COMPTROLLER'S SEAL STATE OF CONNECTICUT

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

II. Payment Procedures

III. Exclusions

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

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

NW:MKA:la

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