Policy ID no: DCS 8 - CL

Debtor Management Policy

Date Authorised by Council: / 6 December 2017
Commencement Date: / 6 December 2017
Review Date (10 years from authorised date): / December 2027
Responsible Department / Corporate Services

This policy has been authorised.

Nerina Di Lorenzo

Chief Executive Officer

1Introduction

This policy is to outline the principles and other key matters that Council’s officers must take into account when collecting debts and when reviewing the likelihood of collection, the need for providing for doubtful debts or the writing off of bad debts.

2Context

Council commonly enters into transactions where payment is not received for provision of the goods and services or application of fines.Thus Council provides credit to those parties from the time that the service or good is provided (or fine levied) until they pay the full amount due (or Council decides to forgo the debt). During that time, Council must recognise those parties as debtors (also known as accounts receivable).

Credit is issued by way of rate notice, fine or invoice. A rate notice, fine or invoice can only be issued when Council is legally entitled to collect the debt.

3Objectives

To provide direction to Council’s Officers when collecting and providing for/writing off debts owed to Council and to ensure Council manages its accounts receivable in such a way that it does not jeopardise the funding of its operations and takes into consideration the Financial Hardship Policy and requirements under the Local Government Act 1989.

The policy will be guided by the principles of:

  • Transparency by making clear the obligations of debtors and the processes used by Council in assisting it to meet its obligations;
  • Efficiency and effectiveness by making the processes used to recover the outstanding debt clear, simple to administer and effective;
  • Capacity to pay in determining appropriate arrangements for different groups within the community; and
  • Equity by treating all debtors consistently and in a fair manner.

4Policy Details

4.1Payment Terms

Council’s payment terms are 30 days from the date the document is issued unless specific regulations apply or an alternative due date is displayed.

4.2Payment Arrangements

Any person, organisation or company who is having difficulty in paying a debt is encouraged to contact Council’s Revenue Services Unit and make a personal payment arrangement to pay off the debt in a reasonable and manageable timeframe.

4.3Continuation of Provision of Service

In some cases Council will continue to supply services regardless of outstanding debts.

In the case where the service is discretionary (for example Sports Ground Hire) and is not governed by specific regulation the relevant Department or Unit must not continue to supply service where debts are more than 60 days old and no payment arrangement has been agreed.

In these circumstances approval from the relevant Director is required to continue provision of services.

4.4Financial Hardship

Under sections 170 and 171A of the Local Government Act 1989 (the Act), local councils have the authority to:

  • defer payment of rates and charges due to hardship (s170); and
  • waive rates and charges and interest due to financial hardship (s171A).

Council has developed the Financial Hardship Policy for the purpose of defining Council’s interpretation and application of sections 170 and 171A of the Act.

This Debtor Management Policy recognises that the principles of the Rates Hardship Policy are also applicable to sundry debtors, with the exception of property debt.

4.5Debt Recovery

Unless there is a specific regulation or other requirements or unless a payment plan has been agreed, Council has discretion to refer a debt that is overdue to a debt collection agency.

The debtor will be liable for all legal costs incurred by Council in the debt collection process. Finance will advise the relevant department of the intention to refer the debt to a debt collection agency.

4.6Waiving of Debt

There may be special circumstances where Council may waive a debt as a goodwill gesture. An example may be where a debtor has suffered severe personal hardship.

In such a circumstance the debt may be written off as follows:

  • a debt of up to $5,000 may be written off by the Chief Financial Officer;
  • a debt greater than $5,000 and less than $10,000 may be written off by the Director of Corporate Services;
  • a debt greater than $10,000 may be written off by the Chief Executive Officer.
  • Provision of Doubtful Debts

A provision for doubtful sundry debts is a liability to reflect debt that is likely never to be collected and hence is expected to be written off in future periods. Finance will maintain a provision for doubtful debts based on the following factors:

  • for debts over $500, an individual assessment will be undertaken to determine whether a debt is doubtful. All debt assessed as doubtful will be included in the provision.
  • for debts under $500, the following arrangements will apply:

­50 per cent of debts aged between 90 days and 150 days overdue will be included in the provision (unless payment plans are in place and being adhered to).

­100 per cent of all debts aged over 150 days overdue will be included in the provision (unless payment plans are in place and being adhered to).

4.8Bad Debts

If debts are over one year old with no payment plans in place, they will be considered to be bad debts. After all avenues to collect the debt have been exhausted, approval may be sought to write off a bad debt. Finance will refer all bad debts over 1 year old to the Director of Corporate Services for approval.

If a debt is written off and a client seeks to have further service provided at a future date, the written off debt will be reinstated and the client will be required to pay the debt before the service is reinstated.

4.9Approval to Write Off Bad Debts

A bad debt of up to $5,000 may be written off by the Chief Financial Officer.

A bad debt greater than $5,000 and less than $10,000 may be written off by the Director, Corporate Services.

A bad debt greater than $10,000 may be written off by the Chief Executive Officer.

5Definitions

Term / Definition
Debt / Debt is the amount (of money) owed by a debtor as a result of a transaction with Council.
Debtor / Debtor refers to the individual, organisation or other party that owes a debt as a result of a transaction with Council.
Specific Regulation / A regulation set out in the Local Government Act 1989, the Magistrates Court Act 1989or the Infringements Act 2006

6Associated Documents

  • Local Laws – Local Government Act 1989, Adopted Local Laws, Road Safety Act 1986, Road Safety Rules 2017, Magistrates Court Act 1989, Metropolitan Fire Brigades Act 1958, Environment Protection Act 1970, Domestic Animal Act 1994, Impoundment of Livestock Act 1994, Prevention of Cruelty to Animals Act 1986, all associated regulations to each Act and Local Laws Procedures.
  • Building – Local Government Act 1989, Local Laws, Building Act 1993, all associated regulations and Building Procedures
  • Planning and Environment Act 1987, Subdivision Act 1988, associated regulations and Planning Procedures
  • Sundry - Local Government Act 1989, Public Health and Wellbeing Act 1958, Food Act 1984, Residential Tenancies Act 1997, Local Laws and Budgeted Fees and Charges schedule.
  • Infringements Act 2006
  • Moreland City Council Financial Hardship Policy

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