Exh 8AAGENDA ITEM tiBA
FEBRUARY 12, 2001
CITY OF ATLANTIC BEACH
CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: Accounts Receivable Collections and Write-Off Policies and
Procedures
SUBMITTED BY: Jim Hanson, City Manager
DATE: February 12, 2001
BACKGROUND:
During the recent fiscal-year-end audit grocess, the City's independent auditors, Purvis
Gray and Company, recommended that the City implement policies and procedures to provide for
the periodic write-off of past due accounts receivable. No formal policy currently exists and write-
offs have never been done before as a matter of procedure.
The City has been properly recording an allowance for doubtful accounts over the years,, as
evidenced in our financial statements. However, for accounting purposes, those accounts deemed
uncollectible should be written off the City's books, The attached Collections and. Write-Off
Policies and Procedures will enable the City to accomplish this objective.
In conjunction withthese policies and procedures, the City will be requesting proposals from
collection agencies. Use of external collection agencies will aid the City in effectively working
accounts in a timely manner to reduce write-offs. The City is in the process of preparing the Request
for Proposals (RFPs) for collecfion agencies. and will present their recommendation to the City
Commission at a later date.
BUDGET:
Revenue realization may improve with the added collection efforts. The budget impact
cannot be determined at this time.
RECOMMENDATION:
The City Commission adoptthe proposed Collections and Write-OffPolcies and Procedures.
ATTACHMENTS:
Proposed Collections and Write-Off Policies and Procedures.
AGENDA ITEM #SA
FEBRUARY 12, 2001
City of Atlantic Beach
TITLE: COLLECTIONS and WRITE-OFF POLICIES AND PROCEDURES
EFFECTIVE DATE:
February 12, 2001
POLICX STATEMENT: The City of Atlantic Beach shall assist and encourage its customers
to prompt]y pay all utility accounts with the least possible adverse impact on al] customers through
effective customer service practices and equitable service priorities.
Objectives: The City's objectives are:
• to maintain receivables on a current basis;
• toimplementaperiodic,routinemethodtomonitorbothcollectonsanduncollectible
account trends;
• to reduce the City's uncollectible amount;
• to collect delinquent amounts and recover costs through delinquent customer penalty
chazges; and
• to streamline clerical and administrative functions, where appropriate.
Assignment of Resnonsibilitv: The Finance Director is responsible for implementation of
these policies and procedures. The Finance Director, Utility Billing Supervisor, and the
Customer Service Supervisor aze responsible for maintaining .department operating
procedures that support these policies and procedures.
Delinquent Accounts:
Customer accounts aze billed once a month.
• If the bill is not paid within fifteen (15) days or by 5:00 p.m. of the due date, the
account is considered delinquent and a penalty charge determined by City ordinance
is added to the amount owed.
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AGENDA ITEM #SA
FEBRUARY 12, 2001
A customer's account is also considered delinquent if:
1. the customer's check for payment was returned by the financial institution;
or,
2. the customer used service in a fraudulent or unauthorized manner.
If a delinquent account is not paid within an additional fifteen (15) days, the services
will be cut-off and all past due chazges, including reconnect fees per City ordinance,
will be collected before services aze restored.
Terminated Accounts:
• Accounts aze terminated at the customer's request or by the City when it has been
determined that the service location is no longerusing the services.
• Final bills aze generated within two (2) weeks.
• Final bills will include all chazges and fees owed less the customer's deposit(s) plus
interest (if the deposit has not already been refunded).
• The City will mail the final bill to the mailing address of the account or other mailing
address provided by the customer. The City will process credit balance refund
checks within two weeks of final bill generation. The City will not generate a bill or
refund for credit balances (a balance owed to the customer) of $1.00 or less unless
requested by the customer. The City may adjust this dollar limit from time to time,
depending upon changes in processing costs.
• If a customer has not paid their outstanding balance due within thirty (30) days of the
bill date, the City will mail a delinquent notice to the customer.
