AGENDA MEMORANDUM

 

 

MEETING DATE:   September 25, 2006  

                                   

FROM:                        William Pfeilsticker, Finance Director                                      

 

SUBJECT:                   Accounts Receivable Write-Offs      

 

 

 

Staff Recommendation:

 

No action is required.  This memo serves as formal notification to the Commission pursuant to internal policy.  The action requested here has no impact on the operating (income) statement.  It simply reclassifies a portion of the accounts receivable on the balance sheet as uncollectible.

 

Analysis:

 

Internal policy requires that the Finance Director annually write off, at the end of each fiscal year, the amount of accounts receivable determined to be uncollectible.  Uncollectible is defined as an account that is unpaid 120 days after the customer’s service has been terminated.  This policy does not prevent the City from maintaining records on terminated accounts and subsequently collecting these amounts, should the customer attempt to renew service with the City.  Furthermore, when an account is written off pursuant to this policy, it has no impact on any pending or yet to be initiated collection efforts.  It has been the longstanding policy of the City that accounts are not written off until they remain in “C” (collection agency) status for one year.

 

During fiscal year 2005-06, 698 uncollectible accounts have been written off, which is a decrease of 193 accounts from last years total of 891 which is a reflection of the collection efforts of Customer Service. This year’s write offs of $193,425.12 represent a decrease of $49,193.65 from the prior year total of $242,618.77. Receivable balances increased to $8,253,631.98 from the prior year balance of $5,930,452.73, an increase of  $2,323,179.25.  The percentage of the accounts receivable written off fell from 4.09% to 2.34% as of August 31, 2006. The increase in receivable balances were mainly attributable to Electric, Water and Wastewater.  The amounts currently being written off are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

 

 

Amount of

 

Balance as of

 

Percentage

Fund

 

Written off

 

August 31, 2006

 

Written off

General

 

11,200.97

 

812,101.29

 

1.38

Stormwater

 

2,215.79

 

57,795.09

 

3.83

Electric

 

112,098.96

 

5,143,906.88

 

2.18

Gas

 

14,856.09

 

451,239.19

 

3.29

Water

 

15,726.45

 

558,670.44

 

2.81

Wastewater

 

22,952.19

 

969,321.49

 

2.37

Communications

 

527.24

 

57,701.42

 

.91

Solid Waste

 

13,847.43

 

202,896.18

 

6.82

 

 

 

 

 

 

 

TOTAL

 

193,425.12

 

8,253,631.98

 

2.34

 

 

 

 

 

 

 

 

 

 

Fiscal Impact:

 

The City annually appropriates funds for bad debt expense based on the prior year’s collection history.  For fiscal year 2005-06, amounts budgeted in the various funds for bad debt expense was based on the percentage of uncollectible accounts as of September 30, 2005 on a fund by fund basis multiplied by total fiscal year 2005-06 estimated revenues.  Accordingly, the amount budgeted and expensed to bad debts is based on estimates.

 

Submission Date and Time:    9/21/06 8:11 AM____

 

Department: ____Finance    ______

Prepared by:  ____                     

Attachments:  Yes____   No __x____

Advertised:   ____Not Required __x___                     

Dates:   __________________________                     

Newspapers:

_________________________________                                                    

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. _ _

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. __N/A___________

 

Project No. ___N/A___________

 

WF No. ______N/A___________

 

Budget  ______N/A___________

 

Available _____N/A___________