EAP: Late Interest Charge Calculation Analysis does not match Federal calculation (Doc ID 2176084.1)

Last updated on AUGUST 25, 2016

Applies to:

PeopleSoft Enterprise FIN Payables - Version 9.2 to 9.2 [Release 9]
Information in this document applies to any platform.

Symptoms

Late Interest Charge Calculation Analysis in PeopleSoft does not match the federal calculation provided by the Bureau of the Fiscal Service when using the Monthly Compounding Interest Calculator at https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/monthly_interest.htm.

For example:

Payment Gross Amount = $250,000
Interest Rate = 2.5%
Net Due Date = 11/16/2015
Payment Date = 08/22/2016

PeopleSoft calculated $4,905.085 for the interest (using the Late Interest Analysis from Voucher Inquiry) Treasury calculated $4,903.65 for the interest (using the Monthly Compounding Interest Calculator)

When the Gross Amount is small, there is no difference. The difference is seen when the Gross Amount is big.

STEPS
1. On the Installation Options > Payables page, both Federal Payment and Late Charge are enabled
2. On the Procurement Control > General Controls page, "Allocate Late Charges" is selected
3. Late Charge Code is setup with Interest Rate = 2.5
4. Create a Voucher for a Vendor that is setup as a Federal Supplier
5. Invoice Date = 11/16/2015 and Total = 250,000.00
6. On the Voucher > Payments page, click on the Late Charge hyperlink
7. On the Late Charge Information page, Late Charge Code = LATE
8. Run Voucher Posting to post the voucher
9. Navigate to Accounts Payable > Review Accounts Payable Info > Vouchers > Voucher
10. On the Voucher Inquiry page, display the Voucher created in Step 4
11. For Late Interest Analysis, change Payment Date to 08/22/2015
12. Click Calculate
13 .Late Charge Amount = 4905.09
14. Go to the website https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/monthly_interest.htm.
15. Enter the following values when using the Monthly Compounding Interest Calculator:

Enter the principal amount = 250000
Enter the number of months late = 9
Enter the number of days late = 10
Enter 0 through 31. This number is NOT the total number of days late
Enter the Prompt Payment interest rate = 2.5

16. The resulting Interest calculated is 4903.65
17. Below is the formula the calculator uses to determine monthly compounding interest:

P(1+r/12)n * (1+(r/360*d)) -P

  P is the amount of principal or invoice amount;
  r is the Prompt Payment interest rate;
  n is the number of months; and
  d is the number of days for which interest is being calculated.

The first part of the equation calculates compounded monthly interest. The second part of the equation calculates simple interest on any additional days beyond the number of months.

For example, if the amount owed is $1,500, the payment due date is April 1, the agency does not pay until June 15, and the applicable interest rate is 6%, interest is calculated as follows:

$1,500(1+.06/12) 2 * (1+(0.06/360*15))-$1,500 = $18.83

Changes

 

Cause

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