Collection procedures are established by the responsible departments and will vary depending on the nature of the receivable. Types of receivables covered by this chapter include, but are not limited to: business license tax; transient occupancy tax; water and sewer utility billings; regulatory and development impact fees; fees for service; recovery for damage to city property; fines and penalties; and legal judgments.
Accounts receivable should generally be written off during the fiscal year in which an account is determined to be uncollectible. Subsequent collection of an account previously written off will be treated as new revenue in the appropriate fund.
A. Designation Of An Account As Uncollectible: An account will be considered uncollectible after the appropriate collection procedures have been followed if it meets one or more of the following criteria:
1. The debt is disputed and the city has insufficient documentation to pursue collection efforts;
2. The cost of further collection efforts will exceed the estimated recovery amount;
3. The amount is under twenty dollars ($20.00) and remains unpaid after one year;
4. The account remains unpaid after the lesser of four (4) years or the applicable period for commencement of a recovery action (statute of limitations);
5. The debtor cannot be located, nor any of the debtor's assets;
6. The debtor has no assets and there is no expectation they will have any in the future;
7. The debtor has died and there is no known estate of guarantor;
8. The debtor is a company which is no longer in business;
9. The debt is discharged through legal action (bankruptcy or court judgment);
10. The debt has been forgiven by action of the city council.
B. Preparation Of Request For Write Off Of Accounts Receivable: At least annually, each department will identify any accounts receivable for which it is responsible that meet the criteria for designation as an uncollectible account. A request for write off of accounts receivable will be prepared by departmental staff, signed by the department head, and submitted to the director of finance.
The request for write off of accounts receivable must include an itemized list of the uncollectible accounts to be written off specifying the following:
1. Debtor name;
2. Account balance;
3. Due date;
4. Brief description of receivable type;
5. Criteria under which the account was deemed uncollectible;
6. Account number of the receivable in the city's accounting system.
For each uncollectible account, documentation must be attached to the request to support the uncollectible account designation and substantiate that the department has followed its collection procedures and exercised due diligence in its collection efforts. Due diligence documentation could include:
1. Invoices, reminder letters, or collection letters (and any documentation that are returned as undeliverable, no known forwarding address, etc.);
2. Information from the Arizona corporation commission;
3. Bankruptcy claim and any related plan or discharge;
4. Judgment awarded by the court or settlement agreement;
5. Notice of discontinuation of services.
C. Approval Authority For Write Off Requests: Upon receipt of a request for write off of accounts receivable by the director of finance, finance department staff will review the request to ensure that it is complete and that all necessary due diligence documentation has been attached. Once finance department staff has completed its review of a request, the qualified accounts to be written off will be forwarded to the city clerk then presented to mayor and city council for final approval. (Ord. 2014-04, 7-8-2014)