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Maricopa County Subject: Uncollectible Accounts Number: Receivable F2501 Policies and Procedures Issue Date: 06/98 Approved: David R. Smith Initiating Department: Finance A. Introduction I. MARICOPA COUNTY CURRENTLY BILLS AND/OR INVOICES FOR A WIDE VARIETY OF REVENUE ACCOUNTS. THE PURPOSE OF THIS POLICY IS PURPOSE To establish procedures and guidance to ensure that Maricopa County Departments properly value accounts receivable through the regular review and write-off of uncollectible accounts. For the purposes of this policy, Accounts Receivable is defined as: an account reflecting amounts due from individuals, organizations, businesses and governmental entities. The County shall take appropriate and prudent steps to collect evaluation of delinquent accounts which are described in Section D - Proceduresreceivable. In some instances, departments may exhaust all avenues of collection. At that time, the account must be assigned to the County Attorney, Division of County Counsel (County Counsel). This type of action usually occurs after all collection efforts have been exhausted and the account is considered to be uncollectible. It is critical to ensure that adequate documentation is maintained to support the decision to assign the account to County Counsel. Examples of supporting documentation may include: records of all telephone calls, copies of correspondence between the department and the debtor, and reports indicating their collection attempts. County Counsel will diligently continue collection activities including establishment of a repayment schedule, filing an action for collection, or recommendation and execution of a settlement of less than the full amount due if it is in the best interest of the County and upon approval of the Board of Supervisors. In the event an account is being assigned to County Counsel, the following items must be provided to initiate further collection activities: • Documentation regarding collection attempts (copies of letters, invoices, etc.). • Complete and accurate Debtor Name, Address, and Phone Number. • Amount of the uncollected account. • Reason for the account. B. Definitions 06/1998 Page 1 of 4 Maricopa County Subject: Uncollectible Accounts Number: Receivable F2501 Policies and Procedures Issue Date: 06/98 II. APPLICATION This Policy applies to all Maricopa County appointed departments as well as the Flood Control District of Maricopa County, the Maricopa County Library District, and the Maricopa County Stadium District (Special Districts). The Board of Supervisors is authorized to jointly adopt policies applying to the Special Districts under the Intergovernmental Agreement, C-06-18-393-6-00, approved on April 11, 2018. This policy also applies to employees of County elected offices unless the elected official has implemented a similar policy specific to their office. III. DEFINITIONS A. Accounts Receivable: An asset account reflectingfor amounts due from goods or services provided by Departments to individuals, organizations, businesses and, governmental entities for goods and/or services furnished by the County., etc. Accounts receivable can occur through imposition which arise as a matter of law (e.g. property taxes, court ordered judgments, fines, fees, and restitution) or by transaction (i.e. a good or service is provided through an exchange of money or by an amount due on an account). B. Collection Agency: A County contracted outside organization which specializes in debt collection. C. Debtor: The individual, organization, business, and/or governmental entity which owes monies to a Department. D. Delinquent Accounts: Receivable: Accounts that are past due by a predetermined number of days. E. Department: For the purpose of this Policy, “Department” refers to any division of the County including elected and judicial branch offices, and Special Districts. F. Uncollectible Accounts: Receivable: A seriously delinquent account that the County either has no legal basis for collection or for which the resources needed to continue collection efforts far exceed the value of collection. , for the sake of efficiency, financial reporting integrity, and a consideration of reasonable collection efforts, is removed from the County’s books of account but is not forgiven. C. Authority And Responsibility 06/1998 Page 2 of 4 Maricopa County Subject: Uncollectible Accounts Number: Receivable F2501 Policies and Procedures Issue Date: 06/98 Department Directors, Managers, and Elected Officials or their designees have the authority to assign an account to County Counsel. D. Procedures IV. POLICY All Maricopa County departments who are Departments that actively involved in generatinggenerate accounts receivable must develop internal Policiespolicies and Proceduresprocedures regarding Uncollectible Accounts. This policy is to serve as a guide in the development of an effective Account Collection Procedure. The following is the sequence of events leading to the account being assigned to County Counsel. 