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BACKGROUND City departments issue invoices for costs incurred by the City for business license tax; transient occupancy tax; water and sewer utility billings; regulatory and development impact fees; fees for services; recovery for damage to City property; fines and penalties; and legal judgments. Each invoice indicates what the billing is for and includes repayment terms language. After 30 days and again at 60 days of delinquency, staff mails a collection notice, which notes any interest, penalties and applicable fees, to the debtor. After 90 days of delinquency, staff reviews remaining delinquent accounts to decide what action to take to ensure payment of the outstanding debt, including assigning the account to a collection agency. Also, at the time the invoice is issued, staff records the invoice as an accounts receivable in the City's accounting records. The periodic purging of delinquent, uncollectible accounts receivable is a fiscally responsible process to ensure an accurate recording of the City's expected revenues and is required by generally accepted accounting principles. To date, the City has not implemented a write-off policy that would allow the City to write-off uncollectible accounts receivable and remove these items from the City's accounting records. DISCUSSION During the period 1987 to 2007 the City accumulated approximately $350,000 of bad debt. The City does not have a policy for writing-off uncollectible accounts receivable. Therefore, these bad debts are still on the City's accounting records as accounts receivable. Staff reviewed the City's outstanding accounts receivable and determined that the appropriate write-off policy for the City is as follows: 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. 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: • The debt is disputed and the City has insufficient documentation to pursue collection efforts; • The cost of further collection efforts will exceed the estimated recovery amount; • The amount is under $20 and remains unpaid after one year; • The account remains unpaid after the lesser of four years or the applicable period for commencement of a recovery action (statute of limitations); • The debtor cannot be located, nor any of the debtor's assets; • The debtor has no assets and there is no expectation they will have any in the future; Page 2 of 4