WHAT YOU SHOULD KNOW

BEFORE YOU ISSUE A CHEQUE

Collections

Credit Worthiness

Credit Granting and Control Directive No: 3101

1. INTRODUCTION The Government grants credit in order to support program delivery. In order to minimize bad debt losses, Government departments and public agencies must control credit granting carefully, following good business practices. Credit must be granted selectively, based on borrower creditworthiness, except where directed otherwise in legislation, regulation or by order of the Comptroller General. The Government notifies credit applicants that it reserves the right to provide credit information to credit bureaus.

The Financial Reporting and Collections Section, Financial Management Board Secretariat (FMBS), is available to advise and assist Government departments and some public agencies in assessing the creditworthiness of potential borrowers. It gathers, analyzes, and provides credit information from varied sources inside and outside the Government, including credit bureaus. It may, if appropriate, assist departments and public agencies with collections

Credit Worthiness

2. DIRECTIVE Except as permitted in the following Provisions, credit may be granted only when there is a reasonable assurance of timely recovery from the potential debtor. 3. PROVISIONS 3.1 Credit Information

3.1.1 Before a Government department or public agency issues goods, services, or money on credit, makes a contract prepayment or accountable advance, or issues goods on consignment, the approving officer shall:

a) ensure that the potential debtor is not on the listing of write-offs maintained by the Financial Reporting and Collections Section of the FMBS (see 3.13 and 3.14); b) ensure that the potential debtor or consignee is sufficiently creditworthy; and,

c) be accountable for credit granting decisions.

Credit WorthinessDirectors of Finance and Program Managers are:

d) accountable for effective credit granting and control; and,

e) responsible to ensure that credit approving officers in their departments and public agencies have the information and resources necessary to make good credit-granting decisions.

3.2 Application for Credit

3.2.1 Every credit application must provide enough information on the applicant’s credit history, current financial position and current address to enable the approving officer to determine the applicant’s ability and likelihood to fulfil the repayment terms.

3.2.2 Every credit application from a business entity must provide the name and address of the business entity and every individual who is a principal of that entity.

3.2.3 Credit applicants shall be notified that, as a condition of granting credit, the Government reserves the right to provide to established credit bureaus the details of every credit application, the details of any credit granted, and the details of the debtor’s previous, current, and future repayment performance. Credit must not be granted without such notice.

Delinquent Accounts Receivable

“Collection of outstanding receivables must be Actively and Vigorously Pursued, so that the credibility of programs, which generate revenues and recoveries, may be maintained and receivables may be realized in cash as quickly as possible.”

Delinquent Accounts Receivable

Collection of Delinquent Accounts Receivable

Directive No: 3102.

The Office of the Comptroller General, through the Financial Reporting and Collections

Section, Financial Management Board Secretariat (FMBS), shall collect delinquent accounts receivable in accordance with the following Provisions and provide Government departments and public agencies with advice on record keeping and procedures for the purpose of collecting receivables and overdue receivables.

Delinquent Accounts Receivable

PROVISIONS4.1 Responsible Government departments and

public agencies shall collect all receivables and overdue receivables promptly, efficiently, and in a thoroughly accountable manner. Unless directed otherwise within this 3103 series of directives, departments and regional offices of the FMBS shall transfer immediately to the Financial Reporting and Collections Section, FMBS, the collection of:

a) any delinquent account receivable; and,b) any receivable, overdue receivable, or delinquent

account receivable that is owed by a debtor who has begun bankruptcy or liquidation proceedings.

Delinquent Accounts Receivable

4.3 Collection procedure for receivables

a) Except as described in (e) below, an invoice must be prepared, recorded, and delivered to the debtor as soon as a receivable is created and the debtor must be given 30 calendar days from the date of the invoice to return payment to the Government.

b) If payment is not received within in 30 days of the date of the invoice, the responsible department or public agency shall attempt to collect by notifying the debtor in writing that payment is overdue and payable immediately. At this point, the debt has become an overdue receivable.

c) If payment is not received during the next 30 days, i.e., within 60 days of the date of the invoice, the responsible department or public agency shall attempt to collect again by notifying the debtor in writing that payment is now 30 days overdue andpayable immediately.

