ACCOUNTS RECEIVABLE (AR)
Administrative Rule Adopted by Council
The purpose of this administrative rule is to establish minimum standards for management of accounts receivable and to provide bureaus with guidance for timely and efficient revenue collection efforts.
While prompt billing, timely collection and accurate reporting are the goals, the emphasis of this administrative rule also includes maintaining good communications with customers, encouraging voluntary payment on overdue accounts, identifying actions necessary for collection of these accounts, and providing minimum requirements in managing and monitoring accounts receivable.
The bureaus, using their best efforts and available resources, should meet the minimum standards in this administrative rule. Failure of bureaus to meet these standards does not waive the City’s right to collect accounts receivable and does not create any rights of action for any account debtors or third parties.
This administrative rule does not prohibit bureaus from taking additional collection actions, including, but not limited to, submission of overdue accounts to third party collection agencies and litigation.
Authority for this administrative rule is established in the City Charter and City Code. This administrative rule has been approved by the City Council.
This administrative rule applies to all accounts receivable citywide, whether processed through the IBIS AR module or a separate bureau system. Accounts receivable include all monies owed to the City for services performed for other persons or organizations including contracts, grants, and leases. Specialized language used throughout this rule is common accounting terminology as established in Generally Accepted Accounting Principles.
The Accounting Division of the Bureau of Financial Services of the Office of Management and Finance (Accounting Division) will periodically monitor bureaus to assess compliance with the minimum standards of this rule. As instances of non-compliance are identified, bureaus will be required to develop and implement a corrective action plan. The Accounting Division will provide assistance to bureaus, if requested, to develop this plan. The Controller will report all instances of non-compliance annually to the Chief Financial Officer (CFO) and City Council.
"Accounts Receivable" means money owed to the City for services or merchandise received by the customer on credit. Payment is generally due within 30 days after the service or merchandise has been received.
"Allowance for Doubtful Accounts" means an estimate of the percentage of accounts receivable that will not be collected. The estimate is based on past experiences and an analysis of current accounts receivable.
"Subsidiary Ledger" means a group of accounts with common characteristics used to facilitate the accounting process. This frees daily transactions from flowing to the general ledger.
Sales on credit shall be invoiced monthly within 30 days of providing goods or services on credit or within 30 days of meter reads, construction cost or billing information becoming available unless grant contracts or other written agreements require an alternate billing schedule.
Invoices shall be sequentially numbered unless grant contracts or other written agreements require the use of a specific form. Bureaus may establish their own numbering systems but these systems shall include a unique bureau identifier.
Invoices shall include a description of the goods or services provided; the date(s) those goods or services were provided; the amount due; and the invoice due date.
Invoice amounts shall be based on approved price lists, fee schedules, actual cost recovery or signed contracts.
Invoices for grant reimbursements from Federal Financial Assistance and state or private funding with a match or audit requirement must be processed through the Grants Office in the Bureau of Financial Services.
Subsidiary accounts receivable ledgers shall be reconciled to the IBIS general ledger each accounting period.
Credit balances at the end of each accounting period shall be analyzed by bureau staff and a report with explanations shall be submitted quarterly to the Accounting Division for review.
Adequate separation of duties shall be maintained among those responsible for cash receipts, cash disbursements, posting of entries to the accounts receivable subsidiary ledger and the general ledger, sales and collections.
If adequate separation of duties is not possible due to limited staffing, alternate compensating controls shall be established through the Accounting Division. Alternate compensating controls could include such procedures as review by supervisors or managers, analytical review by an independent party or verification by other staff.
Detailed aging schedules shall be prepared for each accounting period for bureau use. At a minimum these schedules shall include the name of the customer or account number, the current amount due, a list of outstanding invoices and a classification for each invoice showing the number of days past due.
Customers whose invoices are past due shall be contacted and such contacts shall be documented.
Interest of 1% per month shall be charged on outstanding invoices more than 30 days past due unless interest is prohibited by statute, grants, contracts or other written agreements, or an alternate rate is specified by statute, grants, contracts or other written agreements. Additional amounts may be added for a rebill charge.
Bureaus shall submit a quarterly status report on all accounts more than 90 days past due to the Accounting Division, indicating what action has been taken on accounts more than 90 days past due. Those bureaus that maintain independent automated AR systems may submit an aging schedule to meet this requirement.
Upon referral by the Commissioner in Charge or the City Council, the City Attorney will evaluate appropriate legal action to collect delinquent accounts more than 180 days past due. In addition to initiating litigation in Circuit Court, accounts less than $5,000 may be referred to one or more collection agencies or Small Claims Court.
Bureaus with their own accounts receivable systems may use their own collections systems provided those systems have been approved by the City Controller.
When it has been determined that collection of past due amounts is unlikely, bureaus shall write-off amounts greater than one year old, subject to the requirements in 2. and 3. below. Documentation should include reasons for the write-off, including inability to find the debtor, lack of assets belonging to the debtor, etc.
Write-offs, reductions, adjustments or special payment arrangements to receivables require written approval from an authorized bureau manager or director depending on the amount of the write-off. The approval thresholds are:
•Bureau Directors or their designees must approve amounts to $4,999.
•Bureau Directors must approve amounts of $5,000 to $24,999.
•Both the Bureau Director and the City Chief Financial Officer must approve amounts of $25,000 or more.
Written approval shall include the reason for the write-off or adjustment and a record of the collection efforts to date on the invoice or account.
Bureaus that use alternate write-off processes authorized by City Code are exempt from the requirements of this section.
Outstanding receivables will be recorded at fiscal year-end and related revenues will be recognized on an accrual or modified accrual basis as appropriate throughout the year. Revenues will be recorded on a modified accrual basis in governmental funds and on an accrual basis in enterprise and internal service funds. Those bureaus that maintain independent automated AR systems shall submit journal entries to record outstanding receivables for this purpose.
An allowance for doubtful accounts shall be recorded at fiscal year-end to record estimated uncollectible accounts. This allowance will be based on an analysis by bureau staff to determine those accounts that are currently outstanding but for which collection is unlikely. Documentation of this analysis shall be provided to the Accounting Division to support the year-end journal entry.
Resolution No. 36248, originally adopted by Council September 1, 2004.
Revised by Resolution No. 36435, adopted by Council September 6, 2006.