MANAGEMENT OF RECEIVABLES

1.0 Statutory Reference

CGS 3-39a, 4a-12, 13a-166; Public Act 98-204; Public Act 99-2.

2.0 General Principles

Accounts receivable records should be accurate, complete, and maintained in a manner to indicate the length of time the debt has been outstanding. This practice establishes policies and procedures for all state agencies in the management and collection of receivables.

3.0 Accounting for Receivables

3.1 Definition of Receivables

The term �receivables� includes all claims held against others for future receipts of monies, goods and services. For State accounting, the term is used in a more restrictive sense to indicate claims, which have been billed and are expected to be collected in monies. The term �receivables� includes taxes receivable, amounts due from the federal government, from political subdivisions, from other funds, from other agencies, and such other amounts which come due as a result of regular business transactions.

For a fuller explanation see Comptroller's Memorandum 2000-15 http://osc.ct.gov/memoarchives3/2000memos/200015.htm 

3.2 Taxes Receivable

Taxes are not considered as receivables until a determination is made that the tax is actually due, but has not yet been paid. Therefore, under the classification of �Taxes Receivable,� the following may be found:

A. Taxes under litigation, pending court decision.

B. Amounts erroneously underpaid by taxpayers that are expected to be collected.

C. Amounts reported due from the taxpayer, but not yet paid.

In all of the instances cited above, documentation of the receivables must be available before the transaction can be entered in the agency's books of accounts.

3.3 Amounts Due from Other Governmental Units

Amounts due from the federal government are to be set up on the books of the receiving agency as receivables if either of the following conditions is met:

A. The State of Connecticut has incurred expenditures which qualify and are eligible for reimbursement from the federal government.

B. The State of Connecticut has expended funds to finance a project which, either by law or by contractual agreement, is to be financed on a matching basis by federal and state funds.

Outright grants, since they do not meet these conditions, cannot be properly categorized as receivables.

Amounts due from other political subdivisions to be set up on the books of the receiving agency as receivables may include:

A. The State's share of taxes collected by its political subdivisions.

B. Loans.

C. Charges for services rendered or goods sold.

3.4 Loans Receivable

Amounts, which have been loaned to persons or organizations,, including notes taken as security for such loans.

3.5 Due from Other Funds

Amounts owed to a particular fund by another fund in the same governmental unit for goods sold or services rendered. This includes only short-term obligations on open account and not long-term loans.

3.6 Licenses, Fees, Permits and Donations

Revenues and receivables for licenses, fees, permits and donations should be recognized when the underlying event takes place and the State has an enforceable legal claim to the amounts.

Fees for Licenses and Permits - Citizens and others pay fees for licenses and permits for the privilege of engaging in a regulated activity. Often the fee is intended to cover a privilege granted for a particular period of time. Because citizens and others granted the license or permit have no legal right to exercise the privilege granted by a license or permit until the fee is paid, a government's enforceable legal claim arises only when the fee is paid.

Therefore, no receivables or revenues should be recorded when renewal notices for licenses and permits are sent out. The revenues should only be recognized when payment is received.

3.7 COP-9

These forms are used for recoveries of salary overpayments to employees and workers' compensation recoveries when a payment is received from an employee or third party insurance administrator.

See http://www.core-ct.state.ct.us/hr/payroll/doc/cop-9_form.doc 

3.8 Miscellaneous/Other Receivables

Receivables arising from transactions other than those outlined in the preceding paragraphs may be classified under the general category of �other receivables.� Such receivables may include items such as overpayments by an agency subject to refund, interest and penalties assessed against an individual or a corporation, and any of the receivables, which may arise during an agency's course of operations.

4.0 Agency Procedures

4.1 Minimum Collection Procedure

It is the responsibility of each state agency to immediately notify the person or entity who owes money that money is owed. It is the responsibility of each state agency to collect amounts owed to the State in the most effective and efficient manner. Unless the State Comptroller's Office approves an agency's alternative collection procedure, all state agencies will adhere to the following basic procedures relating to collection of past due accounts. These procedures are considered minimum efforts. Certain state agencies may find it necessary to expand these general procedures to fit their particular circumstances.

A. All accounts which are more than 30 days past due must be subjected to collection procedures.

B. A record must be kept for each action taken to collect an account, the name of the person taking the action, and the date the action was taken. This documentary evidence of collection efforts must be available at the agency to support classifying an account as uncollectible.

