FISCAL INTEGRITYJennifer Paris, Fiscal Management Division

A presentation for

Best Practices in Texas State Contract Management

October 5, 2011

What is “Fiscal Integrity”

Compliance with laws and rulesAdherence to budget

Risk identification and mitigation

Conservation of taxpayer funds

3% Fed Tax Withholding required on most governmental vendor payments (exceptions apply)

Starts 1/1/2013 if not repealed in D.C. Government unit (i.e. state agency) is

liable for failure to withhold Complex procedural problems

Affecting Contract ManagementIRS adopted rules and has training on its website. Go to

www.irs.gov

Currently, there is information here: http://www.irs.gov/govt/fslg/article/0,,id=243336,00.html

Exempts contracts existing on or before 12/31/2012 for one year

Exempts payments (not contracts) under $10,000 Certain vendors and programs are exempt

Compliance: Immediate To-Do’sKeep up with IRS rules and Congressional

repeal effortsDetermine when and how your entity will

determine and manage vendor exemption status (W9s?)

Determine how IRS’ guidance on contract effective dates affects – your contracting cycle– your contract management data

BUDGET BUSTER

Will everything cost 3% more?

Texas needs

YOU to help Conserve Taxpayer Funds

Strategy #1: “JUST PAY NO”

Are your contracts

EXPLICITLY CLEARabout when your entity

will NOT pay for a good or service?

STATE PAYS MILLIONS FOR FAILED PROJECT AustinA Contract Manager with the state’s ________ agency testified today in front of the state’s Senate Finance Committee that the contract only required the vendor to

What’s a bona fide dispute?

When the documented expectations

are not met

Did you know: A/P staff is not supposed to pay an invoice for

goods/services which are in dispute?

SIMPLE, EFFECTIVECONTRACT ENFORCEMENT

If your agreement (or the law) says we won’t pay

DON’T PAY

Strategy #2: Look out for Mom’s Money

Would you let your mom SIGN this agreement?

Would you let your mom RENEW this agreement?

Insurance & Performance Bonds

Make sure you know1.How does your entity track and collect on

performance bonds?

2. How does your entity check for required insurance and how often?

Strategy #3 Understand THIS state policyand its purpose

PAYMENT SCHEDULING POLICY: Negotiable early payment scheduleSays that the state won’t pay until the latest

possible timeUNLESS - A cost effective discount is offeredOr- The contract defines an early payment date

LET’S MAKE A DEAL !!!!Vendor Look, I just need payment by the first of

each month.

Contract Negotiator Let’s discuss that possibility.

We need 24/7 guaranteed service with no extra service charges.

Strategy #4: Do the Math

DISCOUNTS and REBATES Look great Do the Math“10/10 net 30” (wow!) invoice date= day 1“2% rebate on 10” Mail time= day 2-5

Process Invoice= day 6-13

1. Know how the vendor computes a discount. 2. Do the math during any contract evaluation

Comptroller Tools for YOU

Discount calculator: https://fmx.cpa.state.tx.us/fmx/purchase/

disccalc/index.php

Treasury “pool” earnings rates: http://www.window.state.tx.us/treasops/

poolrates/

Scheduling Resources: https://fmx.cpa.state.tx.us/fm/usas/prompay/

index.php

Just keep in mind…

You cannot negotiate the “late” payment date. The state’s Prompt Payment law says:

it’s always 30 days past the LATER ofInvoice received

Or Service Provided

Strategy #4: Don’t elude Controls

Creating a P.O. after Receipt of Goods“We are required to have one or the auditors will…””The computer made me do it” How could the vendor agree to its terms?

Step 1: Acknowledge that they happenAs long as there are telephones and credit cards…

Step 2: Have a policy POLICY STATEMENT – TRY THIS: Employees must write verbal agreements down or

employee is liable for the amount (overage)

Step 3: Enforce the policy

Verbal Agreements

Avoid Confusing Language

Strategy #5: Know thy Risks

Upset Taxpayer

HEADLINE RISK

LEGISLATIVE RISK

Risk Mitigation Made Simple

Think like a taxpayer (you are one of them)

Treat every contract as if it is YOUR OWN.

“I’m just the Contract Manager”

The words that you writeor do not writeinto a contract

(and how the language is enforced) directly affect the

Fiscal Integrity of the State

State Fiscal Management Contacts

Purchase and Travel Compliance Assistance for state agencies: (512) 475-0966

Payee/Payment Services (state funds): (512) 463-3660

Jennifer Paris, Fiscal Integrity Analyst(512) 475-1367