TO:  Mike Wildgen, City Manager

FROM:  Ed Mullins, Finance Director

DATE:  April 22, 2004

SUBJECT:  Write-off of Receivables

The City Commission is requested to authorize the write-off of certain water, sewer, sanitation and miscellaneous receivables deemed uncollectible by the Finance Department.  The period covered is January 1, 2002 through December 31, 2002.  The total requested write-off is $189,083.87 for 1,130 utility billing customers and $14,364.83 for 50 miscellaneous receivable accounts.

In order to fairly present the financial position of the City of Lawrence, the Finance Department performs an annual review of the status of its accounts receivable.  Since the Department has the capability of disconnecting delinquent active accounts within two months, uncollectible utility accounts are typically unpaid final bills of our inactive customers.  The increase in the number and amount of write-offs can be partially attributable to an increase in bankruptcies.  The Farmland bankruptcy resulted in the write-off of over $30,000.  The uncollectible miscellaneous receivables are primarily insufficient funds checks written to the Parks and Recreation Department and uncollected billings for inspections and sanitation roll-offs.  Nearly $2,200 was uncollected from a former employee for a computer purchases and over $1000 was not received from an employee for health insurance.

The Finance Department has reviewed the utility accounts to determine if the customers have relocated to another service address within Lawrence.  Delinquent notices have also been sent and the accounts have been turned over to a collection agency.  The collection agency will continue to pursue the accounts.  Utility billing personnel also can sometimes find an individual who has had a prior account written-off when they are signing-up for new service.

The amounts written off in 1999, 2000, 2001, 2002 and 2003 were $79,485.56, $85,826.02, $78,412.13, $72,026.30, and $113,136.65, respectively.

The Finance Department has been charging $15.00 per account sent to a collection agency since January 1991.  The number of utility accounts to be written-off represents 3.9% of the total accounts in the City.  A detailed list of utility accounts to be written-off is available upon request.  The list of miscellaneous accounts is attached.

To help locate prior uncollectible accounts, the social security number and driver’s license number of customers are recorded when the account is established.  Delinquent customers are sent to the State of Kansas as part of its set-off program.  If the customer is owed any money from the State of Kansas, the amount due the City is deducted from the amount and paid to us.

The increase in both the number and amount of utility accounts written off is a concern.  In order to be more aggressive in terminating utility service in a timelier manner, the utility billing staff will need to be increased.  An additional Field Service Representative that would spend the majority of their time on collection activities would help reduce the number of delinquent accounts.  An increase in the amount of deposit is also recommended.