C. At least three documented efforts should be made to collect all delinquent accounts over $25. Accounts $25 and under require only one documented attempt.

D. When an account becomes 60 days past due, further credit should be denied until the account is returned to a current status.

E. The State's right to offset debts owed the State against state payments due such debtors should be utilized.

See Expenditure Section 5.3 for information regarding the Offset Program.

F. Deferred payment terms should be extended on a limited basis, only upon determining that the debtor is unable to pay the balance in full. Terms should not extend beyond six months. However, terms can be extended for a few months more where large balances are concerned and payment of such balances within six months would create a hardship. Certain Higher Education funds are governed by federal laws.

G. Agencies may contact the Collection Services Division of the Department of Administrative Services for assistance in the collection of debts owed to the State.

H. When other statutes address the agency's collection procedures, those procedures should be followed.

4.2 Write-Off Request Procedures

C.G.S. 3-7 and permits agencies to write-off uncollectible amounts under $5,000 without OPM approval. These write-offs of uncollectible accounts do not require approval by the Governor. An agency must request approval from OPM to write off a receivable over $5,000 when the following criteria are met:

A. A valid receivable does exist, i.e., there are no unsettled differences between the agency and the debtor as to the validity of the charges to the account.

Note: Do not submit amounts resulting from billing errors (e.g., charges for services not rendered) or medical insurance adjustments (e.g., non-covered Medicare charges). State agencies may make the appropriate accounting entries to remove these items from their accounts.

B. The receivable is past due (having missed a scheduled payment). The length of time past due may vary by the type of the receivable.

C. The agency has complied with the �Minimum Collection Procedure� section, without success, and has determined that the receivable is uncollectible. As soon as the criteria noted above are met, the agency should prepare the request in two copies; the original to be forwarded to OPM for approval to write off the receivable, and the copy to be retained in the agency.

For agencies that routinely request write-off of uncollectible accounts, a statement describing their collection process which determined that the item is uncollectible must be filed with OPM before any write-offs are considered. The request should include the following:

A. The number of accounts to be written off.

B. The total dollar amount of such accounts.

C. For each account, list the debtor's name, social security number or federal employer identification number, amount, and a brief statement of the reason or basis for determining the account uncollectible. In lieu of said brief statement, the agency may use a numerical write-off code.

Note: Agencies should make sure that the statement or write-off code clearly identifies debts that have been discharged in bankruptcy.

D. A statement by the responsible individual that in his or her opinion the accounts are uncollectible and that all reasonable efforts have been pursued and the request is submitted in accordance with policy and procedure.

E. The signature of the agency head which certifies his or her approval of the request. A request signed by an agency head's designee is acceptable, provided OPM has received a designation letter from the agency head.

The agency should retain the receivables on its record pending notification of approval from OPM. Upon receiving such notification, the agency should promptly remove the receivable from its records.

All accounts receivable and taxes receivable written off by the state agency as described above are thereby assigned for collection. The state agency must maintain all information relating to the receivables, which were written off. Officers and employees of the state agency may be required to participate in, and provide documentation for, hearings or litigation regarding the collection of the receivables. See Job Aid at: http://www.core-ct.state.ct.us/user/finjobaids/docs/write_off_bill.doc

4.3 Annual Reporting by Agencies

Fiscal Year End Instructions: Fiscal year end instructions should be referred to by each agency to report its fiscal year end receivable transactions and balances to the State Comptroller's Office, Budget & Financial Analysis Division. The due date for the report will be the first Friday in September.

For further information: http://osc.ct.gov/2009memos/numbered/200938.htm

5.0 Definitions

Abatement: A complete or partial cancellation of a levy imposed by a government. Abatements usually apply to tax levies, special assessments and service charges.

Aging of Receivables: Classifying the account balances of all receivables by the amount not yet due or past due by varying lengths of time.

Allowance for Estimated Uncollectible: A valuation account used to indicate the portion of a receivable which it is estimated will never be collected.

Compromise: The statutory authority granted certain state agencies to negotiate a settlement of a debt between the debtor and the agency.

Current Account: An account which is within stated terms and has not yet become past due.

Past Due (Delinquent) Account: An account in which one or more scheduled payments have not been made.

Uncollectible: An account unable to be collected.

Write-Off: Accounting procedures for removing uncollectible charges receivable balances.