06/1998 Page 3 of 4 Maricopa County Subject: Uncollectible Accounts Number: Receivable F2501 Policies and Procedures Issue Date: 06/98 1. The Department must bill/invoice the debtor for a minimum of three (3) consecutive billing cycles. A. 2. The Department should review all, maintaining and tracking accounts to determine those that become past due receivable, and/or delinquent. These accounts should be reviewed each billing cycle to determine their collectibility. It is recommended that the Department maintain an Accounts Receivable Aging report to monitor/track collection activitiesefforts. Please Note: At anytime during the billing cycles, if a notice of bankruptcy is received by the billing department, immediately forward the notice and all backup documentation to County Counsel. They will establish a file, file a claim with the Bankruptcy Court and advise you of the disposition. 3. In the event the account is deemed uncollectible, the department shall complete the following steps: a) Prepare Attachment A (or a similar format) and attach all supporting documentation to demonstrate collection activities. After receiving “departmental approval” forward these documents to County Counsel. b) Forward a copy of the completed form (Attachment A) to the Department of Finance toPayment is due at the time goods or services are provided. If not possible, then establish an “Allowance for Uncollectible Accounts”. Please note: after an account has been assigned to County Counsel, the Department is not to communicate with the Debtor. All communication is to be conducted by County Counsel. County Counsel will notify the debtor of the assignment. 4. The disposition of the account is determined by one of the following results: COLLECTION OF FUNDS: If County Counsel collects the funds, the following should be completed: 06/1998 Page 4 of 4 Maricopa County Subject: Uncollectible Accounts Number: Receivable F2501 Policies and Procedures Issue Date: 06/98 a) County Counsel will prepare a cover letter and mail the check to the original department with copies to the Department of Finance. b) The original department will complete a cash receipt transmittal form and submit the form and check to the Department of Finance for deposit. The Department of Finance will adjust the Allowance for Uncollectible Accounts. RECOMMEND ACCOUNT FOR WRITE-OFF: In the event the account is uncollectible, County Counsel may request the Board of Supervisors’ approval to discontinue collection efforts and write the account off. Upon Board of Supervisors approval, County Counsel should inform the original department and the Department of Finance that the Board of Supervisors has authorized the account to be written off as a bad debt. A copy of the signed Agenda should be forwarded to the original department and the Department of Finance to support the financial transactions. E. SUMMARY: B. Utilization of this policy will provide departments with consistent guidelines to develop and implement an Uncollectible Accounts Receivable Policy and Procedure. Upon implementation of a Departmental - Uncollectible Accounts Receivable Policy and Procedure, forward a copy of the document to the Department of Finance.account with the following information from the debtor: 06/1998 Page 5 of 4 Attachment A AUTHORIZATION TO ASSIGN AN UNCOLLECTIBLE ACCOUNT TO THE COUNTY COUNSEL In accordance with Administrative Policy #__________, Uncollectible Accounts Receivable, you are hereby authorized to continue the collection of the following account: Debtor Name Debtor Address Account Balance* $ All Collection Activities Attached YES NO 06/1998 Page 6 of 4 Attachment A * In the event, only a partial amount of the account is being sent to County Counsel, the department must describe the methodology utilized in determining the amount being collected. 06/1998 Page 7 of 4 MARICOPA COUNTY INTERNAL POLICY Policy Number: A2501 Policy Title: Current Adoption DELINQUENT ACCOUNTS RECEIVABLE Date: Current Implementation Date: Board Agenda Approved by: Number: BOARD OF SUPERVISORS Original Adoption Date: June 1998 SAMPLE COLLECTION LETTER John Q. Debtor 123 Main Street Anytown, U.S.A. Re: Account Number: # Amount Past Due: $ Dear Mr. Debtor: According to our records, we have not received payment for the past due account. The enclosed billing statement has been due since ____________________. We are sure this is just an oversight on your part and feel our customers appreciate it when we bring these matters to their attention. We feel certain that you understand how important and necessary it is for us to