SUBSECTION 2.2.4.3
RECEIVABLES

2.2.4.3.1

General

Effective Date:

Sept. 1, 1998

2.2.4.3.1.a

Receivables are defined as the amounts to be collected from private individuals, businesses, agencies, accounts, or other governmental units.

2.2.4.3.1.b

Agencies are to promptly record receivables when the asset or revenue recognition criteria have been met or the underlying accounting event has occurred and the amount is determinable. (Refer to Section 2.1.2.2.1.c.)

2.2.4.3.1.c

Agencies are to maintain a general ledger system, by account, with a receivable control account for each type of receivable. Subsidiary records are also required (refer to Section 2.2.4.3.6). Agencies may either maintain an in-house receivable subsidiary system with the approval of OFM, or utilize the central accounts receivable system which is available through the Accounting Division of OFM. Detailed receivable subsidiary ledgers are to be established and maintained on an open item basis (i.e., an entry or entries in the subsidiary ledger for each outstanding amount due.) However, existing balance forward systems may continue to operate with approval from OFM.

2.2.4.3.2

Types of Receivables

Effective Date:

Sept. 1, 1998

2.2.4.3.2.a

2.2.4.3.2.a(1)

Taxes receivable that are considered measurable, available and due within twelve months, are recorded as debits in GL Code 1311 "Taxes Receivable - Short-Term" and GL Code 1328 "Tax Liens Receivable - Short-Term," the related amounts estimated to be uncollected as credits in GL Code 1341 "Allowance for Uncollectible Taxes Receivable - Short-Term" and the difference as credits to revenue.

2.2.4.3.2.a(2)

Not all taxes due to the state meet the GAAP criterion of being available and objectively measurable; therefore, taxes receivable recognized as revenue are generally limited to:

• Property taxes that are collectible within 60 days.

• Taxpayer assessed taxes (such as sales and B&O) that are collectible within one year.

• Other taxes as reported by, or levied on, the taxpayer but not yet paid to the state.

• Taxes under litigation pending court decision.

• Amounts erroneously underpaid by taxpayers.

• Interest and penalties on taxes.

2.2.4.3.2.a(3)

Taxes receivable which are measurable, but are not due within twelve months, are recorded as debits to GL Code 1611 "Taxes Receivable - Long-Term" and the related amounts estimated to be uncollectible as credits to GL Code 1641 "Allowance for Uncollectible Taxes Receivable - Long-Term." Since the net amount of long-term taxes receivable does not meet the GAAP criterion of available, it is recorded as a credit to GL Code 5292 Deferred Revenues - Long-Term." (Refer to Section 2.2.4.7.11 for an illustrative entry.)

2.2.4.3.2.b

2.2.4.3.2.b(1)

GL Code 1351 "Due From Federal Government - Short-Term" includes amounts that are due within twelve months from all federal government agencies for such items as:

• Expenditures incurred by the state which qualify for reimbursement from the federal government. (Refer to Sections 2.2.4.7.13.a and b for illustrative entries.)

• The federal government's share of monies expended by the state to finance a project which, either by law or by contractual agreement, is to be financed on a matching basis with the federal government.

• Amounts due from the federal government in a governmental fund type account which are in dispute at the end of the accounting period. The revenues associated with these receivables are not recognized until the dispute is settled. Disputed receivables are offset by credits to GL Code 5192 "Deferred Revenues - Short-Term." (Refer to Section 2.2.4.7.13.c for an illustrative entry.)

2.2.4.3.2.b(2)

Amounts due from the federal government, that are not due within twelve months, are to be recorded as debits to GL Code 1651 "Due From Federal Government - Long-Term." In governmental and expendable trust fund type accounts, revenues associated with long-term receivables are deferred by crediting GL Code 5292 "Deferred Revenues - Long-Term."

2.2.4.3.2.c

2.2.4.3.2.c(1)

Other governments are defined as any separate governmental units and include: other state governments; Native American tribes; county governments; municipal governments; school districts; and any other political subdivisions. This does not include agencies of Washington State government or the federal government.

