7-1509: Late Fees and Interest Payment Policy

Purpose

The purpose of this policy is to promote fiscal accountability, prevent unnecessary costs, and ensure consistent oversight of late fee and interest payments. This policy provides guidance on the appropriate circumstances for paying late fees, interest or penalties. The intent of this policy is to ensure fiscal responsibility while maintaining the integrity of County operations.

Authority

Government Code 26881
Government Code 29742

Scope

This policy applies to all County Departments and Special District agencies that process payments through the County’s financial system.

Policy

All late fees and interest payments are subject to review by the Department of Finance prior to payment to ensure compliance with contractual terms, applicable laws, and County fiscal policies.

Each County department is responsible for reviewing and evaluating the validity and reasonableness of all late fees and interest charges associated with their contracts, including identifying the cause of the charge and confirming whether the fee is allowable and justified.

Late Fees on a Contracted Purchase

In most instances, the County of Sacramento is obligated to make payment within 30 days of receipt of a correct and undisputed invoice from the County’s vendor, however certain contracts may have alternate negotiated terms.

Before considering the payment of any late fees, interest or penalties on a payment that pertains to a contracted purchase (whether contract, purchase order, or other agreement type), the specific contract terms and clauses related to late payments, fees and penalties should be reviewed. Those specific contractual terms must be followed.

To the extent contractual terms are not clear and the situation warrants, departments should seek advisement from the Contract and Purchasing Services Division or County Counsel prior to payment of late fees, interest or penalties.

Late Fees on Non-Contract Obligations

The County generally does not pay late fees or penalties on liabilities that arise outside of a contract or agreement. Certain categories of payments, such as utility payments, may be governed by the policies or regulations of the utility providers themselves, and those rules can create additional obligations for the County.

Departments should obtain additional guidance from Department of Finance or County Counsel when necessary to evaluate claims for interest payment.

Detailed Invoice

Late fees and penalties must be included on an invoice, and the County may issue payment based on a statement.

Procedures

When determined that the County may be responsible for late fees, interest, or penalties, departments shall take the following steps:

Determine Cause

County departments should assess the reason for delays in payment. If the delay is due to internal errors or oversight, the department must address the underlying issue to prevent future occurrences. If the delay is due to a vendor or service providers failure to submit the invoice accurately or timely, this should be documented and communicated to the vendor.

Evaluate Impact on County Services

County departments should consider the impact of the late fee or penalty on County services. If paying the fee will ensure continuity of essential services (ex. utilities), the department may submit them for payment.

Conversely, if the late fee or penalty is excessive or unjustified, alternative solutions should be explored.

Request reduction or waiver of later fee or penalty

County departments should, whenever justifiable, request a waiver of the late fees or penalty with the vendor. If a waiver is not obtained, the department should consider requesting a reduction.

Maintain documentation

Departments must keep detailed records of late fees and penalties paid including the reason, analysis performed, any requests for waiver or reduction, and ultimately whether the fee or penalty was accepted or rejected for payment.

Pre-payment review

The Payment Services Unit within the Auditor-Controller Division of the Department of Finance shall conduct a review and audit of all invoices prior to the issuance of payment. As part of this pre-payment audit, each department shall provide written justification and supporting documentation establishing the basis for any late fee assessed. The Payment Services Unit may require additional information from the submitting department as necessary to ensure compliance with this policy.