8474.3 PENALTY CALCULATION
(Revised 06/08)
Whenever a State agency or the SCO determines a penalty is due, the rate for small businesses and nonprofits shall be 0.25 percent per calendar day. This rate does not change. The rate for all other businesses including defined grantees shall be one percent above the rate accrued on June 30 of the prior year by the PMIA, not to exceed 15 percent. This rate changes annually; therefore, the PMIA rate is communicated to State agencies via a Budget Letter (BL). For the latest BL on late payment penalty rates, refer to the DOF website: http://www.dof.ca.gov/html/budlettr/budlets.htm
The penalty will be calculated as follows:
Step 1. Determine The "Required Payment Approval Date": This is the last calendar day before interest starts to accrue (i.e., the payment date specified in the contract or specific grants or 30 calendar days after the date State agency receives an undisputed invoice).
Step 2. Amount Subject To Penalty: The gross amount of the invoice less sales tax is the amount subject to the penalty.
Step 3. Penalty Per Day: Multiply the amount subject to penalty (as determined in Step 2) by the applicable penalty interest factor per day as specified in the BL.
Step 4. Number Of Days Penalized: The number of calendar days between the approval date (as determined in Step 1) and the date a correct claim schedule is submitted to the SCO.
Step 5. Late Payment Penalty Amount: Multiply the amount (as determined in Step 3) by the number of days penalized (as determined in Step 4). The result is the late payment penalty amount due the claimant; except that penalty amounts of $75 or less shall not be paid to an entity that is not a small business or nonprofit. See Penalty Requirements–Other Businesses and defined grantees in SAM Section 8474.2(B).
See SAM Section 8474.3 ILLUSTRATION 1 for samples of late payment penalty calculations.
When a late payment penalty is incurred, a completed Penalty Calculation worksheet, STD. 208 must be attached to the related invoice submitted to the SCO. See SAM Section 8474.3 ILLUSTRATION 2.
Any invoice included in a claim schedule the SCO determines is subject to a claim correction shall be deemed to be improperly submitted and the State agency shall be responsible for the penalty incurred on the invoice.
