The District of Columbia government was late in paying 72 percent of its bills in fiscal 1981 and paid some others too early, for a net loss of at least $583,000 that the city could have earned in discounts or interest, according to a report by the U.S. General Accounting Office.
GAO estimated the city lost about $383,000 in failing to take advantage of discounts offered by suppliers for quick payments. The federal agency also said the city could have earned as much as $200,000 in interest on short-term investments if it had not paid its utility bills too early.
In addition, GAO estimated that late payments by the city cost contractors about $612,000 in expenses, such as the cost of borrowing money to tide the firms over during the average 66 days it took to get paid by the city government in 1981, the year covered in the GAO study.
"Minority and small vendors are especially vulnerable to the negative effects of late payments because they may not have cash to cover operating expenses," said GAO, the investigating arm of Congress.
The GAO report noted that the District has been "criticized repeatedly over the years for not paying its bills on time," but said its report was the first comprehensive effort to document the city's practices.
The report said the city also pays a hidden, uncalculated cost in higher bills because some firms decline to compete for city contracts while others inflate bills to compensate for late payments.
City Administrator Elijah B. Rogers said in a formal response to the GAO that the city is working on a new program of centralized policies to control its costs and that there have been improvements.
"Over the last year we have focused greater attention at the agency level in order to improve vendor-payment performance," Rogers said.
"The major cause of late payments is the slow processing of payment documents by District agencies," GAO said in the report, which reviewed about 500 payment vouchers from 36 different agencies. The report said the city makes about 95,000 such payments each year.
"Clear policies and uniform procedures have not been established . . . , reports on payment performance are not prepared, and existing procedures are not always followed," the GAO report said.
The report noted that the city's computerized Financial Management System is programmed to automatically hold payments for 17 days--a built-in delay that city officials said was necessary because of chronic cash flow problems.
The GAO also criticized the city for its failure to routinely collect data on payments to individual contractors or to give them unique code numbers for accounting purposes. Rogers said the city may have such a tracking system in place by fall.
The GAO investigators compared Washington's billing system to five other cities with comparable expenditures--Chicago, San Francisco, Los Angeles, Philadelphia and Baltimore.
"Each of the cities . . . has a centralized procurement process," GAO said. Four of the cities had clear, written policies, and all of them had specific contractor information systems that listed all of the contracts particular companies had received.