Debtor Management Policy

Adopted by Council on 8 May 2017

Policy goals

Debtor management is an essential element of Latrobe City Council’s overall budget monitoring and control strategy. Rates and charges account for a considerable percentage of the total operating income of the Council. Ineffective collection of this revenue has the potential to negativity impact on the Council’s cash flow. The Debtor Management Policy is designed to ensure that an appropriate collection procedure is in place so that debtor management is undertaken in an efficient and community conscious manner.

Objectives

  • To ensure that the collection of debts is undertaken impartially, consistently, efficiently and in accordance with good governance.
  • To encourage any person, organisation or company having difficulty in paying an outstanding debt to contact Council and make arrangements for a payment plan to pay the debt in a reasonable and manageable timeframe.
  • To ensure that the collection of debt is consistent with the Local Government Act and Regulations, Accounting Standards and recognised financial practices.                                                                                            

Scope

 This Policy applies to all Business Units and Council employees authorised with the responsibility of providing credit, invoicing and recovery of outstanding debt including Rates and Charges including Fire Service Property Levy, Special Charges, Waste Charges, Child Care Fees, Preschool Fees, Prekinder Fees, Council Property, Leases Charges, Health Fees, Local Laws Fees and Fines, Asset Protection Fees, Home & Community Care (HACC) Fees, Sundry Debtors Fees, Interest Charges and all miscellaneous fees and charges where a debt to Council is created.                                                                                         

References

  • Food Act 1984
  • Public Health & Wellbeing Act 2008
  • Penalty Interest Rates Act 1983
  • Local Government Act 1989
  • Transfer of Land Act 1958
  • Council Delegations S5. Instrument of Delegations to Chief Executive Officer.
  • Council Delegations S6. Instrument of Delegations
  • Financial Hardship Policy_11_POL-2
  • Debt Management – Asset Protection Procedure
  • Debt Management – Child Care Procedure
  • Debt Management – Council Property Leases Procedure
  • Debt Management – Health Procedure
  • Debt Management – HACC Procedure
  • Debt Management – Local Laws Infringements Procedure
  • Debt Management – Prekinder Procedure
  • Debt Management – Preschool Procedure
  • Debt Management – Rates Procedure
  • Debt Management – Sundry Debtors Procedure

Definitions

  • Accounts Receivable, Charge, Credit, Fee, Infringement, Interest, Rates, Sundry Debtors, Debt - all refer to an amount owed to Council;
  • Service – admission, hire of facilities or items, supply of information and any other matter which gives rise to a fee or charge being made by Council;
  • Debtor - any person, corporation, business or other entity owing money to Council;
  • Provision for Doubtful Debts – an estimate of the amount of debt raised that is unlikely to be collected;
  • Singular terms also imply the plural

Principles of Management

Debtor terms

Payment due dates are printed on all invoices issued.  Debtor terms will be set at either 14 days or 28 days as determined by the billing cycle and/or are determined under the Local Government Act 1989, Food Act 1984 or Public Health & Wellbeing Act 2008.

Provision of credit

The provision of credit is not automatic and credit can be suspended or withdrawn based on compliance with trading terms.

Credit checks

Internal credit checks will be conducted for all debtors. External credit checks will be undertaken where an above average credit risk is identified.

Commercial Creditors are required to complete a Commercial Credit application form which will be assessed prior to credit being approved. An external credit check is to be undertaken where deemed necessary.

Council reserves the right to deny or withdraw credit facilities from any customer who does not satisfy the requirements of an internal or external credit check.

Recovery of outstanding debt

Any payment not made by the due date falls into arrears and in the case of a rates payment, attracts a penalty in the form of an interest charge. If a debt is still outstanding after internal recovery processes have been undertaken and a special arrangement has not been entered into, then the account will immediately be referred to Council’s contracted debt collection agency.

All debt collection agency fees with be passed onto the client.

Waiver of penalty interest

The Penalty Interest may be waived in accordance with Council’s Hardship Policy. Manager Finance or nominee as delegated officers will negotiate the terms of settlement within delegated levels of authority.

Hardship/special arrangements

A debtor has the option to approach Council for special consideration of payments in the case of genuine hardship and these will be considered on a case by case basis.

Special arrangement plans will normally only be considered if the request is received in writing prior to the due date of the account. If a special arrangement is not adhered to, the matter will be referred directly to Council’s contracted debt collection agency.

Sale of property

The Local Government Act 1989 provides councils with the power to sell properties in order to recover outstanding property rates and charges. The sale of property to recover debt is done as a last resort, when all other options have been reasonably exhausted. A resolution of council is required prior to proceeding with the sale of a property.

Payment agreements

All payment arrangements shall be determined on the merits of each individual case. Recovery action for overdue amounts will be suspended whilst the terms/conditions of the arrangement to pay are being met.

All payments under an arrangement should be paid as a regular amount and consecutively.

Defaulting twice on consecutive payments may  result in the arrangement being terminated at the discretion of the relevant staff member having regard to all the circumstances of the debtor. Where a default of payment occurred twice in a row an attempt will be made to personally contact the debtor. This will be followed by a further letter before recovery action is taken for retrieval of the amount due.

Bankruptcy

Council will declare itself as a creditor on bankruptcy applications with the exception of property based debts where Council’s rights are secured by government legislation under the Local Government Act 1989 Part 8 Rates & Charges on Rateable Land and Transfer of Land Act 1958 Section 43 (f). 

Bad debts

Provision for Doubtful Debts will be reviewed on an annual basis in accordance with Accounting Standards.

An outstanding debt will become a bad debt when one or more of the following applies:

  • The debt is uneconomical to pursue e.g. the cost of recovery would exceed the value of the current debt;
  • The debt can't be proven e.g. fraud or there is no proof of the delivery of services;
  • The debtor cannot be located;
  • Upon advice from Council’s Solicitor, Collection Agent or an Insolvency Practitioner.

Bad debts exceeding $10,000 will be reported to the Audit and Risk Committee.

Reporting

Debt Management reports including any recommendations to write off outstanding debt that is considered a bad debt are to be prepared on at least a quarterly basis and will be reviewed by the Chief Executive Officer, within delegation.

Accountability and responsibility

Accountability and responsibility for this policy is outlined below.

Council

  • Responsibility to ensure this Policy is consistent with Latrobe City Council Strategic Direction and other Latrobe City Council Policy
  • Responsibility for the decision to approve this Policy by Council Resolution

Chief Executive Officer

  • Overall responsibility for compliance with this policy
  • Overall responsibility for enforcing accountability
  • Overall responsibility for providing resources
  • Overall responsibility for performance monitoring

General Manager

  • Responsibility for compliance with this policy
  • Responsibility for enforcing accountability
  • Responsibility for providing resources
  • Responsibility for performance monitoring

Manager

  • Develop frameworks and procedures in compliance with this policy
  • Enforce responsibilities to achieve compliance with frameworks and procedures
  • Provide appropriate resources for the execution of the frameworks and procedures

Employees, Contractors and Volunteers

  • Participate where required in the development of frameworks and procedures in compliance with this policy.
  • Comply with frameworks and procedures developed to achieve compliance with this policy.

Evaluation and review

This policy will be reviewed at least once during each council term or on request by Council, or in the event of significant change in the Executive team, significant changes to legislation applicable to the subject matter of the policy or, in any other case, during each Council term (generally four years).

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