2.2.4.3.2.c(2)

Loans to local governments and other receivables from local governments, that are due within twelve months, are recorded as GL Code 1352 "Due From Other Governments - Short-Term."

2.2.4.3.2.c(3)

Amounts due from other governments, that are not due within twelve months, are to be recorded as debits to GL Code 1652 "Due From Other Governments - Long-Term."

In governmental and expendable trust fund type accounts, revenues associated with long-term receivables are deferred by crediting GL Code 5292 "Deferred Revenue - Long-Term." If the receivable arises from an advance or loan, a second entry is required to reserve a portion of account balance to indicate that long-term receivables are not available for appropriation. This is accomplished by debiting GL Code 9590 "Unreserved/Undesignated Fund Balance" and crediting GL Code 9570 "Reserved for Receivables - Long-Term."

2.2.4.3.2.d

2.2.4.3.2.d(1)

All transactions involving short-term activity or loans between accounts within an agency, that are due/paid within twelve months, are recorded as GL Code 1353 "Due From Other Funds - Short-Term" on the general ledger of the account making the loan and as GL Code 5153 "Due To Other Funds - Short-Term" on the general ledger of the receiving account.

2.2.4.3.2.d(2)

Amounts due from other accounts, that are not due within twelve months, are recorded as debits to GL Code 1653 "Due From Other Funds - Long-Term" on the general ledger of the account that will collect the amount due, and as either a credit to GL Code 5253 "Due To Other Funds - Long-Term" on the general ledger of the proprietary fund type account that owes the amount or in Account 999 "General Long-Term Obligations Account Group" if it is a governmental fund type account that owes the amount. Revenues of governmental and expendable trust fund type accounts associated with long-term receivables are deferred because they are not considered available.

2.2.4.3.2.d(3)

Amounts advanced from one account to another account are recorded as GL Code 1656 "Due From Other Funds - Advances - Long-Term" on the general ledger of the account making the advance and as GL Code 5256 "Due To Other Funds -Advances - Long-Term" on either the general ledger of the proprietary fund type account receiving the advance or in Account 999 "General Long-Term Obligations Account Group" if it is a governmental fund type account that is receiving the advance. In governmental and expendable trust fund type accounts, an additional entry is required to reserve a portion of fund balance to indicate that long-term receivables are not available for appropriation. This is accomplished by debiting GL Code 9590 "Unreserved/Undesignated Fund Balance" and crediting GL Code 9570 "Reserved for Receivables - Long-Term."

2.2.4.3.2.d(4)

All interfund receivables (GL Codes 1353, 1653 & 1656) and payables (GL Codes 5153, 5253 & 5256) are to be in balance within an agency (i.e., interfund receivables must equal interfund payables.) To facilitate this, agencies are to maintain separate subsidiary ledgers for interfund receivables and interfund payables indicating the account which the receivable/payable is due from/to.

2.2.4.3.2.e

2.2.4.3.2.e(1)

Agencies supplying goods and services to other agencies are to establish internal procedures for the timely billing to other agencies for such goods and services provided, and for the timely recording of these receivables and accrued revenues.

• Billings are to include enough information to provide for maintenance of subsidiary ledgers in accordance with Section 2.2.4.3.6.

• Billings are to be prepared on a regular basis, at least quarterly, except for instances where a written contract or regulation requires a different schedule.

• Billings are to incorporate sufficient detail to adequately document the goods or services provided. Source documentation should be retained by the billing agency and be available, upon request, for review by the billed agency.

2.2.4.3.2.e(2)

Amounts due from one agency to another agency, that are due within twelve months, are recorded as GL Code 1354 "Due From Other Agencies - Short-Term" on the general ledger of the agency providing the goods or services and as GL Code 5154 "Due To Other Agencies - Short-Term" on the general ledger of the agency receiving the goods or services.

