to vendors.

Even though PPD continued to grow during FY2012, the Commonwealth lost the opportunity to save an additional $1.9 million due to late payment (invoice) processing by departments.  Accounts Payable staff should be aware that “Discounts Not Taken” results in savings lost for your appropriations.  Departments can increase PPD dollars by reviewing the Discounts Not Taken Report and reminding Accounts Payable staff to process invoices on timely basis.   CTR will continue to assist departments by identifying contracts that could potentially offer PPD.  The CTR’s web portal provides a listing of Active Master Agreements that offer Prompt Payment Discount as well as a report listing vendors that offer discounts on department contracts.  The list is refreshed daily and it is prepared from department encumbrances in final status with prompt payment discounts in FY2012.

Successful discount implementation needs the full support and participation of each department’s Accounts Payable, Contract and Vendor Management staff.  Departments should verify that the discount terms entered for encumbrances are accurate on the vendor and commodity lines in MMARS.  MMARS will calculate and take the correct discount automatically if payments are processed in accordance with the terms of the discount.

To analyze and report FY2012 activity, the following attachments offer department specific and summary data.

Attachment A xls format of FY2013-07 Attch A is a report sorted by department for the fourth quarter of FY2012.  This report shows discounts taken, partial discounts taken and discounts missed due to payments scheduled after the discount terms expired.   Please note that capturing future discounts is within each department’s control.

Attachment B xls format of FY2013-07 Attch B is a statewide summary discount report for FY2012 as of June 30, 2012.

To help departments save more money, we have prepared a FY2013 query that lists encumbrance activity of for departments in all object codes that generate discount savings

Attachment C xls format of FY2013-07 Attch C is a report that summarizes by department the FY2013 encumbrances on MMARS that are eligible for discounts based on the object code used as of July 18, 2012.   As illustrated below, FY2013 activity reflects a high volume in dollars and counts, of encumbrances that do not offer discount.  Departments are reminded to review these contracts and take the appropriate measure to increase discounts taken for FY 13.

FY2013 Encumbrances With and Without Discount (as of 07/18/12)

Dept.

Total Dollars Encumbered Eligible for Discount

Dollars Encumbered with Discount

Dollars Encumbered without Discount

% of total dollars with Discount

% of total dollars without Discount

All 

$534,952,783.56

$146,281,769.07

$388,671,014.49

27.3%

72.7%

Dept

Count Total Encumbrances Eligible for Discount

Count Encumbered with Discount

Count Encumbered with no Discount

% of encumbrances with Discount

% of encumbrances without Discount

All

5,966

2,270

3,696

38.0%

62.0%

Attachment D xls format of FY2013-07 Attch D list encumbrance transactions “with discount” offered on one tab and encumbrances in selected object codes offering “no discount” on the second tab. It is sorted by department, transaction, and object code; it includes the discount percentage, commodity line number, accounting line number, and line amount.  Records can be filtered by department.  Those encumbrances in the “no discount” tab should be reviewed and negotiated with the vendor to add prompt payment discount terms.  It is crucial that department CFOs and contract managers review these contracts and take the initiative to capture lost opportunities by encouraging the vendors to offer a mutually agreeable discount rate.  Attachment D xls format of FY2013-07 Attch D is for FY2013 as of July 18, 2012.

The Prompt Payment Discount Policy states that “Even if a Department has not included the Prompt Payment Discount Form as part of the RFR process or for contracts when a procurement is not required, the Department is strongly encouraged to have a Contractor complete a Prompt Payment Discount Form during the contract execution, renewal or amendment process to ensure that Prompt Payment Discounts are available to departments to the maximum extent possible.”

For your reference, the companion FY12 reports for Attachments C and D are Attachment E xls format of FY2013-07 Attch E and Attachment F xls format of FY2013-07 Attch F file size 8MB respectively, both as of June 30, 2012.

Through queries, CTR has identified eligible contracts with many vendors who offer discounts on other department contracts.  This information is forwarded to department fiscal staff to assist them in requesting discounts directly from vendors.  It is crucial that CFOs and Contract Managers review the discounts missed report and instruct relevant staff to ensure that payments are processed on a timely basis to receive the maximum discount offered under the contract. 

To assist with department analysis, CTR has provided starter queries that departments can run in the Commonwealth Information Warehouse (CIW) to identify payments made with discount terms offered.  These Discount Starter Query instructions are available here.  

Please review your discount statistics and, if you have any questions, contact Michael Weld Eyob at (617) 973-2310.

Enc:
Attachment A xls format of FY2013-07 Attch A - FY2012 Quarter 4 Department Discount Summary – Taken, Partial Taken
Attachment B xls format of FY2013-07 Attch B - FY2012 Commonwealth Discount Summary Report as of June 30, 2012
Attachment C xls format of FY2013-07 Attch C - FY2013 Discount Analysis Report as of July 18, 2012
Attachment D xls format of FY2013-07 Attch D - FY2013 Encumbrance Listing as of July 18, 2012
Attachment E xls format of FY2013-07 Attch E – FY2012 Discount Analysis Report as of June 30, 2012
Attachment F xls format of FY2013-07 Attch F file size 8MB – FY2012 Encumbrance Listing as of June 30, 2012

cc:  
General Counsels        
Payroll Directors        
Internal Distribution