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RESOLUTION NO. 2017-079 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ADOPTING AN UNCOLLECTIBLE ACCOUNTS RECEIVABLE WRITE-OFF POLICY
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
The purpose of this policy is to provide guidelines and authorization levels by which a City of Chula Vista accounts receivable may be removed from the books of the City when the accounts have been deemed to be uncollectible. Where a debt is determined to be uncollectible it must be subject to a write-off process to comply with generally accepted accounting principles.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it involves only adoption of a policy that governs how uncollectible debt is written-off; therefore, it is an organizational or administrative activity of government that will not result in a direct or indirect physical change in the environmental; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not applicable
DISCUSSION
The City of Chula Vista currently collects payment for fees, charges and other collectibles associated with City operations. City staff diligently attempts to collect all monies due to the City from various revenue sources. However, not all outstanding receivables are secured as a normal course of business. Some accounts become uncollectible through a matter of law, such as bankruptcy, or practical application such as inability to locate the debtor or assets of the debtor. Other accounts become uncollectible when the statute of limitations expires. As a result, staff has identified the need for adoption and execution of a policy addressing accounts receivable and the write-off of uncollectible debt.
Generally accepted accounting principles dictate the write-off of receivables to conservative collectable levels for financial reporting purposes. Where a debt is determined to be uncollectible it must be subject to a write-down process. Otherwise, the City will be overstating its assets on the balance sheet if these receivables are not adjusted to its realizable value when all reasonable efforts to collect have proven unsuccessful, and/or the statute of limitation has expired. In determining reasonable effort, the collection costs should not exceed the value of the receivables.
The write-off of an uncollectible account is different from the forgiveness of an account due to the City. By writing-off the uncollectible accounts, the City is not forgiving them, but acknowledging that the collection of these accounts is doubtful. Additionally, writing-off of an account does not stop the City from pursuing further collection of the account should new information become available. The City Attorney’s Office and contracted collection agencies may continue attempting to collect upon these doubtful accounts and the City will recognize the revenue if a written-off account is subsequently collected.
The attached accounts receivable policy establishes criteria under which an account may be written-off, describes due diligence documentation and defines authorization levels for write-offs. The recommended policy includes multiple administrative levels of authority and reporting to ensure adequate review of all delinquencies identified as potentially uncollectible.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently, the 500-foot rule found in California Code of Regulations section 18705.2(a)(11), is not applicable to this decision. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City's Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The proposed policy supports the Operational Excellence strategy as it seeks to promote fiscal responsibility and accuracy in financial reporting.
CURRENT YEAR FISCAL IMPACT
Staff does not anticipate any fiscal impacts as a result of this policy.
ONGOING FISCAL IMPACT
Staff does not anticipate any ongoing fiscal impacts as a result of this policy.
ATTACHMENTS
1. Uncollectible Accounts Receivable Write-Off Policy
Staff Contact: Lisa Partee, Fiscal Management Analyst, Finance Department