2.2.4.3.2.e(3)

Amounts due from other agencies, that are not due within twelve months, are recorded as debits to GL Code 1654 "Due From Other Agencies - Long-Term" on the general ledger of the agency that will collect the amount, and as either a credit to GL Code 5254 "Due To Other Agencies - Long-Term" on the general ledger of the proprietary fund type account that owes the amount or in Account 999 "General Long-Term Obligations Account Group" if it is a governmental fund type account that owes the amount. Revenues of governmental and expendable trust fund type accounts associated with long-term receivables are deferred because they are not considered available.

2.2.4.3.2.e(4)

Separate subsidiary ledgers are to be maintained for interagency receivables and interagency payables indicating the agency which the receivable/payable is due from/to. Sufficient communication is to be maintained among agencies to ensure that interagency receivables (GL Codes 1354 and 1654) and interagency payables (GL Codes 5154 and 5254) are in balance statewide.

2.2.4.3.2.f

2.2.4.3.2.f(1)

Monies lent by agencies in the form of notes or loans to private entities (e.g., economically disadvantaged areas) or individuals (e.g., student loans) that are due within twelve months, are classified as GL Code 1313 "Notes Receivable - Short-Term" or GL Code 1314 "Loans Receivable - Short-Term," as appropriate.

2.2.4.3.2.f(2)

Amounts due from private entities or individuals on loans that are not due within twelve months, are recorded as debits to GL Code 1614 "Loans Receivable - Long-Term" and the related amounts estimated to be uncollectible as credits to the GL Code 1644 "Allowance for Uncollectible Loans Receivable - Long-Term."

2.2.4.3.2.f(3)

For governmental and expendable trust fund type accounts, fund balance is reserved for net long-term receivables other than student loans. GL Code 9570 "Reserved for Loans Receivable - Long-Term" is adjusted through GL Code 9590 to equal net long-term non student loans receivable. (Refer to Section 2.2.4.7.14 for illustrative entries for both budgeted and non-budgeted long-term receivables.)

For higher education agencies, an entry is required to reserve a portion of fund balance to indicate that net long-term student loan receivables (GL Codes 1614 and 1644) do not represent available spendable resources. GL Code 9560 "Reserved for Student Loan Receivable" is adjusted through GL Code 9590 "Unreserved/Undesignated Fund Balance" so that the balance of GL Code 9560 equals net long-term student loans receivable.

2.2.4.3.2.g

Other Receivables-- Receivables arising from transactions other than those outlined above, which are due within twelve months, are classified as GL Code 1312 "Accounts Receivable - Short-Term" (refer to Section 2.2.4.7.12.a for an illustrative entry); GL Code 1316 "Interest Receivable on Investments - Short-Term" (refer to Section 2.2.4.7.5 and 2.2.4.7.6 for illustrative entries); or, under the general category of GL Code 1319 "Other Receivables - Short-Term."

Other Receivables - Short-Term include such items as:

• Overpayments by an agency subject to refund (does not include overpayments to other governmental units).

• Miscellaneous receivables which may arise during an agency's course of operation.

Other long-term receivables, which are measurable but are not due within twelve months, are recorded as GL Code 1619 "Other Receivables - Long-Term" and the related amount estimated to be uncollectible in GL Code 1649 "Allowance for Uncollectible Other Receivables - Long-Term."

2.2.4.3.3

Receivable Collection Procedures

Effective Date:

Sept. 1, 1998

2.2.4.3.3.a

Agencies with more than $50,000 in past due receivables are to prepare aging reports at least monthly. Aging reports are required to be reviewed by management and such review documented on the report.

Written procedures are to be developed and followed to ensure that past due receivables are followed up promptly and in a manner that is cost-effective for the overall collection program. These procedures are to provide for the full range of collection procedures to be used as appropriate, including issuance of statements and dunning letters, phone and personal interviews, filing of suits and liens, referral to private collection agencies or letter services, etc. Agencies that do not have special statutory collection authority, or specialized collection operations are encouraged to use collection agencies after receivables become 90 days past due.

2.2.4.3.3.c

Interest of one percent per month is to be charged on past due receivables in accordance with RCW 43.17.240, except when one of the following conditions are met:

• Charging interest conflicts with the provisions of a contract, or with any other law.

