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Monday, September 24, 2007

Accounts Receivable Operational Review

The final Operational Review Team report on Accounts Receivable has been completed. The Operational Review Oversight Committee has yet to accept the report or make revisions, but the preliminary goals and recommendations are summarized below.

Accounts receivables are taxes due to the Commonwealth that have not yet been collected. Collecting these taxes can result in mllions on dollars in additional revenue. In 2003, 98.3 million was collected as a result of renewed efforts by the Department of Taxation.This report is an update to the Governor’s Commission on Efficiency and Effectiveness Final Report published in late 2002.

That report made the following recommendations:

  • Standardize collections management across all Commonwealth agencies;
  • Shorten the time period for declaring accounts delinquent;
  • Use multiple collection agencies to foster competition; and
  • Consider legislation enabling the use of “debt sales” to provide cash.

The first three recommendations have already been implemented and are resulting in improved state revenue flow. Accounting policies and procedures were revised, and the deliquency designation was shortened from 90 to 60 days. Private collection agencies were also contracted to strengthen collection efforts. The fourth recommendation of the Governor's 2002 report will be harder to implement. There are significant constitutional and legislative barriers to debt sales. Before this can be accomplished, the General Assembly and Office of the Attorney General must address the legal issues.

There is still work to be done as Virginia adapts to new technologies and economic uncertainty. The report notes that Virginia needs to maximize collections from accounts receivable in order to offset declining cash flows from several revenue streams that are showing the effects of falling markets. The most effective way to do this is to use the new technologies to speed up collections and simultaneously reduce collection costs.

The Operational Review team has identified six areas where small investments could yield large returns in maximizing collections:

  • Enhance agencies’ abilities to skip trace. Several agencies, notably the Department of Social Services, now access current address and other contact information from new data sources including cell phone records, cable user records and insurance company records. These new information sources should be identified and made available to all agencies and institutions, including local governments.
  • Revise setoff procedures to stop uncompleted matches. Currently, debtors are informed of their rights of due process at the time a payment or refund is intercepted. This after-the-fact approach has cost approximately a million dollars a year in lost setoff payments. The current methodology should be changed. Debtors should be notified what the debt is and what their rights are as soon as claims are submitted to the setoff programs. The responsibility for exercising the identified rights should be placed on the debtor, not the State agencies. This way, successful matches will be final and available for timely deposit.
  • Establish one master database of debtors’ contact information. Information from TAX, Virginia Employment Commission, State Corporation Commission, Motor Vehicles and several other license-granting agencies should be selectively combined in one secure database that other agencies and institutions would have read-only access to. Combine repositories into one new “debtors’ database.
  • Do not issue business or personal licenses to delinquent debtors. Match state and local government permits, licenses (both business and personal), and registrations against setoff records. This would be facilitated by using a central database. Debtors would be encouraged to pay the entire amount or follow signed payment plans in order to retain current permits and licenses or apply for new ones.
  • Leverage the economies of scale and specialization for smaller agencies. Small and medium sized state agencies have a disadvantage when it comes to collecting accounts receivable. They lack the capacity to dedicate full time positions to the business of collecting money from slow or non payers. This disadvantage can be overcome by outsourcing delinquent accounts to a vendor that would receive all of the debt files from the agencies, distribute the files to the private collection agencies under State contract, and monitor the ongoing efficiency of those private collection agencies. Good experience has resulted from the operation of a centralized payroll services bureau which has covered the cost of its operation through users’ fees. This model can be used to build a receivables management bureau from resources created through service arrangements made between smaller agencies and larger agencies to provide administrative and business functions.
  • Measure agencies’ efficiency and effectiveness at collecting receivables. Measure individual state agency performance in collecting the dollars they have billed. The agencies’ performances should be disclosed and reported quarterly. One measure is Collections as a percentage of Billings. This measure shows the effectiveness of agencies in getting paid for providing services when the service is provided. The second measure is the percentage of Delinquent (over 60 days past-due) Receivables compared to Gross Receivables. This measures the efficiency of agencies in following up on unpaid billings and obtaining subsequent payments. These two measures would reflect the agencies’ efficiency and effectiveness at managing their accounts receivable and help ensure the Virginia Debt Collection Act is being followed.


