Determining Uncollectible Receivables and Collecting Past Due Receivables

Policy Approve By
Scott McCallum, Superintendent
Policy Date (original policy date)
Policy Prepared By
Mary Sarate, Director of Business and Finance
Policy Category
Administrative

PURPOSE:

This policy sets forth provisions for determining whether receivables are uncollectible and to distinguish between those considered uncollectible and economically uncollectible and provide for collecting past due receivables.

DEFINITIONS:

Economically Uncollectible means the value of a receivable is less than its estimated costs to collect.

Uncollectible means a receivable that cannot be collected using standard DES collection procedures.

POLICY:

Each step in the collection procedure (e.g. issuance of statements and dunning letters, phone and personal interviews, filing of suits and liens, referral to private collection agencies or letter services, etc) has a cost associated with it.  When the cumulative cost of those efforts exceeds the receivable value, it shall be considered economically uncollectible.

If after all receivable collection procedures have been exhausted and the receivable is more than 12 months past its due date, it shall be considered uncollectible.

The Director of Business and Finance or designee has the discretion to modify collection timeframes and criteria as needed.

Prudent collection of amounts owed to the agency is important for the ongoing operation of the agency.  SAAM chapter 85.54.50 calls for written procedures to be developed to ensure that past due receivables are followed up promptly and in a manner that is cost-effective for the overall collection program.

The use of collection agencies is authorized by RCW 19.16.500 if agency collection efforts are unsuccessful.

Agency Collection Activity

Action By Action
Business Office Staff Monthly – Provide receivables aging reports to programs monthly and discuss at Monthly Financial reviews with Superintendent.
Business Office Staff >30 Days Past Due – Send statements of account to all customers with balances more than 30 days past due.
Business Office Staff >45 Days Past Due – Phone call to customer to ensure receipt of invoice and inquire about any issues.
Business Office Staff >60 Days Past Due – Send statements of account to all customers with balances more than 60 days past due.  Notify program of accounts more than 60 days past due.  Discuss follow up.
Program Staff >60 Days Past Due – based on discussions with finance staff contact customer to resolve any issues and to inform them of further collections activity.
Business Office Staff >90 Days Past Due – Send dunning letter including date for sending account to collections.
Business Office Staff / Program Staff >90 Days Past Due – Discuss with program options for discontinuing services and sending to collections.
Business Office Staff >120 Days Past Due – Turn over to collections and notify program staff.

Sending to Collections Agency and Writing off Bad Debt

Action By Action
Business Office Staff Determines if debt should be considered uncollectible.
Business Office Staff If debt is considered uncollectible directs accounts receivable to be written off.  Write offs over $10,000 require Superintendent approval.
Business Office Staff Verify all collection processes have been followed and that program is aware that the debt is being turned over to collections.
Business Office Staff Log into the site of the current state contracted collection agency and enter information necessary to submit for collections.
Business Office Staff Notify accounting staff that the bill has been turned over to collections and needs to be removed from the receivables balance.  Also notify program management and budget that the revenue is being reduced.
Business Office Staff Write off receivable.
Business Office Staff Notify extended management team of write off to ensure no further business is conducted with customer.

All collections activities are to be documented in writing and should include the date and action taken.

Authorizing state law:

RCW 19.16.500: Public bodies may retain collection agencies to collect public debts—Fees.

Related state policy:

SAAM Chapter 85.54 - Receivables