3.0 MANAGEMENT OF RECEIVABLES - RECOMMENDED PRACTICE
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. For clarity, these policies and procedures have been
separated into three sections: (I) Accounting for Receivables -
defines and classifies receivables; (II) Agency Procedures -
establishes procedures for collecting delinquent accounts, obtaining
approval to write off accounts, and reporting receivable balances
and transactions to the State Comptroller's Office, Budget &
Financial Analysis Division, Accounting
Services Unit; and (III) Terminology - defines important terms
used in these procedures.
3.2 Authoritative Reference
The policies and procedures contained herein are in accordance
with the following: General Statutes 3-39a, 4a-12, 13a-166; Public
Act 98-204; Public Act 99-2; and the State Accounting Manual.
3.3 General Practices
I. Accounting for Receivables
- A. General: In general, the term "receivables" includes all
claims held against others for future receipts of monies, goods
and services. In accounting, however, this 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.
- B. 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:
- 1. Taxes under litigation, pending court decision.
- 2. Amounts erroneously underpaid by taxpayers that are
expected to be collected.
- 3. 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.
- C. 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:
- 1. The State of Connecticut has incurred expenditures which
qualify and are eligible for reimbursement from the federal
- 2. 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:
- 1. The State's share of taxes collected by its political
- 2. Loans.
- 3. Charges for services rendered or goods sold.
- D. Loans Receivable: Amounts, which have been loaned to
persons or organizations, including notes taken as security for
- E. 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.
- F. 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.
- G. 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.
II. Agency Procedures
A. Minimum Collection Procedures: 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
- 1. All accounts which are more than 30 days past due must be
subjected to collection procedures.
- 2. 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.
- 3. At least three documented efforts should be made to
collect all delinquent accounts over $25. Accounts $25 and under
require only one documented attempt.
- 4. When an account becomes 60 days past due, further credit
should be denied until the account is returned to a current
- 5. The State's right to offset debts owed the State against
state payments due such debtors should be utilized. Please refer
to Section 6 of the State Accounting Manual for information
regarding the Offset Program.
- 6. 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.
- 7. Agencies may contact the Financial Services Center Unit
of the Department of Administrative Services for assistance in
the collection of debts owed to the State.
- 8. When other statutes address the agency's collection
procedures, those procedures should be followed.
B. Write-Off Request Procedures: As of July 1, 1998, Public Act
98-204 went into effect. Under this legislation write-offs of
uncollectible accounts no longer require approval by the Governor.
Also, effective July 1 the threshold for approval by OPM was raised
from $200 to $1,000. Agencies are permitted to write-off amounts
under $1,000 without OPM approval. An agency must request approval
from OPM to write off a receivable over $1,000 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
- 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. Note: For agencies that routinely request
writeoff of uncollectibles, a statement describing their collection
process which determined that the item is uncollectible must be
filed with OPM before any writeoffs are considered. The request
should include the following:
- 1. The number of accounts to be written off.
- 2. The total dollar amount of such accounts.
- 3. 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.
- 4. 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.
- 5. 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.
C. 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, Accounting Services Unit. The
due date for the report will be the first Friday in September and
should be submitted to the Accounting Services Unit.
- 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.
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