PENALTY CALCULATION - 8474.3
Whenever an agency/department or the Controller determines a penalty is due, the rate for resource conservation districts, small businesses and nonprofits shall be a rate of 10 percent above the United States Prime Rate on June 30 of the prior fiscal year. The rate for all other businesses including grantees that provide victim services or prevention programs shall be 1 percent above the Pooled Money Investment Account (PMIA) daily rate on June 30 of the prior fiscal year, not to exceed 15 percent. The rate for refunds or other payments due to individuals is 1 percent below the PMIA daily rate on June 30 of the prior fiscal year. These rates change annually; therefore, the PMIA rate is communicated to agencies/departments via a Finance Budget Letter (BL). For the latest BL on late payment penalty rates, refer to the Finance website.
The penalty will be calculated as follows:
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Step 1: Determine the Payment Due Date |
The payment due date is 45 calendar days after receipt of a properly submitted, undisputed invoice, unless otherwise specified in the contract or grant. In the case of refunds, the payment due date is 45 calendar days after notification of the refund to the payee or other payments due to individuals. |
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Step 2: Amount Subject to Penalty |
The gross amount of the invoice less taxes or the “refund or other payment due” amount. |
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Step 3: Penalty Amount Per Day |
Multiply the amount subject to penalty (as determined in Step 2) by the applicable daily penalty rate (based on the payment due date) as specified in the BL. |
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Step 4: Number of Days Penalized: |
Calculate the number of calendar days payment was issued beyond the payment due date (as determined in Step 1). |
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Step 5: Late Payment Penalty Amount |
Multiply the penalty amount per day (as determined in Step 3) by the number of days penalized (as determined in Step 4). The result is the late payment penalty amount due to the claimant; except that penalty amounts of $10 or less shall not be paid to small businesses, nonprofit and refunds nor other payments due to individuals. For all other businesses, penalty amounts of $100 or less shall not be paid. |
For samples of late payment penalty calculations, see Illustration 1 below.
When a late payment penalty is incurred, a completed Penalty Calculation form, STD 208 must be attached to the related invoice submitted to the Controller.
Agencies/Departments shall be responsible for penalties if a correct claim is not submitted to the Controller within 30 calendar days and payment is not issued within 45 calendar days.
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FACTS |
PAYMENT DUE DATE SET FORTH IN CONTRACT AS DEFINED IN SAM 8474.01 |
PAYMENT DUE DATE NOT SET FORTH IN CONTRACT |
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A |
Date Agency/Department Receives Invoice |
3/1/XX |
3/1/XX |
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B |
Payment Due Date Per Contract |
4/1/XX |
N/A |
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C |
Payment Issue Date |
4/6/XX |
4/30/XX |
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STEP |
Completing Penalty Calculation Form STD 208 – Part A |
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1 |
Payment Due Date /1 |
4/1/XX |
3/31/XX |
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Amount subject to penalty /2 |
$30,000 |
$30,000 |
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2 |
Daily Penalty Rate |
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0.000363 |
0.000363 |
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0.000034 |
0.000034 |
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Penalty per day |
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(multiply amount by daily |
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3 |
penalty rate as shown in Step 2) |
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10.89 |
10.89 |
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1.02 |
1.02 |
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4 |
Number of days penalized /3 |
5 |
15 |
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Penalty amount |
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5 |
(multiply amount by the number of days as shown in Steps 3 & 4) /4 |
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$10.89 x 5 = $54.45 |
$10.89 x 15 = $163.35 |
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$1.02 x 5 = $5.10 |
$1.02 x 15 = $15.30 |
1/ The payment date specified in the contract, or 30 calendar days after the date the department receives an undisputed invoice.
2/ Use the current penalty interest factor per day provided annually in a Finance BL.
3/ Count the number of days beyond the payment due date the claim was submitted to the SCO.
4/ Minimum late penalty payments: Small business - $10 / Other business - $100