• The debt is to be paid by other governmental unit.

• The debt became due prior to July 28, 1991.

• Interest is waived based upon rules adopted by OFM found at Chapter 82-06 WAC describing the conditions under which interest may be waived on past due receivables.

2.2.4.3.3.d

RCW's 19.16.500 and 82.32.265 allow the use of collection agencies for the purpose of collecting public debts. Agencies are encouraged to use collection agencies whenever they determine that this will be more cost effective than internal collection efforts.

Debts may be assigned to a collection agency when all of the following conditions have been met:

• A written contract has been established with the collection agency;

• There has been an attempt to notify the debtor of the existence of the debt and the fact that the debt may be assigned to a collection agency for collection if the debt is not paid; and

• At least thirty days have elapsed from the attempted notice.

The Office of State Procurement, Department of General Administration, maintains a statewide contract for "collection agency services." This contract may be used by state agencies and satisfies requirement of this section.

Collection agency services are not to be used for the collection of receivables in the following categories: Due From Federal Government, Other Governments, Other Funds, and Other Agencies.

Agencies should be aware that the assignment of accounts to "letter services," which send debtors a series of letters but do not actually collect monies for the state, is not subject to the above requirements. Agencies may use such "letter services" as part of their collection efforts whenever they determine such services to be cost effective. The same is true of "pre-collect" services that send the 30-day notice but do not collect money for the state.

2.2.4.3.3.e

The Office of Attorney General has a Bankruptcy and Collection Unit (BCU) specializing in bankruptcy cases and other collection situations. Use of BCU services can be cost effective and should be coordinated through the assistant attorney generals assigned as agency general legal counsels.

2.2.4.3.3.f

Agencies are to document all efforts made toward the collection of receivables.

2.2.4.3.3.g

Agencies are encouraged to take advantage of the Uniform Commercial Code (UCC) provisions for dealing with NSF checks. This may be accomplished by agency collection procedures or through use of state contracts from the Office of State Procurement, Department of General Administration, for letter writing services and NSF collection services. In either case, the UCC provisions found at RCW 62A.3.515 through 62A.3.525 are applicable.

Under the provisions of the UCC agencies must send a notice of dishonor meeting statutory requirements that are contained in RCW 62A.3.520.

After sending notice of dishonor under the provisions of the UCC agencies may:

• Collect a reasonable handling fee for each NSF check. Agencies must establish their handling fee by rule. Agencies that intend to use the state contract for NSF check collections through the Office of State Procurement, Department of General Administration should establish fees consistent with the rates in the state contract.

• After 15 days notice, charge interest at the rate of 12 percent per year.

2.2.4.3.3.g(1)

If the matter goes to court, collect reasonable attorney fees, and damages of three times the face amount of the check, or three hundred dollars, whichever is less.

Agencies should consult with legal advisors regarding any question as to how the UCC provisions coordinate with other enforcement provisions available to the agency. Agency statutes may supersede, supplement, or otherwise affect the operation of the UCC provisions.

2.2.4.3.4

Uncollectible Receivables

Effective Date:

Sept. 1, 1998

2.2.4.3.4.a

The allowance method of accounting for uncollectible receivables is to be used by agencies.

2.2.4.3.4.b

Estimates of total uncollectible receivables are to be made at least quarterly and adjusting entries are to be recorded in the agency's accounting records to the allowance for uncollectible receivables. (Refer to Sections 2.2.4.7.12.b and c for illustrative entries.)

2.2.4.3.4.c

Generally Accepted Accounting Principles require that a determination be made between receivables deemed to be collectible and those considered not economically collectible, including those not collectible at all. Agencies are to develop, and follow, written criteria for the determination of uncollectability. Receivables determined to be uncollectible are to be written off promptly against the appropriate allowance account (GL Code Series 134X). (Refer to Section 2.2.4.7.12.d for an illustrative entry.)

2.2.4.3.4.d

After management review, any account determined to have been inappropriately written off is to be returned to the accounting records by reversing the write-off entries.

