Budget Shortfall? Look here!

Accounts Receivable Operational Review
May 1, 2007

The Accounts Receivable Operational Review is a follow up to the previous Governor’s Commission on Efficiency and Effectiveness Report. That report made four recommendations to improve accounts receivables:

(1) Standardize collections management across all Commonwealth agencies;
(2) Shorten the time period for declaring accounts delinquent;
(3) Use multiple collection agencies to foster competition;
and
(4) Consider the impact of using “debt sales” to provide cash.

Virginia implemented those recommendations and enhanced its revenue flow as a result.

Now we face the challenges of new technologies and an uncertain economy. We need to stay on top of our game and offer a better value to our stakeholders. The best way to do this is to use the new technologies to speed up collections and simultaneously reduce collection costs.

To set the new direction, Delegates Chris Saxman and David Toscano, and State Senator Ken Cuccinelli have set up and oversee an Accounts Receivable Operations Review Team to look at industry best practices and Virginia’s current practices. The team is represented by representatives from the Departments of Accounts, Corrections, Social Services, Medical Assistance Services and Taxation, and Virginia Polytechnic Institute and State University. The team will make recommendations to enhance collections efficiency and reduce collection expenses.

The team has identified six areas where a small investment could have large returns:

(1) Enhance skip traces. Get current address and other contact information from new data sources such as cell phone records and cable user records.

(2) Change current setoff methods. Currently debtors are informed of their rights of due process at the time a payment or refund is intercepted. This after the fact approach costs time and money. Rather, debtors should be told up front, when claims are submitted to setoff programs, what their rights are, and place the responsibility for exercising those rights on the debtor, not the State agencies.

(3) Leverage new technology to gather debtor information from several different current repositories into one new “debtors’ database.” This would simplify security requirements and lessen chances of missed setoffs at the same time.

(4) Match State and local government permits, licenses (both business and personal), and registrations against setoff records. Why should those who owe be permitted to go?

(5) Small and medium sized State agencies have a disadvantage when it comes to collecting accounts receivable. They lack the capacity to dedicate full time staff to the business of collecting money from slow or non-payers. This can be improved by outsourcing the management of the accounts receivable that do not pay on time to a vendor that would receive debt files from the agencies, distribute the files to the several private collection agencies the State contracts with, and monitor the ongoing efficiency of the several collection agencies.

(6) Measure individual state agency performance in collecting the dollars they have billed to ensure the Virginia Debt Collection Act is being followed and adequate debtor information is gained up front to compel payment when it is due.

The Accounts Receivable Operational Review Team is finalizing its full set of recommendations. We encourage and welcome any questions, additional ideas and advice from readers of this Blog. Please send your ideas and comments to Rob.Meinhard@doa.virginia.gov. Please include “Accounts Receivable” in your Subject, so our team can readily identify your emails. We will get back to you. Thanks for helping make this effort a success.