New finance IT system caused spike in Home Office’s late payments
In the 12 months to the end of September, the department incurred potential interest of £2.66m – an increase of more than £2m than the preceding 12-month period
A financial IT system installed by the Home Office in December 2018 led to a sharp increase in invoices paid outside the government’s 30-day target.
In January to March of 2019, the department failed to pay 8.5% of invoices within 30 days, compared with an average of 3.6% in the previous 12 months. Suppliers not paid within 30 days are legally entitled to charge interest, although this is not paid automatically.
The Home Office’s late-paid invoices in the first three months of the year led to a potential interest liability of £982,576.
“The Home Office implemented a new finance IT system in December 2018, leading to some changes to the prompt payment performance, which we quickly resolved,” said a spokesperson for the department. “Suppliers were flexible during this period and urgent payment mechanisms were available on request. We have a strong track record in prompt payments and are continuously working to improve our performance.”
The department’s proportion of invoices paid later than 30 days has since fallen to 2.86% for July to September, the latest available data. However, the problems earlier in the year led to total potential interest liability for the 12 months ending in September of £2.66m, more than £2m higher than the figure for the previous 12 months.
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All central government departments, their executive agencies and non-departmental public bodies have been required to publish quarterly prompt payment performance data since April 2015.
Minister for the Cabinet Office, Oliver Dowden, said: “Late payments are unacceptable, and are particularly damaging to the small and medium-sized businesses that power the British economy. The government has been clear that payment times must improve, so we're setting an example by measuring departments against the very strict standard of paying invoices within 5 and 30 days – rather than the private sector’s 60-day target.”
Data shows that some other departments have recently seen an increase in late payments.
The Department for Work and Pensions tripled its proportion of late-paid invoices this financial year, although from a low level. It paid 1.35% of invoices outside 30 days between April and June, and 1.21% between July and September – compared with an average of 0.43% in 2018/19 financial year. Between April to September 2019 this led to late payment interest of £943,324.
The Department of Health and Social Care has also recorded an increase in invoices paid late, with 6% paid outside 30 days in April to June this year, up from an average of 2% in the 2018/19 financial year.
A departmental spokesperson said: “Ensuring companies – particularly small businesses – in our supply chain are paid on time is crucial. We are committed to meeting public sector targets in line with government policy and we pay the vast majority of our supplier invoices within 30 calendar days."
HM Revenue and Customs’ late-paid invoices rose slightly from an average of 0.24% for the 2018/19 financial year to 0.39% average for April to September.
The Ministry of Defence’s rate has risen from an average of 0.01% paid late in the 2018/19 financial year to 0.46% in April to June, the most recent data.
However, other departments have significantly improved their performance recently. The Foreign Office paid nearly 5% of invoices after 30 days in the 2017/18 financial year, but since 2018/19 it has paid fewer than 1% outside the target period.
The Cabinet Office, which manages policy in this area, paid 11% of invoices outside 30 days between July and September 2018 but just 3% in the same three months in 2019.
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