OMB Mandates Agency Use of Electronic Invoicing by 2018
Published: July 29, 2015
Today only 40% of the 19 million invoices the federal government receives annually are processed and managed electronically. OMB plans to put an end to that by 2018.
OMB issued a memo on July 17 requiring federal agencies to move to an electronic invoicing platform by the end of FY 2018. Agencies will be required to use a shared service provider for e-invoicing. The OMB mandate follows a four year pilot of the Internet Payment Platform (IPP) at Department of Treasury. OMB worked with Treasury to improve the platform and determine how to offer it government-wide. OMB is not mandating use of IPP, but is barring agencies from building their own e-invoicing system. DOD and VA are the only other departments that have invoicing systems that meet OMB's requirements.
"The reason we want to do [this] is two-fold. One is there is a clear savings to the government from moving from paper to electronic. We have estimates over a couple of studies that show an annual savings of anywhere between $150 million and $260 million, which is significant savings. I think as important, or maybe more important, the benefit there is to vendors in moving this process to electronic, especially for small businesses who are very concerned about cash flow. Electronic [payments], obviously, give you the heightened accuracy, the prompt payment and the quick movement of payment of invoices from invoicing to cash in the bank," said Dave Mader, the controller and acting deputy director for management at OMB in a Federal News Radio interview.
Anne Rung, OFPP administrator, jointly signed off on the memo, because the requirements also impact acquisition personnel.
Over the next four to six months, OMB will work with Treasury's Office of Financial Innovation and Transformation (FIT), the CFO council and the Chief Acquisition Officer's council to develop a governance model, data standards, and recommendations for a central collections portal.
According to Treasury, 80 agencies are already using the IPP and in 2015 they have electronically processed 500,000 invoices through the system to date.
Moving to electronic invoicing pairs well with efforts to implement the Digital Accountability and Transparency Act (DATA Act) which mandates transparency in federal spending.
Why has it taken so long for the federal government to walk away from paper and manual processes? Mader said, "We needed as a government to prove this would be as effective as people imagined, and I think the benefit of Treasury stepping out there as a leader in 2011 and actually now proving over three or four years that this is really valuable to both government and industry. They convinced us it's now time to move everybody to this environment. There's also a cost element. Agencies are going to have to change their technologies and change their business processes. There is a cost to conversion as well. But we feel giving people a couple of years to get there, we can move that delta, that 12 million, over the next three years."OFPP will be working with agencies regarding procurement requirements related to contractor invoicing to fit the new OMB requirements. Contractors may be required to submit invoices electronically, if they are not already doing so. But e-invoicing on the government side should speed up accounting approvals and the payment process for federal contractors.