1. FISCAL INTEGRITY Jennifer Paris, Fiscal Management Division A presentation for Best Practices in Texas State Contract Management October 5, 2011

2. What is “Fiscal Integrity” Compliance with laws and rules Adherence to budget Risk identification and mitigation Conservation of taxpayer funds

3.  3% Fed Tax Withholding required on most governmental vendor payments (exceptions apply)  Starts 1/1/2013 if not repealed in D.C.  Government unit (i.e. state agency) is liable for failure to withhold  Complex procedural problems

4. Affecting Contract Management IRS adopted rules and has training on its website. Go to www.irs.gov www.irs.gov Currently, there is information here: http://www.irs.gov/govt/fslg/article/0,,id=243336,00.html 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

5. Compliance: Immediate To-Do’s Keep up with IRS rules and Congressional repeal efforts Determine 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

6. BUDGET BUSTER Will everything cost 3% more?

7. Texas needs YOU to help Conserve Taxpayer Funds

8. Strategy #1: “JUST PAY NO” Are your contracts EXPLICITLY CLEAR about when your entity will NOT pay for a good or service?

9. STATE PAYS MILLIONS FOR FAILED PROJECT Austin A 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

10. 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?

11. SIMPLE, EFFECTIVE CONTRACT ENFORCEMENT If your agreement (or the law) says we won’t pay DON’T PAY

12. Strategy #2: Look out for Mom’s Money  Would you let your mom SIGN this agreement?  Would you let your mom RENEW this agreement?

13. Insurance & Performance Bonds Make sure you know 1.How does your entity track and collect on performance bonds? 2. How does your entity check for required insurance and how often?

14. Strategy #3 Understand THIS state policy and its purpose PAYMENT SCHEDULING POLICY: Negotiable early payment schedule Says that the state won’t pay until the latest possible time UNLESS - A cost effective discount is offered Or - The contract defines an early payment date

15. 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.

16. Strategy #4: Do the Math DISCOUNTS and REBATES Look greatDo 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

17. 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/poolrate s/ Scheduling Resources: https://fmx.cpa.state.tx.us/fm/usas/prompay/ind ex.php

18. 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 of Invoice received Or Service Provided

19. 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?

20. Step 1: Acknowledge that they happen As 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

21. Avoid Confusing Language Simple English – and Spanish - works great ! Clearly say what we want to procure  Does it have to be functional?  What happens if it is not functional? Say the legal terms vs. just citing the law  “We will pay no earlier than 30 days after…” Say when we will NOT pay the bill  If agency may “terminate contract for any reason”… Enforce the contract language Note: Visually impaired people, like your presenter, don’t prefer small print

22. Strategy #5: Know thy Risks Upset Taxpayer HEADLINE RISK LEGISLATIVE RISK

23. Risk Mitigation Made Simple Think like a taxpayer (you are one of them) Treat every contract as if it is YOUR OWN.

24. “I’m just the Contract Manager” The words that you write or do not write into a contract (and how the language is enforced) directly affect the Fiscal Integrity of the State

25. 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