Texas Prompt Payment Law
This guideline provides guidance for complying with the TexGov.Ch2251 and requirements for documenting and resolving disputed invoices.
Table of Contents
- 30-Day Payment Requirement
- Interest Calculation
- Disputed Shipments or Invoices
- Vendor Hold Procedures
The Texas Government Code Chapter 2251 Prompt Payment Act stipulates that payment is due for goods or services 30 days from the date goods/services are received/completed, or a correct invoice is received, whichever is later. “Invoice” in the context of this prompt payment law means a vendor’s request or demand for payment. A statement that does not include a request or demand for payment is not an invoice. A payment is considered overdue beginning on the 31st day.
Under the prompt payment law, a vendor:
- Is a person who supplies goods and services to a governmental entity (including a state agency) or another person directed by the entity
- Includes an officer or employee of a state agency when acting in a private capacity to supply goods or services
- Does not include a state agency, except for Texas Correctional Industries.
Disbursements & Travel Services (DTS) receives mail daily and date stamps all invoices with the date received. If a department receives a vendor's invoice directly, the department must date stamp the invoice when received, and email it to DTS as soon as possible. It is important to date stamp the invoice when it is received, as payment is due 30 days from this date regardless of whether the invoice is received by DTS or another department.
A payment is considered to be mailed when postmarked or electronically transmitted. Because state agencies are required to schedule vendor payments so that the state receives the maximum benefit, payments are scheduled as close to the due date as possible within the 30-day requirement. If the 30th day is on a weekend or a University of Texas at San Antonio (UTSA) or state holiday, the payment date is adjusted so that the payment is postmarked or electronically transmitted within or before the 30-day requirement.
Although UTSA generally does not process payments to vendors before they are due, payments may be processed earlier than the standard 30-day processing time when:
- An early payment discount is available per terms of the purchase order, or as stated on the invoice;
- A contract requires pre-payment before goods or services are received;
- An earlier payment date is required for a sponsored project; or
- The early payment is required to comply with accounting principles at fiscal year-end.
Any other exceptions must show benefit to UTSA and be pre-approved in writing by the Director of DTS, the Assistant Vice President – Business Services or the Associate Vice President for Financial Affairs/Controller (AVPFA/Controller).
Interest is due to a vendor when the payment is overdue according to the Prompt Payment Law (the 31st day), except when:
- There is a bona fide dispute with the vendor;
- The invoice was not mailed or sent to the address that appears on a UTSA purchase order;
- The terms of a federal grant, contract, regulation or statute prevent UTSA from making a timely payment with federal funds; or
- The invoice is for payment to another Texas state agency (except for Texas Correctional Industries).
Interest for an overdue payment is calculated in accordance with the Prompt Payment Law with guidance provided at the Texas State Comptroller’s website. The State Comptroller determines the late payment interest rate on an annual basis, the rate is updated in UTSA’s financial accounting system, and interest is automatically calculated when applicable.
Interest accrual begins on the date the payment becomes overdue, and stops accruing on the date the payment is postmarked or electronically transmitted. The interest must be paid at the same time the principal is paid.
Interest is not accrued or paid if the amount is less than or equal to $5.
See Vendor Hold for rules regarding interest accrual/payment to vendors on hold with the state.
If there is a dispute with an invoice or shipment, the vendor must be notified by email or telephone within 21 days of receipt of the invoice.The disputing department and/or DTS are required to document all relevant information on a Vendor Dispute form. The form requires:
- Nature/reason for the dispute;
- Date(s) of the dispute;
- Details of communication with the vendor regarding the dispute, including phone numbers and contact names; and
- Dispute resolution and in whose favor it was resolved.
A corrected invoice must be submitted by the vendor for all disputes resolved in favor of UTSA.
If the dispute is resolved in favor of the vendor, the overdue payment is eligible for interest which is calculated from the original due date.
NOTE: When the department is responsible for disputing the invoice or shipment, the department must send the completed forms and related payment documentation to DTS.
