Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The legislation will require the DOH to process all invoices within 15 days regardless of how the invoice is submitted. The bill will create problems on all types of invoices with the exception of those submitted through the P Card. Many of the DOH's contractor invoices are $1+ Million and in order to comply with Federal mandates, as well as accounting internal controls, the paperwork must go through multiple auditing processes prior to payment. As such, a 15 day window would be extremely hard to meet without adding additional employees to process the paperwork.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2011 Increase/Decrease (use"-")	2012 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	756,000	756,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

Estimated between 15 to 20 new employees will be needed 15 Employees @ $43,000 (inc additive) $ 648,000 20 Employees @ $43,200 (inc additive) $ 864,000 Total $1,512,000 Average $756,000

Memorandum

During the most recent Fiscal Year (2010) the Division of Highways processed invoices (not inclusive of agency IGT’s) totaling $885,597,683. Of that total, the Division’s Purchase Card payments totaled $166,334,836 or 18.8%. These P-card invoices are the only ones the agency would be comfortable with a 15 day processing limit. Another $553,300,507 of agency payments were the contractor voucher estimates, which the agency routinely processes bi-monthly. The voucher estimate payments to DOH contractors are generated by the agency and must be audited by the DOH district responsible for the specific construction project. Upon completion of that audit process, the voucher estimates are processed to the agency’s central Finance & Administration Division for further processing to the State Auditor’s Office for additional audit and payment processing. It is not unusual for a voucher estimate payment to be in excess of $1 million; due to the processing/auditing required and the value of these payment types, the agency would not be comfortable having only a 15 day payment processing window. The remaining $165,962,340 of agency payments are composed of the following types: Encumbered Purchases Employee Expense Account Reimbursements Claims Utility Expenses Right of Way Expenses Emergency Purchases Employee Benefit Payments Most of these payment types are not payable using the state Purchase Card payment method. As a result, these invoices must be audited at the DOH location receiving the commodity or service and then forwarded to the central DOH Finance & Administration Division for audit and processing to the State Auditor’s Office for further processing. Some of the above type invoices have due dates from the vendor. An example of this is the quarterly payments to Brick Street. The agency will always process the Brick Street payment before the due date; however, good cash management would dictate the agency not process these ‘due-date’ payables too far in advance of the actual due date. The agency would not be comfortable with a 15 day payment window for these payable transaction types as well. The DOH does not believe this agency has issues with prompt payment. Our payables transactions are processed as expeditiously as possible, given the internal controls and audits that are required for a payables system. The DOH has worked to streamline the payables process at the same time reducing the staffing once required to process the agency’s payables. If a 15 day mandatory processing period is mandated, this will obviously require additional agency staffing to insure compliance by the agency. The State Auditor’s 2010 State Dollar Report available at http://www.wvsao.gov/Accounting/files/SDR2010.pdf shows the amount of Prompt Payment Interest Penalties (all state agencies) from 1992 to 2010 under the 60 day rule; that total for all 19 years is only $40,640.26. The greatest penalty amount for any year was $9,248.00 in 1994. Since 2005, the greatest penalty amount for a single year was $2,615.28 for 2007. The Division of Highways respectfully requests the agency be exempted from the SB642 provision of prompt payment within 15 days.

Person submitting Fiscal Note: Kathy J Holtsclaw
Email Address: Kathy.J.Holtsclaw@wv.gov