PROMPT PAYMENT OF BILLS
AND COMPENSATION

Over the last several months, we have discussed financing, revenue enhancement, and other applicable management procedures that are very important in the day-to-day operation of a municipality. The concern of most public officials is to maintain (and if possible, to expand) revenues to meet the obligations incurred during the normal course of operations.

It often seems that the problem of having sufficient funds, to meet the payroll and pay vendors for products and services, is becoming more difficult. The laws have been made more flexible to permit municipalities to borrow in anticipation of future revenues so their credit worthiness may be protected. Yet, at the same time, laws have been made to insure that municipal employees and vendors are paid in a timely fashion.

The continuous nature of many local government services requires capable personnel and supplies or commodities that are sufficient and available without restriction or interruption. Water systems, sewer systems and sewer treatment facilities, streets, fire and police protection, to name a few, cannot be inoperable for any extended period of time without dire consequences.

While the local government services are essential, it is also important that vendors be paid on time. They, too, have obligations to meet. The lack of prompt payment for personal services or for products purchased can cause serious problems for the vendor.

Cities and villages and other units of government must now comply with the Illinois Prompt Payment Act which became effective July 1, 1987. (See Ch. 85, par. 5601 et. seq. of the Illinois Revised Statutes). This legislation became law on September 21, 1985 but did not become effective until this year.

The law resulted from the complaints of some vendors who experienced delays in receiving payment for goods or services purchased by local governments.

The Local Government Prompt Payment Act requires specific action to be taken by local governments when purchasing goods or services. Listed below are the major provisions of the Act.

1. Local governments receiving goods or services must approve or disapprove a bill from a vendor within 30 days after the receipt of a bill or within 30 days after the date on which the goods or services were received, whichever is later. Written notice must be mailed to the vendor immediately if a bill is disapproved.

2. Any bill approved for payment must be paid within 30 days after the date of approval. If payment is not made within the 30 day period, an interest penalty of 1 percent of any amount approved and unpaid must be added for each month or fraction thereof after the expiration of such 30 day period, until final payment is made.

3. If for any reason, the local government fails to

September 1987 / Illinois Municipal Review / Page 25

approve or disapprove a bill as required, the penalty for late payment of the bill must be computed from the date 60 days after the receipt of the bill or the date 60 days after the goods or services are received, whichever is later.

Municipalities must also comply with the Wage Payment and Collection Act (Ch. 48, par. 39 m-1). The provisions of the act have been in effect for some time. The Act requires that wages earned by employees under a semi-monthly or bi-weekly pay period, must be paid no later than 13 days after the period in which they were earned. Wages earned by employees during a weekly pay period must be paid no later than 7 days after the end of weekly pay period in which the wages were earned. All wages earned on a daily basis must be paid insofar as possible on the same day as they are earned, or not later than 24 hours after the day on which the wages were earned. Wages of executive, administrative and professional employees, as defined in the Federal Fair Labor Standards Act, may be paid on or before 21 calendar days after the period during which they were earned. However, these pay requirements do not apply if valid collective bargaining agreement provides different arrangements.

The Wage Payment and Collection Act also dictates the municipality's responsibility relative to:

(a) Vacation pay and final compensation
(b) Collective bargaining agreements
(c) Workers on strike or layoff
(d) Absent workers
(e) Final compensation
(f) Vacation pay

The duties and powers of the Department of Labor are also covered. As an employer, the municipality has an obligation to know and comply with this statute.

Page 26 / Illinois Municipal Review / September 1987