Review of Corps of Engineers Water Contracting and Repayment Practices]Gao ID: B-198378 July 15, 1981
During a review of Corps of Engineers water contracting and repayment practices, GAO found that repayment contracts allow up to 15 days after the due date to pay cost-sharing installments without any penalty and that the percentage rate used to assess late charges is not based on the current value of funds to the Treasury. These conditions may preclude timely recovery of the installments and encourage late payments at the expense of the Federal Government. The grace period allowed is inconsistent with the Treasury Department's guidance on effective management of the Government's cash. Treasury states that contracts under which goods or services are sold will include payment terms and provisions which, at a minimum, require that payment be received no later than the due date and which provide for late charges for payments received after the due date. These charges will be applied and collected at a percentage rate based on the current value of funds to the Treasury. The current Corps' delinqency penalty charges are much less than the current short-term value of funds to the Treasury. Therefore, GAO recommended that the Corps initiate action to eliminate the 15-day grace period in all new, amendatory, or supplemental contracts and provide for penalty charges based on Treasury's current short-term value of funds when contractors pay their installments after the due date.