MDOT Changes Payment Schedule
Wednesday, October 07, 2009
In order to remain compliant with federal law, MDOT will change its’ payment schedule to contractors. Per Title 31 of the United States Code, MDOT must pay its’ vendors (contractors and consultants) at the same time it receives federal reimbursement.
The old MDOT payment schedule was established when the payment process involved the issuance and deposit/cashing of warrants with an average clearance pattern of two days. MDOT made payment on Wednesday and the warrants cleared generally by Friday, the day when MDOT received federal reimbursement (essentially payment and reimbursement “at the same time” consistent and compliant with the intent of the federal law).
With the advent of electronic funds transfer (EFT) the average clearance pattern has been reduced from two days to the same day. When MDOT makes payment by EFT on Wednesday, those recipients receive those funds that same day, creating a two-day lag between the time MDOT makes payment and their receiving federal reimbursement on Friday. As MDOT is able to receive federal reimbursement on Thursday, a “one day” lag remains.
To remain compliant with the federal law and resolve this remaining “one-day” lag between payment and reimbursement, MDOT payments will be transferred on Thursdays (rather than Wednesdays) effective the week of November 2nd.
Click here to view the MDOT Contractor/Consultant Announcement on this matter.
MITA members are encouraged to review your accounting and payment processes to assess how this change in payment schedule may impact your business.
If you have any questions about this payment schedule change contact Glenn Bukoski at firstname.lastname@example.org or call him at the MITA office at 517-347-8336.