• The Finance Department will move the account to internal collection status to
segregate the accounts to be worked in-house.
• No additional late charges will be charged to the customer's account.
• The Finance Department will continue to perform internal collection efforts thirty
(30) days following the delinquent notice, focusing on larger account balances.
Collection letters, phone calls, "Address Correction Requested" envelopes, skip-
tracing or other collection techniques may be used.
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FEBRUARY 12, 2001
• The City will contract with collection agencies to assist with the accounts receivable
collection efforts. If the customer owes the City $25.00 or more and the City has not
received payment for the final bill within sixty (60) days from the account
termination date, the City will deliver the account to one of the agencies for
collections. The Finance Department will move these accounts to external collection
agency status.
• After all .other collection methods have been .exhausted, and upon the.
recommendation ofthe Finance Director, accounts receivable documentation maybe
turned over to the City Attorney for legal action.
This actionmay include:
• Formal demand for amount due
• Complaint, with Summons to appear in Court
• Judgment
• Wage garnishment
• Property attachments and liens
Accounts Receivable Write-Offs:
• Terminated accounts will be written off after all collection efforts have been
exhausted, and the account is either considered to be uncollectible or the amount
owed is too small to warrant further collection efforts.
Situations in which write-offs will be allowed:
(1) Discharged Bankruptcy.. The account has been discharged through
bankruptcy court and the file has been noted with the date filed,
number, court district, and date of discharge.
(2) Wrong Responsible Party. The account was referred in the name of
a company or individual that cannot be held liable for the debt.
(3) Deceased. Debtor is deceased with no estate.
(4) Invalid Referral. The account was assigned in error. A billing
should not have been generated.
(5) Caurt Refuses Judgment. The debt could not be substantiated in
court.
(6) Outlawed. The statute of limitations has run out without payment or
promise of payment since the last transaction date.
(7) Amount Doesn't Warrant Further Effort. No response to demand
for payment. Further pursuit would not be cost effective.
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FEBRUARY 12, 2001
Guidelines for write-offs:
Age of Account. Accounts will be evaluated on an on-going basis.
However, the longer an account has been delinquent, the hazder it will
be to collect. Therefore, accounts with no activity afer one (1) yeaz
from the account termination date will be written off against the
allowance for uncollectible accounts. Account write-off entries will
be made once a month by the Finance Department.
Size of Account. Extensive collection efforts for small accounts is
not cost effective. If routine collection efforts fail, accounts less than
$25.00 will be written off sixty (60) 'days from the account
termination date.
• Consequences of Non-Payment. For account balances $25.00 or
greater that aze recommended for write-off, the City may send the
debtor a warning letter to provide them with an incentive to settle
their account: The letter will include, a request for a social security
number or federal identification number (for businesses) and notify
the debtor of the City's intention to issue. an Internal Revenue Service
(IRS) 1099 form. Once a 1099 form is issued, the debtor becomes
liable for income taxes on the amount of the debt.
Prior Collection Attempts. Documentation proving collection efforts
have been taken aze required before an account can be written off.
The documentation may take the form of records of telephone calls,
copies of correspondence between the government and the debtor,
reports from collection agencies outlining their collection attempts,
and documents indicating court action or justification for the lack of
court action.
The City Manager will be responsible for approving the recommendations of the
Finance Director for the write-off of any account receivable when the balance due
does not exceed $2,500 for an individual account.
The City Manager will submit recommendations for write-offs to the City
Commission, when the balance due in an individual account is in excess of $2,500:
The City is writing debt off for accounting purposes. If an account was mistakenly
written off the account will be reinstated. If a previously uncollectible account
becomes active after being written-off, the City's receivable balance will be adjusted
accordingly.
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FEBRUARY 12, 2001
Periodically, at a minimum annually, the City Manager will provide a summary of
accounts written off to the City Commission.
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