Certified Government Financial Manager (CGFM) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Under the Prompt Payment Act, a federal agency that fails to pay an invoice on time may be required to pay interest on the late payment. This legislation is designed to ensure timely payments to vendors and contractors, fostering prompt performance of contracts. The Act lays out specific timelines for when payments should be made, and if an agency fails to adhere to these deadlines, it must compensate the vendor by paying interest on the overdue amount. This serves as a financial incentive for agencies to process payments promptly and helps ensure fiscal responsibility.

While other options imply possible actions or consequences, they do not accurately reflect the provisions outlined in the Prompt Payment Act regarding late payments. For instance, negotiation of payment extensions does not typically align with the purpose of the Act, which is to promote timely payments rather than facilitate delays. Moreover, losing funding for a project is not a direct consequence of late payments according to the Act. Therefore, the obligation to pay interest on late invoices is a key component that promotes accountability in federal financial management.