Systems Payment Management
Description / objective
The Systems Payment Management function deals with the calculation of payments due under a Service Contract, and the transfer of the payment. The Service Contract is most typically with the Transport Authority for the provision of scheduled bus services, but it could also be with another public agency (e.g. Department of Education for schools transport services, Department of Social Welfare for provision of special services for people with disabilities). In some cases, it could be a contract between one Operator and its subcontractors.
Service Contacts may be Gross Cost (Authority pays for the service, keeps the revenue); or Net Cost (Operator keeps the revenue it collects, Authority pays an agreed supplemental amount); or some variant of one or other model. There may be provision for sharing revenues above a threshold, or sharing shortfalls below a certain threshold. There are usually provisions for payments to be deducted for trips not operated, and there may be incentive/bonus payment or quality-related deductions. Payments may be calculated on a daily basis, but funds transfer might take place on a periodic basis (weekly, fortnightly, monthly). If there are disputed amounts, payments will be made on time (with or without the disputed amounts) and reconciliation will be made in a later period when the matter is determined. Other adjustments may also be made from one period to the next.
While some Transport Authorities enter Service Contracts with a single Operator for their entire coverage area, other may have a single major contract for the core urban area and additional smaller contracts for the peripheral areas; or the Authority may have separate contracts for every route, thus having one hundred or more contracts, perhaps with 10-30 individual Operators.
The Service Payment Management function needs to manage all of the above, and to ensure that payments are accurate and timely. The primary tasks are to:
- Receive, enter and verify all claims for payment
- Determine the payments due for operation of the planned service
- Apply any adjustments for additional services operated, or service not performed
- Apply any penalties or bonus payments in relation to service quality (linked to the Service Performance Analysis function)
- Apply any revenue-related incentives or deductions, where revenue-sharing agreement is in place
- Where relevant, apply any reimbursement for prepaid or concessionary passengers (if not performed under a separate revenue distribution function)
- Identify any non-performed trips/kms which are not deducted from the Operator’s payment (e.g. in case of traffic disruption or other accepted cause beyond Operator’s control).
- Identify any disputed payments and open a file/entry and provision for these
- Apply any adjustment from previous periods (additional payments or deductions)
- Calculate the total amount payable for the period and the corresponding documentation for both internal users and for the Operator
- Initiate the payment transfer
- Transfer information to the accounting and audit functions, and other relevant stakeholders.
Technologies, data and resources
Systems Payment Management functions are software applications. They may be dedicated software systems, or they may be utilities within the Accounting system or the Service Contract Management system. Regardless of their location, they are essentially accounting utilities, with focus on data gathering and reconciliation, and preparation of payment requests that are fully supported and auditable.
The System Payment functions can be strongly supported by the ITS systems. The primary data inputs are from:
- AVM system (trips/km operated by route, direction, time, day; non-performed trips, by cause);
- Fare Collection system (revenue by route, by day; number of pre-paid tickets, concessionary passes recorded)
- Service Performance Analysis function (bonus/penalty adjustments, by route, by day, by type)
Systems Payment management utilities are not resource hungry.
Advantages and cautions
The primary advantages of ITS-supported System Payment Management are:
- Ability to effectively manage multiple contracts (sometimes more than 100) with multiple Operators (sometimes more than 50) with minimal personnel
- Automated calculation of payments for Operators and other contractors into a secure, transparent, audit-compliant system.
- Data can be transferred automatically from both ITS and other corporate IT information stores. This saves on data inputting costs, and eliminates human errors.
- Speed of data transfer and report production, so that same-day or following-morning reports are available.
The primary cautions are:
- Problems with the AVM data (e.g. problems with GPS coverage or GSM transmission) may impact on the data presented in the payment claim
- Since it is automatic, there may be a ‘disconnect’ by those analysing and using the data, so that they may not notice errors and fail to test its integrity
- The outputs of the system directly impact on the payments received by the Operators. This can be worth some hundreds of millions of dollars annually. There is very strong motivation for fraud, both internal staff siphoning off some of the funds, and collusion between Operator and internal staff. An effective independent audit function must be in place..