HomeMy WebLinkAbout220-03POLICY & PROCEDURE
Subject: BAD DEBT Index: FINANCE
Number: 220-03
Effective Date:
12/05/2022
Supersedes:
11/01/2002
Page:
1 of 3
Staff Contact:
Kari Roller
Approved By:
1.0 PURPOSE:
To establish a policy for the management of delinquent customer accounts and processing accounts receivable write-offs.
2.0 ORGANIZATIONS AFFECTED:
All departments/divisions
3.0 REFERENCES:
RCW 19.16.500, RCW 62A.3-515
Policy & Procedure 220-02, Accounts Receivable
Policy & Procedure 220-04, Handling and Collection of Returned Items
Policy & Procedure 220-05, Bad Debt (Court)
4.0 POLICY:
4.1 The city will actively pursue collection of past-due accounts receivable, and if
necessary, refer uncollectible debts to the city’s designated collection agent.
4.2 The finance department is responsible for formulating, implementing, and
conducting collection efforts, which vary depending on the nature of the
receivable.
4.3 The finance department will regularly review the status of past due accounts and
write-off amounts determined to be uncollectible. A write-off of uncollectible
accounts receivable from the city’s accounting records does not constitute
forgiveness of the debt. Accounts receivable should generally be written off
during the fiscal year in which an account is determined to be uncollectible.
4.4 This policy does not cover city interdepartmental billings or Renton Municipal
Court activities.
5.0 DEFINITIONS:
5.1 Debt: for the purpose of this policy, debt is defined as money owed to the city for
any reason.
5.2 Bad debt or Uncollectible debt: debt which the city, or its collection agent, has
attempted to collect but has been unsuccessful at collecting, as outlined in section
6.7 of this policy.
5.3 Bad debt recovery: a payment received for a debt that was previously written off
and considered uncollectible.
5.4 Customer: any person, any organization, any business that owes money to the City
of Renton.
5.5 Collection agent: a licensed and bonded collection authority that has been
retained to collect funds for the city.
5.6 Generally Accepted Accounting Principles (GAAP): a common set of accounting
principles, standards and procedures issued by the Financial Accounting Standards
Board (FASB).
5.7 Write-off: an elimination from the financial statement of an uncollectible
accounts receivable.
6.0 PROCEDURE:
6.1 All monies due the city will be considered a fair and owing debt to the city.
6.2 The finance department is responsible for notifying customers of past due
amounts owed the city, as outlined below:
6.2.1 All customers that have not paid a debt to the city in full within thirty (30)
days of original due date will be sent a statement of past due amount.
6.2.2 All customers that have not paid a debt to the city in full within sixty (60)
days of original due date will be sent a second statement of past due
amount.
6.2.3 All customers that have not paid a debt to the city in full within ninety (90)
days of original due date will be sent a final notice with a fifteen (15) day
response deadline from date of final notice. If customer fails to respond,
debt will be turned over to city’s designated collection agent.
6.3 Any past due notices returned as undeliverable may be immediately turned over
to city’s designated collection agent, without any further notice attempts.
6.4 Sections 6.2 and 6.3 do not apply to the following:
6.4.1 Customers with balances due through the city’s administration of taxes
and licenses.
6.4.2 Customers with balances due for utility services provided by the city.
6.5 The finance department is responsible for determining accounts sent to
collections and is responsible for coordinating with the city’s designated collection
agent.
6.5.1 Accounts receivable will organize, compile, and retain documentation on
debt that is submitted to the city’s designated collection agent.
6.5.2 All debt sent to the city’s designated collection agent may be subject to
collection fees and interest, as prescribed by RCW 62A.3.515, and RCW
19.16.500, or other applicable law or contract provision.
6.6 Bad debt may be written off with authorization by Finance Administrator after
reasonable collection efforts have been exhausted and the account is considered
a bad debt. A debt is considered bad debt after the appropriate collection
procedures have been followed and it meets one or more of the following criteria:
6.6.1 The debt is disputed, and the city has insufficient documentation to pursue
collections efforts
6.6.2 Amount owed is too small to warrant further collection action
6.6.3 The account remains unpaid after three (3) years with no payments made
6.6.4 The debtor cannot be located, nor any of the debtor’s assets (as
determined by the collection agency)
6.6.5 The debtor has no assets and there is no expectation they will have any in
the future
6.6.6 The debtor has died and there is no known estate or guarantor
6.6.7 The debtor is a company which is no longer in business
6.6.8 The debt is discharged through legal action (bankruptcy, court judgement
or settlement)
6.6.9 The debt has been forgiven by action of the city council
6.7 At least annually, the finance department will identify any accounts receivable for
which it is responsible that meet the criteria for designation as bad debt.
6.8 If a debt that was previously written off shows renewed potential for payment,
the receivable will be reinstated by accounts receivable for bad debt recovery
purposes in accordance with GAAP.