Alaska agencies point to compliance, data gaps and staffing as causes of delayed payments to vendors and grantees

State officials told the Senate Community and Regional Affairs Committee on April 29 that multiple, interlocking factors — not a single root cause — explain why some state payments to contractors and nonprofit grantees are late.

Chair Senator Merrick convened the informal hearing with representatives from the Department of Administration, the Department of Commerce, Community and Economic Development, and the Department of Health to review payment processes and identify steps the Legislature could take to speed payments.

"All departments are responsible for developing their payment approvals and processes at the department level," said Eric Demolen, director of finance and acting administration services director for the Department of Administration. He said departments record approvals in the state’s accounting system, IRIS, and that many payments are routed through a shared-services unit.

Demolen told the committee that much of the delay the Legislature has observed is tied to program compliance: federal grants and pass-through funds often require documentation and supporting reports before payments can be released. He said some grant- and program-level payments are treated as "out of scope" for shared services and are handled at the division level, which can lengthen processing.

Hannah Lager, administrative services director for the Department of Commerce, Community and Economic Development, described large volumes and uneven data as central challenges. "We administer a variety of grant programs under a wide variety of statutory authorizations ... that's about a billion dollar portfolio," she said. Lager told the committee that for 2024–2025 combined, "97% of our operating grant payments are made within 30 days," and that 90% of non-travel, non-p-card transactions (about 19,000 transactions) were also paid within 30 days. She said the department does not currently capture the date a mailed invoice is received, only the invoice date that vendors report, and that inconsistent invoice dates and data-entry errors create outliers in payment-time statistics.

Pam Holleran, assistant commissioner for the Department of Health, told the committee the department manages hundreds of grants and a high dollar volume and that capacity and turnover have contributed to slower processing in some cases. "We have 448 grants," Holleran said. She reported that, for Fiscal Year 2024 contract payments the department reviewed, the department averaged "31 days past the 30 days requirement," while quarterly grant payments averaged "11.2 days" to process after grantee reports were received and reviewed.

Officials also described administrative controls that intentionally slow payment processing to prevent fraud or to meet federal compliance standards. Lager said the department pushes purchasing-card use where appropriate to speed vendor payment and keeps approvals at the lowest possible level; Department of Administration representatives said many routine vendor payments are executed via ACH in nightly batches.

Committee members pressed agencies on two recurring concerns: the financial burden on small nonprofit providers that must bridge delayed state payments and the degree to which prolonged delays lead to contract claims or litigation. Tom Mayer, chief procurement officer with the Department of Administration, said he was "not aware of any claims that would be filed" related to prolonged late payments and that formal contract claims would be managed within agencies and, if appealed, through the commissioner’s office.

Officials said remedies under active consideration include improved invoice-tracking (for example, capturing the date agencies receive mailed invoices), moving more purchases to p-cards where appropriate, centralized shared inboxes for invoices to prevent loss when individual staff leave, training for grantees and agency staff on adequate invoice content, and continued quality-control review of data fields to reduce entry errors.

Agency witnesses emphasized that delays are not uniformly distributed. Demolen and other staff said average central-processing times are short (Demolen said the central processing average is "less than 5 days" for in-scope payments), while the longer delays identified in committee data are concentrated in a small number of problem cases that involve disputed deliverables, budget encumbrances or required federal documentation.

The committee did not take formal action at the hearing. Members said the testimony would inform future work on prompt-payment legislation and data collection.

Ending: The committee scheduled no final decisions at the April 29 hearing; staff and senators said they would return to the topic and consider legislative options after follow-up reporting and additional analysis.