Comptroller Fiscal Year Memo Letter Head

To:        Chief Fiscal Officers and MMARS Liaisons

From:     Martin J. Benison, Comptroller

Date:      February 11, 2014

Re:         FY2014 2nd Quarter PPD Statistics Reports                                                  Comptroller Memo FY#2014--20


Executive Summary

The purpose of this memo is to provide CFO’s 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 so far during FY2014.


 

FY10

FY11

FY12

FY13

FY14

QTR 1 and 2 only

Discounts Taken

$4,655,000

$5,526,000

$6,974,000

$7,971,000

$4,490,000

Discounts Not Taken

$1,519,000

$1,972,000

$1,874,000

$1,916,000

$1,507,000

 The prompt payment discount savings may reach $9 million in FY2014.  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.  All savings are 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, Prompt Payment Discounts are a sensible way for departments to save money and to provide a timely cash flow to vendors.

Even though PPD are continuing to grow in FY2014, the Commonwealth lost the opportunity to save an additional $1.5 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 a 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 weekly.

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 FY2014 activity, the following attachments offer department specific and summary data.

Attachement A- doc format of Attachement A-  is a report sorted by department for the 2nd QTR, FY2014.  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 FY14-20-Attachment b is a statewide summary discount report as of December 31, 2013 for FY2014.

To help departments save more money, we have prepared a FY2014 query that lists the encumbrance activity of departments in all object codes that generate discount savings.

Attachment C xls format of FY14-20-Attachment c is a report that summarizes by department the FY2014 encumbrances on MMARS that are eligible for discounts based on the object code used as of December 31, 2013.   As illustrated below, FY2014 activity reflects a high volume in dollars and counts of encumbrances that do not offer discounts.  Departments are reminded to review these contracts and take the appropriate measure to increase discounts taken for FY14.

FY2014 Encumbrances With and Without Discount (as of 12/31/13)

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

$3,501,320,390.92

$505,062,876.56

$2,996,257,514.36

14.42%

85.58%

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

43,549

20,997

22,552

48.21%

51.79%

Attachment D xls format of FY14-20-Attachment d file size 5MB lists 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 is for FY2014 as of December 31, 2013.

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.”

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 Donna Roux at (617) 973-2314 or Gabe Campos at (617) 973-2362.

Enc:

Attachment A xls format of FY14-20-attch-a – FY2014 Second Quarter Department Discount Summary – Taken, Partial Taken, No Discount Taken

Attachment B xls format of FY14-20-Attachment b – FY2014 Commonwealth Discount Summary as of December 31, 2013.

Attachment C xls format of FY14-20-Attachment c – FY2014 Encumbrance and Discount Opportunities Summary as of December 31, 2013.

Attachment D xls format of FY14-20-Attachment d file size 5MB – FY2014 Encumbrance Listing as of December 31, 2013

 

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