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Administrative Procedure 8.651 Administrative Procedure 8.651



Title

Non-Student Accounts Receivable and Delinquent Financial Obligations

Header

Administrative Procedure Chapter 8, Business and Finance
Administrative Procedure AP 8.651, Non-Student Accounts Receivable and Delinquent Financial Obligations
Effective Date:  May 2017
Prior Dates Amended:  Replaces A8.651, Accounts Receivable, July 1982, April 2002
Responsible Office:  Office of the Vice President for Budget and Finance/Chief Financial Officer
Governing Board and/or Executive Policy:  EP 1.102, Authority to Manage and Control
the Operations of the Campus
Review Date:  August 2018

I. Purpose

To provide guidelines and procedures for recording, reporting, collecting, Tax Setoff, and Write-off of non-student related Accounts Receivable. 

The Accounts Receivable (AR) procedures apply to all departments with Invoice billings, dishonored check memorandums and salary overpayments.  Department Heads and Fiscal Administrators are responsible for ensuring that all AR have been recorded properly and collected in a timely manner. 

For the purposes of this administrative procedure, non-student Accounts Receivable excludes sponsored contracts and grants receivable and student accounts and loans receivable.  Also excluded are interdepartmental transactions which are purchases and sales within University of Hawai‛i (University) departments.  These transactions should not be recorded as AR.  They should be charged directly with the KFS Internal Billing (IB) or Service Billing (SB) eDocs.

II. Definitions

A.    Accounts Receivable (AR) – Money owed to the University for goods sold or services rendered.  These transactions are generally evidenced by an Invoice document.  AR also arise from matters incidental to the operation of the University, such as, salary and wage overpayments, dishonored checks, and vendor credit memos.

B.    Accounts Receivable Subsidiary Ledger – An accounting ledger that shows the transaction and payment history separately for each customer.  The balance in the subsidiary ledger account shall be periodically reconciled to the balance in the general ledger to ensure accuracy.

C.    Allowance for Doubtful Accounts – A valuation account used to estimate the portion of Accounts Receivable which is considered uncollectible (refer to AP 8.671 Year-End Accounting Data).

D.    Invoice – A billing document submitted to a customer or individual, identifying the transaction for which amounts are owed to the University.  See Attachment 1 for the standard UH Invoice form.

E.    Uncollectible Account – As defined in Hawai‛i Revised Statutes (HRS) section 40-82, is an account where:

        1.    The debtor or party causing damage to property belonging to the State is no longer within the jurisdiction of the State,

        2.    The debtor or party causing damage to property belonging to the State cannot be located,

        3.    The party causing damage to property belonging to the State is unknown or cannot be identified,

        4.    The debtor has filed bankruptcy and has listed the University as a creditor, or

        5.    The account is deemed by the University of Hawai‘i General Counsel (UGC) to be uneconomical or impractical to collect. 

F.    Write-off – The process to remove an Uncollectible Account from the Accounts Receivable records, provided the account has been delinquent for at least two (2) consecutive years with demonstrated due diligence collection efforts and approved for Write-off by the UGC.

G.    Tax Setoff – The process, through the State of Hawai‘i Department of Accounting and General Services (DAGS), to set off any valid debt over $25.00, owed to the UH by the debtor against the debtor’s State of Hawai‛i income tax refund.

III. Administrative Procedure

A.    Types of AR Systems

        1.    Kuali Financial System Accounts Receivable (KFSAR) is used to generate Accounts Receivable Invoices and maintain customer Accounts Receivable Subsidiary Ledger records.

              a.    AR billing can be for revenue, reimbursement of expenses, salary and wage overpayments, and dishonored checks.

              b.    Use of KFSAR is required for salary and wage overpayments.

              c.    Use of KFSAR is required for all dishonored checks (except dishonored checks related to the Banner Student Information System).

        2.    Banner Student Information System (SIS) is used to record student Accounts Receivable transactions relating to tuition, housing, and fee revenue.  Please refer to AP 8.731, Student Accounts Receivable and Delinquent Financial Obligations, for detailed procedures.

        3.    Departmental AR systems are used to record certain billing transactions after obtaining approval from the Director of General Accounting.

              a.    Obtain an approval by completing the Request to Maintain Detail Accounts Receivable Transactions in a departmental AR system (see Attachment 2).

              b.    Record payments received for non-KFSAR Invoices during the fiscal year (July through June/fiscal months 1 to 12) as cash sales in the KFS general ledger (GL) account(s).

              c.    Prepare the accrued journal entries to record all outstanding receivables that are not recorded on KFS GL during fiscal year-end close.

B.    Roles and Responsibilities

        1.    The Fiscal Administrator is responsible for ensuring that he/she or authorized staff:

              a.    Prepare and record the Invoice in a timely manner.

              b.    Create and update customer codes needed for Invoice billings on KFSAR.

              c.    Complete the UH Bill and Notice of Dishonored Check document on KFSAR when notified by the Treasury Office.

              d.    Complete the Notification of Salary or Wage Overpayment document on KFSAR when notified by the Payroll Office.

              e.    Collect and record payments from customers.

              f.    Follow-up on unpaid accounts as described in III E.

              g.    Identify and submit State Tax Setoff to General Accounting.

              h.    Request UGC Write-off approval when the AR has been delinquent for at least two (2) consecutive years with demonstrated due diligence collection efforts and record approved Write-offs.

              i.    Review, reconcile, and prepare journal entries as needed to correct the KFSAR and departmental AR subsidiary ledger and reports.

              j.    Prepare the accrued journal entries to record all outstanding receivables that were not on the KFSAR during fiscal year end close.

              k.    AR and allowance for interdepartmental transactions, although excluded for the system-wide financial statements, shall be recorded in departmental financial statements via adjusting entries.