All state agencies and institutions of higher education are required to notify the Texas Comptroller of Public Accounts (State Comptroller) of every person or debtor with an outstanding state debt (including but not limited to indebtedness to the State, tax delinquency, child support delinquency and student loan default). Reporting these debts enables the State Comptroller to hold state payments issued to the individuals or entities in accordance with the Texas Government Code Chapter 403 Comptroller of Public Accounts, §055 Payments to Debtors or Delinquents Prohibited.
The agency to whom the individual or entity is indebted (hold source agency) places a hold on the individual's or entity's Texas Identification Number (TIN) in the Texas Identification Number System (TINS) — Vendor Hold Search. The individual or entity may have one or multiple hold records on file. If a payee is indebted to the State or to a State agency, the payee must first resolve the situation with the hold source agency so that the hold can be released in TINS and payment can be made by DTS.
Any portion of the payment that is paid with federal funds is not subject to the holding process. UTSA will follow the process established by the State Comptroller (Texas Government Code Chapter 403 Comptroller of Public Accounts, §055 Payments to Debtors or Delinquents Prohibited (i)) for amounts paid with federal funds.Any of the following processes may be used to release payment:
- The payee may choose to make a payment for the full liability amount to the hold source agency, which will then release the hold in TINS. When the hold is released, the held payment will be paid.
- The payee may consent to apply the payment to the debt by completing the Payee Limited Power of Attorney. This form, along with a Notice of Payment Held letter, will be mailed to the payee after payment has been processed (but not released) by DTS (one-day turnaround). The payee must submit the completed form for processing to the DTS Office, One UTSA Circle, San Antonio, TX 78249. UTSA will then send the payment to the hold source agency according to the payment instructions on the form, and the payment will be applied to the debt.
- UTSA may choose to release the held payment to the payee; however, a letter that includes the payee name and a statement that the payee is in good standing with the State is required in order to release payment. The letter is submitted by the hold source agency to UTSA (letters may be faxed to 210-458-4236). NOTE: If the hold remains, additional clearance letters will be required in order for any future payments to be processed by DTS.
If no action by payee is taken, payment will be held back by UTSA until a completed Payee Limited Power of Attorney Form is forwarded to DTS. UTSA is unable to offset funds according to the Texas Government Code Chapter 403 Comptroller of Public Accounts, §0551 Deductions for Repayment of Certain Debts or Tax Delinquencies.
Business Expense and Travel-Related Payments to Employees on Vendor Hold:
If the payee on hold is a UTSA employee pursuing reimbursement for a business-related expense, the Vendor Hold Procedures above will be followed.
Payment will not be issued if the payee has requested a cash advance in the form of a direct deposit or a check. A Travel Advance Card (TAC) will be issued in its place upon the completion and approval of a TAC Request. If upon completion of the trip, the payee has been released from hold, then an Expense Report will be processed to reimburse any additional out-of-pocket expenses as authorized by the department. If the payee remains on hold and payment is not released, then the Vendor Hold Procedures above will be followed; however, even if a payee is on State hold, all Expense Reports are required to be processed and settled timely according to UTSA's Financial Guideline — Travel Reimbursement.
UTSA will follow the offset order process established by the State Comptroller if the vendor on hold or payee has multiple holds. For further information, see the State Comptroller’s Reporting of State Debts and Hold Offset Procedures (APS 028) and Texas Government Code Chapter 403 Comptroller of Public Accounts, §0551 Deductions for Repayment of Certain Debts or Tax Delinquencies (f).
UTSA will follow the process established by the State Comptroller if the vendor on hold or payee has an active bankruptcy status in TINS.
|06/19/20||DTS now receives mail daily, and departments are to email invoices to DTS (section A). Hyperlinks, position titles and other editorial updates throughout.|
|06/18/19||Update to Vendor Hold Procedures|
|05/19/16||Update to all sections of operational guideline to follow current standards of practice.|