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Page Title: Computation of Discounts
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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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