        2.    The General Accounting Office is responsible to:

              a.    Coordinate the recording of all outstanding Accounts Receivable and allowances for doubtful accounts at the end of the fiscal year for the UH financial reports

              b.    Reconcile the AR total from sub-ledger (KFSAR) to general ledger (KFSGL). 

        3.    The Treasury Office is responsible to coordinate the completion of KFSAR Invoices initiated by the Fiscal Administrator/Department for checks returned unpaid by the bank, including the UH Bill and Notice of Dishonored Check document.  Refer to AP 8.740, Dishonored Checks.

        4.    The Payroll Office is responsible to coordinate the completion of KFSAR Invoices initiated by Fiscal Administrator/Department for salary or wage overpayment receivables, including the Notification of Salary or Wage Overpayment document.  Refer to AP 8.877 Salary and Wage Overpayment Recovery.

C.    Review of Accounts Receivable ledgers

Subsidiary ledgers shall be reviewed by the departments to ensure that all paid Invoices are properly credited with zero balance and that all and only valid outstanding balances are presented on the UH’s financial statements as Accounts Receivable.

D.    Reporting

Monthly reports, including an aging report, indicating the outstanding Accounts Receivable balance shall be generated and reviewed by the responsible departments.

E.    Follow-up for delinquent accounts

When a receivable is outstanding for more than 30 days, the responsible department shall maintain a log of all telephone conversations and correspondence as documentation of the collection efforts.  All correspondence shall have the notation “ADDRESS SERVICE REQUESTED”.

        1.    Send a reminder.  Departments may use private companies that specialize in letter writing to assist them in this area.

        2.    After 15 days, send a firmer reminder, establishing a deadline for payment within 15 days.

        3.    If no response is received within 15 days, send a final warning, stating that if immediate payment is not received the account will be sent to the collection agency and subject to a tax refund setoff assignment and litigation.

        4.    If no response is received, forward the account to a collection agency. Contact the Director of General Accounting for a referral of collection agencies, if needed.

F.    Allowance for Doubtful Accounts

The University records an Allowance for Doubtful Accounts on past due accounts that are older than 180 days and that have not been written off or forgiven. Prior to closing each fiscal year’s books, General Accounting will record the allowance for the AR accounts on KFSAR.  However, for the AR that are recorded at the departmental systems, Fiscal Administrators are responsible for analyzing the AR accounts and providing the analysis to General Accounting for review and recording of the allowance.

G.    Write-off of Uncollectible Accounts

        1.    Before a request for Write-off is made to the UGC under HRS, Section 40-82, the Fiscal Administrator/Department shall ensure that the receivable account has been delinquent for at least two consecutive years with demonstrated due diligence collection efforts and follow the UGC’s Guidelines for Requests to Write-Off Uncollectible Accounts (Attachment 3)

        2.    The Fiscal Administrator/Department completes and submits the following to the UGC to request a Write-off:

              a.    UGC’s Legal Services Request Form (For UH Campus Requests) available at www.hawaii.edu/offices/legal.

              b.    Request to Write-Off Uncollectible Accounts with supporting documentation of the outstanding debt, collection efforts and the reason for uncollectibility (see Attachment 4). 

        3.    Upon receipt of the UGC’s written Write-off approval

              a.    The Fiscal Administrator/Department using KFSAR shall prepare and process a Customer Invoice Write-off (INVW) eDoc to record the KFS-AR Invoice write off and include the following:

                        (1)    Date of UGC write off approval, Invoice number, dishonored check number or salary overpayment number (if applicable), customer number, and write off reason.

                        (2)    Ad Hoc routing for approval to:

                                (a)    Treasury Office if the KFSAR Invoice is a dishonored check.

                                (b)    UH Payroll Office if the KFSAR Invoice is a salary or wage overpayment .

              b.    Departments with their own AR system shall adjust only their departmental records.  All prior year AR and allowance balances recorded journal voucher on KFS will be automatically reversed at fiscal year-end.

              c.    The department shall be relieved from any further accountability for its collection unless the UGC finds that the facts are alleged and presented were not true or that the account has become collectible.

              d.    The Write-off of an uncollected account is a bookkeeping entry only and does not relieve the debtor from the financial responsibility to the University.  Although the uncollected account has been removed from the financial books and records (i.e., written-off as uncollectible), the University may still have a claim against the debtor and may still seek legal remedy (i.e., file suit for collection in a court of law).

IV. Delegation of Authority

There is no specific administrative delegation of authority.

V. Contact Information

    
Dishonored checks – Treasury Office, 956-8527 or uh-treasury@lists.hawaii.edu
Website:  http://www.fmo.hawaii.edu/cash_handling/index.html
Salary overpayments – Payroll Office, 956-7444 or payroll@hawaii.edu
Website:  http://www.fmo.hawaii.edu/payroll/index.html
Goods and services rendered - General Accounting and Capital Assets Accounting, 956-8278, or uhgalc@hawaii.edu
Website:  http://www.fmo.hawaii.edu/general_accounting/index.html

VI. References


VII. Exhibits and Appendices

Attachment 1:  Standard UH Invoice form

Attachment 2:  Request to Maintain Detail Accounts Receivable Transactions in a
                          Departmental System

Attachment 3:  UGC’s Guidelines for Requests to Write Off Uncollectible Accounts

Attachment 4:  Request to Write Off Uncollectible Accounts

Approved

    Signed    
    Kalbert Young    
    June 05, 2017    
    Date    
    

Topics

accounts receivable, tax setoff, uncollectible account

Attachments