receive payment. Please be advised, full payment of $_________ must be received in this office by _________. We trust you will give this matter your prompt attention and send your check in the enclosed return envelope, today. If your payment and this letter crossed in the mail, please accept our apology and “thank you” for your payment. If not, please consider this to be a friendly reminder that your account is now past due and your “IMMEDIATE” attention is required. Should you wish to discuss your account, or if we can be of any assistance, please contact __________________ at (602) xxx-xxxx. 06/1998 Page 8 of 4 Attachment B Policy Title: Policy Number: A2501 DELINQUENT ACCOUNTS RECEIVABLE Current Adoption Date: Sincerely, ________________________________ Departmental Representative 1. EnclosureIndividual or Business name; 2. Physical home or office address; 3. Telephone numbers for home or office; and, 4. Driver’s license number or business tax identification number C. Amounts due are to be billed at a reasonable time after the amount due is known and collectible (i.e. goods or services have been provided). D. The Department will prepare and review an accounts receivable aging report on a monthly basis to determine accounts receivable that become past due or delinquent. E. A Department’s internal policies will outline their reasonable collection efforts to collect monies past due and procedures for documenting collection efforts. The following are examples of collection efforts: 1. A statement or invoice showing the past due amount; 2. Written notice documenting the amount past due; 3. Phone call with the date of the call, name of the individual contacted and results of the call documented. F. Reasonable collection efforts must take into account the cost-effectiveness of the collection efforts. The effort expended to collect the monies should be in proportion to the amount outstanding. Page 9 of 11 Attachment B Policy Title: Policy Number: A2501 DELINQUENT ACCOUNTS RECEIVABLE Current Adoption Date: G. In addition, Departments will consult with the Maricopa County Attorney’s Office (MCAO) for delinquent accounts in which the debtor is unable to pay for services provided due to an unusual debt discharge circumstance, such as bankruptcy, death, incarceration, etc. As this list is not all inclusive, Departments will consult with the County Attorney assigned to represent their Department. H. Per the Arizona Constitution, Article IX, Section 7, neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state. 1. The Arizona Constitution is interpreted to mean amounts that are due to the County that are determined to be uncollectible are not forgiven, but may, for the sake of efficiency, financial reporting integrity, and a consideration of reasonable collection efforts, be removed from the County’s books of account. I. Pursuant to ARS 42-18101, delinquent property taxes are enforceable by law (sale of tax liens) and are exempt from this policy. J. If a Department has made reasonable but unsuccessful collection efforts, the Department has the discretion to turn the delinquent account over to an outside collection agency under County contract. 1. If the account is not sent to an outside collection agency, the Department must maintain sufficient documentation as to why additional collection efforts were not pursued. 2. If the account is sent to an outside collection agency, the Department must submit all debtor documentation and collection effort documentation to the collection agency and cease all contact with the debtor. K. If collection efforts are unsuccessful, the Department Director (or designee), may determine that the account is uncollectible. L. The Department must maintain a listing of all accounts determined to be uncollectible. M. Since much of the County’s basis of accounting is cash or modified accrual, receivables are frequently not entered in the financial accounting system. Uncollectible accounts not entered into the financial accounting system will not require a journal entry to remove the amount from the financial accounting system. Departments must maintain an offline system for tracking accounts receivable. N. If the receivable has been entered in the financial accounting system, the Department must prepare a journal entry to remove the amount from the financial accounting system. The journal entry must comply with A2514 – Journal Vouchers. Page 10 of 11 Attachment B Policy Title: Policy Number: A2501 DELINQUENT ACCOUNTS RECEIVABLE Current Adoption Date: Revision History Version Revision Date Description of Revision 1 6/1/1998 Initial version. 2 Review and update terminology to be consistent with other policies. Updated references to the County financial system. Removed sample collection letter and assignment to counsel form. Page 11 of 11