Thanks again to everyone who contributed their time and work to this report. Participants include Robert Meinhard Department of Accounts, Deborah Madison Department of Corrections, Karen Stephenson Department of Medical Assistance Services, Jerry Lewis Department of Social Services, Thodore Darden Department of Social Services, David Jordan Department of Taxation, and Wendell Vest Virginia Polytechnic Institute and State University.

2 Comments:

  • VELLIE DEMANDS ANSWERS ON FAIRFAX PUBLIC HOUSING BOONDOGGLE

    County allows families earning $216,000 to live in taxpayer-subsidized housing: “I was among the needy, and this type of abuse is disgraceful”

    http://www.votevellie.org/

    ANNANDALE, VA (September 30) –Mason District Republican nominee Vellie Dietrich-Hall today expressed “outrage” that Fairfax County bureaucrats have allowed families making as much as $216,000 a year to live in taxpayer-subsidized housing, with 1 in 10 residents of low-income housing earning more than the Fairfax County median income of $94,500.

    A Washington Post article this morning by journalist Amy Gardner revealed that hundreds of residents of public housing in Fairfax County make too much to be eligible, with some households earning as much as $216,000 a year. According to the Post, 25 residents of taxpayer-funded public housing earn more than $75,600 a year, and 11 households make more than $94,500.

    Asked about her department’s decision to continue underwriting the rent of a woman and her two sons, both college graduates with full-time jobs, who earn a combined $216,000, the director of the county’s Department of Housing and Community Development, Paula C. Sampson, speculated that “maybe it’s time for the boys to leave the nest and go off on their own.”

    The Post also found that more than a third of the households in the Fairfax rental program make more than half the median income, and more than 10 percent earn more than $75,600 a year. County records uncovered by the Post found that 28 households in the program make more than $94,500, with one family making $184,376 a year, another
    $145,349 and a third $140,962. The rental program makes apartments and townhouses available at below-market rates to 1,190 households, according to the Post.
    What the Post doesn’t talk about is the truly needy people who are turned away from public housing because Fairfax County bureaucrats choose to subsidize the rents of those whose biggest problem is how much to sock away a 401(k). When I came to this
    country, I was among those needy persons, and to me, this kind of abuse is especially disgraceful. While the bureaucrats underwrite the top 5 percent of wage-earners, Fairfax County police officers, firemen and teachers can’t afford to live in the communities they work. That’s not what taxpayers signed up for when they were asked by the Board of Supervisors to support affordable housing to the tune of $20 million a year.

    Vellie noted that Fairfax County’s Board of Supervisors “dragged their feet for years” before imposing any income threshold for public housing, despite being permitted to do so by the Department of Housing and Urban Development.

    “When the Board finally imposed an income ceiling on public housing last year, it set the threshold at a whopping $94,500“ hardly what anybody would consider “low income,” Vellie noted.
    The County’s housing bureaucrats seem to have chosen to turn their backs on massive abuses of the housing program, and taxpayers deserve to know if they had the support of the Board of Supervisors in doing so. There must be accountability for bureaucratic failures and neglect of taxpayer dollars, and the County Board of Supervisors and the bureaucrats at the Department of Housing and Community
    Development ought to be called to task for this.

    Vellie pledged that if she is elected Mason District Supervisor, she will introduce legislation to require participants to notify county officials when their incomes exceed the income ceiling, and to seek other housing arrangements when that happens. If they failed to do so, they should be required to repay the county for the amount of their subsidy and face possible criminal prosecution for fraud, she said.

    By Anonymous Reagan Rises, at 9/30/2007 5:55 PM  

  • This is one reason why so many companies are going bankrupt lately. Their expenses and finances are dependent upon their accounts receivables being actually received, and customers are neglecting to pay them. Because of this, the more investigation into your AR you have done, and the more you can start to go after your debtors, the more beneficial it will be for your business. You may have plenty of customers, but if they don't pay, you're in a financial tie-up regardless.

    By Anonymous Ed Brostek, at 4/16/2008 10:16 AM  

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