2.2.4.3.4.e

Agencies may find it cost-effective to pursue minimal collection actions for certain types of accounts after the write-off has occurred. Examples of minimal collection actions include routine periodic computer matches with new accounts, and allowing student or client records to remain "flagged" for receivables.

2.2.4.3.5

Documentation

Effective Date:

Sept. 1, 1998

2.2.4.3.5

Transactions affecting receivables are to be supported by documents indicating all pertinent information relating to the transactions. Detailed postings of these documents are to be recorded and maintained in the subsidiary ledgers for all outstanding receivables. Detailed postings are to be summarized and entered in the general ledger control account. Typical transactions affecting receivables include the following:

2.2.4.3.5.a

Establishment of Receivables - Sequentially numbered billing documents (invoices) are to be used. Upon completion of transactions, invoices are to be prepared and sent to debtors. Invoices are to contain at a minimum: a description of the goods or services provided; the date(s) provided; the amount of the debt; and the invoice due date. Files of these documents are to be maintained by the agency. These files are to include a means of sequentially accounting for billing documents.

2.2.4.3.5.b

Recording of Receipts - Daily receipts applicable to receivables are to be entered in detail to a daily cash records. Detail listings are to support summary totals. The detail is to disclose the name of the payee or account number, amount received, invoice number if available, mode of payment, and check number if applicable.

2.2.4.3.5.c

Adjustments of Receivables - Any adjustment increasing or decreasing the amount of receivables carried on the books of an agency is to be supported by a revised billing document, a credit memorandum, or other appropriate documentation. Written procedures are to be developed and followed to ensure that only authorized adjustments are recorded.

2.2.4.3.5.d

Valuation of Receivables - Valuation of receivables using the allowance method is to be made at least quarterly and at fiscal year end to reflect the amount of receivable balances estimated to be collectible. This transaction is to be documented by means of a Journal Voucher (A7). (Refer to Sections 2.2.4.7.12.b and c for illustrative entries.)

2.2.4.3.5.e

Collection Efforts - A written record is to be kept, by account, on collection efforts. However, general system documentation may support billing and past due notices produced by automated systems.

2.2.4.3.5.f

Write-Offs of Uncollectible Receivables - For accounting and financial reporting purposes, write-offs of uncollectible receivables are to be made against the appropriate allowance accounts (GL Code Series 134X or Series 164X). Transactions are to be documented by means of Journal Vouchers (A7). (Refer to Section 2.2.4.7.12.d for an illustrative entry.) The name of the debtor, the date of inception of the account, and the amount of the account being written-off are to be part of the supporting documentation for the Journal Voucher (A7).

2.2.4.3.5.g

Records Retention for Write-Offs - The records regarding uncollectible accounts are subject to retention, archival, and destruction according to the applicable statutes and the agency's records retention policies.

2.2.4.3.6

Subsidiary Ledgers

Effective Date:

Sept. 1, 1998

2.2.4.3.6.a

Agencies are to establish and maintain a detailed subsidiary ledger on an open item basis (i.e., an entry in the subsidiary ledger for each outstanding amount due). The following specific information, at a minimum, is to be maintained:

• Name of debtor

• Account number of debtor (or Unified Business Identifier number), if assigned

• Address of debtor, if available

• General ledger control code (or equivalent indicator)

• Account code (or equivalent indicator)

• Description of each outstanding charge and/or credit*

• Invoice or document number*

• Date of invoice or document*

• Invoice due date (if different from date of invoice)*

• Amount of each charge and/or credit*

* In open item systems, these items are maintained in supporting documentation for paid items only. In previously existing balance forward systems, which may be used only with approval from OFM, these items be maintained in supporting documentation to the subsidiary ledger.

2.2.4.3.6.b

Subsidiary ledgers are to be balanced against the associated general ledger control accounts at least monthly.

2.2.4.3.6.c

Current subsidiary ledgers are to be periodically purged of accounts/items which are no longer outstanding. For example, accounts/items that have been paid should not be retained on the current subsidiary ledger file but should be moved to a historical file for retention purposes.