State of Connecticut Office of the State Comptroller MEMORANDUM NO. 2005-33


	STATE OF CONNECTICUT
NANCY WYMAN COMPTROLLER	OFFICE OF THE STATE COMPTROLLER 55 ELM STREET HARTFORD, CONNECTICUT 06106-1775	MARK OJAKIAN DEPUTY COMPTROLLER

MEMORANDUM NO. 2005-33

September 26, 2005

TO THE HEADS OF ALL STATE AGENCIES

Attention:	Chief Administrative and Fiscal Officers and Business Manager
Subject:	Change in Interest Rate for Late Vendor Payments

In accordance with Public Act 05-95, effective October 1, 2005, the interest rate paid to vendors with claims for late payment shall be calculated using the annual effective yield (calculated monthly) of the Short Term Investment Fund (STIF). These STIF rates are published at

http://www.state.ct.us/ott/STIFHome.htm.

The new rate is effective for interest assessed on or after October 1, 2005. Any interest assessed and imposed prior to October 1, 2005 shall be calculated at the former statutory rate of one percent per month. The published rate to be used shall be the annual rate for the month preceding the month in which the interest is assessed (for example: interest assessed between October 1, 2005 and October 31, 2005, inclusive, shall be the annual rate published for the month of September 2005).

In order to avoid the payment of interest charges it is essential that agency fiscal managers ensure that all payments for contractual obligations are made in a timely manner and that no additional costs are incurred by the State.

I. Statutory Requirements

The payment of interest shall be from funds designated for administrative costs of the agency receiving the public works, personal services, goods and services, equipment or travel. Interest shall not be paid from other funds of the state (CGS 4a-73).
Any amount of an interest, which remains unpaid at the end of any thirty-day period, shall be added to the principal amount of the debt and, thereafter, interest shall accrue on that amount (CGS 4a-73).

II. Payment Procedures

The vendor's request for payment of interest must be submitted on a separate invoice identifying the original contract, procurement document, and shipping or service dates.
Verify the time frames for which the interest charge is being made by the vendor.
Confirm the date that the payment was made to the vendor. In most instances the check date will also be the postmark date. ACH and Wire dates may be verified through the Comptroller's Accounts Payable Division.
A separate non-PO voucher for interest payments is required for entry into Core-CT. Under separate cover, a screen print of the Core-CT voucher must be submitted to the Accounts Payable Division Audit Section within five business days. The voucher must be accompanied by a written explanation for the late payment and signed by the agency head. Account Coding should be to Interest Expense - 54730.

III. Exclusions

In accordance with Connecticut General Statute 4a-72, the payment of interest shall not apply to the following:

Interagency or intergovernmental transactions.
Contracts related to highway or road construction.
Claims, contracts or projects that are paid for exclusively with federal funds.
Amounts payable to employees or prospective employees of state departments or agencies as reimbursement of expenses.

IV. Examples

Vendor XYZ Corp. issues a State agency a separate invoice for interest based on the given information. The calculation involves the principal balance multiplied by the daily STIF rate (annual rate divided by 365) multiplied by the number of days unpaid.

A. Payment is made 20 days after the 45-day payment period -

Invoice Amt:	$10,000.00
Invoice Date:	October 4, 2005
Receipt Date:	October 3, 2005
Check Date:	December 8, 2005
Last Timely Payment Date:	November 18, 2005 (45 days from later of Invoice Date or Receipt of Goods and/or Services)
Days Payment Was Late:	20 (the number of days from Invoice Date to Check Date)
Annual STIF Rate:	3.60% (example only, for the month of October 2005)
	3.75% (example only, for the month of November 2005)

Interest Due Vendor:
Step 1 (November)	= $10,000.00 x (3.60%/365) x 12 =	$11.84
Step 2 (December)	= $10,000.00 x (3.75%/365) x 8 =	$ 8.22
TOTAL		$20.06

NOTE: In the following examples, calculation of the interest becomes a multi-step process because of the passage of at least a 30-day period with a balance remaining unpaid. Each 30-day period (or part thereof) after the initial 45 days allowed by statute for timely payment represents an additional step (or steps) in calculating interest. Any amount that remains unpaid - including principal and interest - becomes the amount by which the new interest is based.

B. Payment is made 33 days after the 45-day payment period -

Invoice Amt:	$10,000.00
Invoice Date:	October 4, 2005
Receipt Date:	October 3, 2005
Check Date:	December 21, 2005
Last Timely Payment Date:	November 18, 2005
Days Payment Was Late:	33 (the number of days from Invoice Date to Check Date)
Annual STIF Rate:	3.60% (example only, for the month of October 2005)
	3.75% (example only, for the month of November 2005)

Interest Due Vendor:
Step 1 (November)	= $10,000.00 x (3.60%/365) x 12 =	$11.84
Step 2 (December)	= $10,000.00 x (3.75%/365) x 18 =	$18.49
Subtotal - First 30 Days		$30.33
Step 3 (December)	= ($10,000.00 + $30.33) x (3.75%/365) x 3 =	$ 3.09
Total - 33 Days		$33.42

C. Payment is made 70 days after the 45-day payment period -

Invoice Amt:	$10,000.00
Invoice Date:	October 4, 2005
Receipt Date:	October 3, 2005
Check Date:	January 27, 2006
Last Timely Payment Date:	November 18, 2005
Days Payment Was Late:	70 (the number of days from Invoice Date to Check Date)
Annual STIF Rate:	3.60% (example only, for the month of October 2005)
	3.75% (example only, for the month of November 2005)
	3.90% (example only, for the month of December 2005)

Interest Due Vendor:
	Subtotal - First 30 Days (see preceding example)	$30.33
	Step 3 (December) = $10,030.33 x (3.75%/365) x 13 =	$13.40
	Step 4 (January) = $10,030.33 x (3.90%/365) x 17 =	$18.22
	Subtotal - Second 30 Days	$61.95
	Step 5 (January) = ($10,030.33 + $31.62) x (3.90%/365) x 10 =	$10.75
	Total - 70 Days	$72.70

V. Questions

Questions or requests for assistance may be directed to:

Accounts Payable Division - Mark Aronowitz (860) 702-3399

e-mail: mark.aronowitz@po.state.ct.us

NANCY WYMAN
STATE COMPTROLLER

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