State agencies and public universities in Texas have paid an estimated $9.4 million in interest on late payments to vendors and contractors in the past decade, according to a report by the Austin American-Statesman.
Under a state law aimed at ensuring that Texas pays its bills on time, state agencies must add interest if they pay their bills more than 30 days late. Agencies currently have to add an extra 4.25% — the prime rate plus 1% — on late bills. The amount is automatically added by a statewide accounting system. Vendors and contractors are not allowed to charge separate late fees.
Some state agencies regularly pay six-figure interest payments each year. The Department of Public Safety in 2009 had to add $733,000 to payments it made to 645 contractors and vendors. The Texas Department of Transportation had to pay an extra $317,000 in 2007 for the same reason.
The numbers compiled by the state comptroller's office, however, show a positive trend: Interest payments have dropped dramatically in recent years, from $1.25 million in 2009 to about $467,000 last year.
State agencies have reportedly redoubled their efforts to minimize late payments, which also can happen because of delays in processing invoices, disputes over whether goods and services were delivered as promised and a host of other reasons. The agencies also have been helped by steadily falling interest rates.