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COMPUTATION OF DISCOUNT.— Unless
otherwise specifically stated, normally a discount will
be computed on the total amount of payment requested
by the dealer’s bill and approved for settlement. The
total amount includes such things as taxes and freight,
whether these things were included in the contract price
or shown as separate items on the dealer’s bill. When
trade-ins are involved, unless the contract or order
specifies otherwise, discounts will be computed on the
basis of the net contract price; that is, the actual cash
balance due. Discounts will be computed on any
amount approved for payment regardless of any offsets
for indebtedness of a supplier to the government such
as liquidation of advance payments, interest on advance
payments, liquidated damages, or duplicate payments.
A discount for items priced on a free-on-board
(f.o.b.) origin basis, will not be applied to transportation
charges. Discounts will not be computed on any amount
billed by the dealer that is not approved for settlement
on account of rejection, pending tests, errors in billing,
or other adjustments to correct the total billed. When a
discount is taken, the rate will be shown in the body of
the PV, and the deduction will be shown in the Amount
column.
Generally, discounts will be applied as
reductions of charges to each of the funds chargeable
for the PV. Net charges will be shown in the accounting
classification space on the PV.
When a payment involves multiple lines of
accounting data on a single PV and requires several
computations, the entire amount of the discount maybe
applied to the line to which the largest gross charge is
applicable or to a selected line if two or more amounts
are equal and larger than the others. When a particular
line is due credit for a discount of $100 or more on a
single PV, the credit will be applied to that line.
ACCEPTANCE OF DISCOUNTS.— A s
previously stated, discounts will always be taken when
they are accepted and earned. This means discounts
will be taken when they are cost-effective. A discount
is cost-effective when the rate offered is greater than the
cost to the Department of the Treasury for borrowing
the money to pay the invoice and when the dollar
savings of the discount are equal to or greater than $15.
When the vendor offers a discount greater than the
Department of the Treasury cost of funds and the
absolute dollar of the discount is more than $15, the
Navy will accept and process the invoice to earn the
discount in all cases. Invoices offering discounts of less
than $15 may be taken at the discretion of the paying
office.
No discount will be accepted and processed if the
discount is less than the rate at which the Department
of the Treasury borrows funds. The Department of the
Treasury’s rate is published as an annual rate by a
general disbursing message twice each year, in January
and July. Invoices not offering a discount and those
offering a discount that is not cost-effective will be paid
in a normal manner. The discount terms may be
reduced to an annual percentage by applying the
formula shown in figure 6-2. An example is also
provided in this figure.
REFUNDS.— The DO who paid the original PV is
authorized to make a refund of discounts taken under
the following circumstances:
When a discount was deducted erroneously
When a contractor has promptly protested a
discount taken on reimbursable freight when the
purchase document has provided for prices f.o.b.
supplier’s plant
Initially, the supplier must make a written request
for the refund of the discount. The original request will
be attached to the original PV upon which the refund is
expended. When any question exists as to the right to
deduct a discount, the DO will always take the discount
and pay the balance to the supplier (payee). If the payee
is not satisfied, he or she can accept the payment under
protest and file a claim for a refund of the amount
deducted. If a refund is not authorized under the criteria
previously described, the DO will forward the claim to
the General Accounting Office (GAO). When
discounts not authorized under the purchase agreement
are taken over a period of time on the basis of an offer
on the dealer’s bill, any protests subsequently received
will also be processed as a claim to be settled by the
GAO.
LOST DISCOUNTS.— All officers who receive,
prepare, process, and pay dealers’ bills are responsible
for making sure bills involving discounts are paid
promptly. This policy allows the Navy to take
advantage of discounts when they are practical and
economical. In most instances, bills with acceptable or
mandatory discount terms will be paid in the normal
course of business without any need for special
handling.
However, special handling is required whenever
processing through normal channels would cause the
discount to be lost or when taking the discount as
previously discussed is cost-effective. Special
handling is not restricted to the actions of the paying
office; it also means the receiving and vouchering
6-6
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