SUBJECT: WRITE-OFF OF UNCOLLECTIBLE ACCOUNTS RECEIVABLE
Adoption of a resolution authorizing the Director of Finance to write-off uncollectible accounts receivable totaling $651,179.40.
The City regularly issues invoices for a variety of costs incurred due to service and use fees and other related costs for which the City seeks reimbursement. Occasionally, after exhausting all collection efforts, it becomes necessary to write-off debts to the City deemed uncollectible. Collection efforts include skip-tracing, filing court actions in Small Claims, Municipal and Superior Court, and referrals to collection bureaus.
Writing off uncollectible debts is desirable to facilitate the keeping of the books of account of the City without a relinquishment or abandonment by the City of any such account or claim. Writing off these debts does not preclude the City from further pursuing action which may result in future collection of any debt.
San Jose Municipal Code Section 4.24.030 provides that the Director of Finance is authorized to write off as uncollectible any account or claim not exceeding $5,000 in amount, which the City may have against any person when the Director determines that the claim is (1) uncollectible; or (2) possibly collectible but collection would not be reasonably cost effective taking into consideration the probable necessary cost to the City in pursuing collection and the likelihood of collection; or (3) not a valid, enforceable claim of the City.
As previously mentioned, the write-off pursuant to Section 4.24.030 is authorized solely to facilitate the keeping of the City’s account ledgers, and under no circumstances shall any such write-off be deemed to constitute a relinquishment or abandonment by the City of any such account or claim, and nothing in Section 4.24.030 shall be deemed to prevent the City from collecting or enforcing payment of any such account or claim at any time.
Pursuant to Section 4.24.030(C), no account or claim of the City exceeding $5,000 in amount shall be written off as uncollectible without the express authorization of the City Council. Each of the debts listed on the attached schedule for which a write-off is requested exceeds the $5,000 threshold.
Write-offs for 29 open accounts totaling $651,179.40 are requested at this time. Collection efforts including skip-tracing, filing court actions in Small Claims, Municipal and Superior Court, and referrals to collection bureaus have proved unsuccessful for each of the debts listed herein. The City has been unable to collect for various reasons, including bankruptcy, the debtor not having any assets or indication of any future assets to pay, inability to locate the debtor, prolonged incarceration of the debtor, and the debtor having moved out of the country.
Five (5) accounts totaling $97,747.30 listed on the attached report are requested to be written off as a result of each of the debtors filing for bankruptcy. The City Attorney’s Office is vigorously pursuing each of these claims, but the Finance Department requests that the amounts be written off to facilitate the accounting process.
Other Delinquent Accounts
Twenty-four (24) accounts totaling $553,432.10 listed on the attached report are requested to be written off as a result of an inability to collect for reasons indicated above. These 24 accounts represent delinquent amounts due for an array of City services provided by several different departments from as far back as 1989. The Finance Department has exhausted all collection efforts associated with each of these accounts; but will continue to work closely with invoice-generating departments to assure timely initiation and execution of appropriate collection procedures.
The Finance Department regularly sets an allowance for uncollectible accounts receivable with the assumption that certain debts owed the City will not be paid. As such, the write-offs listed on the attached report will be transacted against the allowance established for bad debt. Writing-off uncollectible accounts does not adversely affect current city revenues.
This memorandum has been coordinated with the City Manager’s Budget Office and the City Attorney’s Office.
SCOTT P. JOHNSON
Director, Finance Department