Delinquent Accounts Receivable

d) If payment is not received during the next 30 days, i.e., within 90 days of the date of the invoice, the overdue receivable becomes a delinquent account receivable. The responsible department or public agency shall:

i) attempt to collect again by notifying the debtor in writing that payment is now 60 days overdue and payable immediately; and,

ii) transfer collection to the Financial Reporting and Collections Section, FMBS, immediately, as directed in 4.4 below. (For departments only. Public Agencies will still be responsible for collection of their delinquent account receivables).

e) Invoices are not required for receivables within pre-determined payment streams such as lease payments. Still, departments and public agencies shall maintain aged schedules of accounts for non-invoiced receivables similar to those used for invoiced receivables. As a means to trigger automated account aging in the Financial Information System, departments may elect to use the invoicing mechanism to generate periodic statements or reminder notices in lieu of true invoices.

Delinquent Accounts Receivable

4.4 Unless directed otherwise within this directive, departments and regional offices of the FMBS shall transfer immediately the collection of any delinquent account receivable to the Financial Reporting and Collections Section, FMBS. The public officer responsible for the transfer shall provide a copy of the record of all action taken to collect the amount owed, including a record of any partial payment received, and shall verify that:

a) a debt is still owed to the Government;

b) four documented attempts to collect have been made, i.e., an undisputed initial invoice has been supplied to the debtor and three subsequent written overdue payment notices have been sent – at 31, 61, and 91 days past the invoice date;

c) the actual amount owing is accurate, any partial payment having been deducted; and,

d) in the case of a disputed or refused invoice, the debtor’s statements have been considered and a reasonable attempt has been made to agree on the amount owing.

Setoff Action

Financial Administration Act

Section 22(1) – The Comptroller General may retain money by way of deduction or setoff of any money payable to a person by the Government out of the Consolidated Revenue Fund where:

a) That person owes money to the Government

b) The Government has made an overpayment to that person

c) That person received an accountable advance and has not repaid or accounted for it.

Setoff Action

Directive Title: Setoffs Directive No: 3106

3. PROVISIONS

3.1 The Government may set off part or all of a debt, including a non-monetary obligation, which a person owes to the Government when:

a) payment of the debt or fulfillment of the obligation is overdue and has not been forgiven; or,

b) the person has commenced bankruptcy or liquidation procedures.

An overdue repayment of an accountable advance is an overdue debt.

Setoff Action

3.2 The Comptroller General may set off overdue debt which a person owes to a public agency by deducting from or withholding payment of debt which the Government owes to that person. “Public agency” is defined in the Financial Administration Act.

3.3 The Government has a statutory right to set off an overdue debt which a public agency owes to the Government. (A public agency is a “person” by definition.)

3.4 The Government may set off a Government employee’s debt to the Government by deducting or withholding salary, wages or other earnings in accordance with the Collective Agreement provisions when:

a) the employee has not paid a Government invoice or bill when due; b) the employee has resigned and owes a debt to the Government; c) the employee agrees to deduction from salary payment; d) the employee has not fulfilled an obligation due to the Government; or, e) the debt has been written off pursuant to Section 24 of the Financial

Administration Act (write-off does not constitute remittance, satisfaction or forgiveness).

Doubtful Accounts, Write-Offs & Forgiveness

DEFINITIONS

Allowance for Doubtful Accounts An allowance for doubtful accounts is the best estimate of the

amount of a debt, for which there is not reasonable assurance of collection considering all relevant factors. The allowance provides for a valuation of receivables at their net realizable value. It does not represent a write-off of the accounts receivable.

Write-off The removal of a receivable from the accounts of the Government of

the Northwest Territories. Unlike forgiveness or remission, a write-off does not cancel the debt or the Government's right to collect.

Forgiveness The deletion of all or part of a debt that is rightfully due to the

Government. Forgiveness cancels the debt and the Government's right to collect. Forgiveness shall not apply to a debt resulting from a tax or penalty. For a tax or penalty, remission is required.

INTEREST

The new Financial System will be able to calculate and charge interest on delinquent accounts.

This will change the dynamics of collections in the future, debtors will want the ability to forgo or negotiate interest charges or they may not remit the interest charges when payment is made.

FAM will require updating to deal with outstanding interest when the new system goes live.

QUESTIONS

If you have questions, please contact any of the following Collectors:

Val Pond – Senior Collection Officer – 920-3445Mary George – Collection Officer – 920-6145Julie Forget – Collection Officer – 920-8002Janice Hagen – Encumbrance Officer – 920-8923

References

Quick References for Collections

Financial Administration Act Sections 12 & 22

Financial Administration Manual

Directives 2700, 2702, 2703, 2704, 2705

Directives 3100, 3101, 3102, 3103, 3104, 3105, 3106

Write-Off & Forgiveness Listing –

J:\FMBS\Prior Write-offs and Forgiveness List