GM4.1 STAFF REPORT ACTION REQUIRED 2014 Accounts Receivable Write-off Report Date: April 24, 2015 To: From: Wards: Reference Number: Government Management Committee Treasurer All P:\2015\Internal Services\acc\ gm15005acc (AFS 20215) SUMMARY This report provides information on account receivable amounts written off as uncollectible in 2014 under delegated authority provided to the Treasurer. RECOMMENDATIONS The Treasurer recommends that: 1. Government Management Committee receive this report for information. Financial Impact There are no financial implications as a result of this report. Amounts totalling $1,399,040.16 were written off by the Treasurer in 2014 in accordance with the City's Financial Control By-law, after completion of appropriate collection efforts. These amounts (detailed in the Comments section of this report) have been provided for in the City's "Allowance for Doubtful Accounts" and expensed in previous years. The Deputy City Manager & Chief Financial Officer has reviewed this report and agrees with the financial impact information. Staff report for action on 2014 Accounts Receivable Write-off 1
DECISION HISTORY The City's Financial Control By-law (i.e. Chapter 71, Toronto Municipal Code, Financial Control) as amended by Council on December 13, 2007, states that: "Write-offs of amounts owing to the City in excess of $50,000 must be approved by Council except for tax reductions as a result of a successful appeal of assessment or taxes by a taxpayer". The Treasurer has the authority to write-off outstanding amounts owing to the City as uncollectible, if the amount is not more than $50,000 and is not an amount raised as taxation or deemed to be taxes, except for items added to the tax bills for collection purposes only and not as a result of a tax or assessment appeal. A further amendment to the Financial Control By-law of June 24, 2008 authorizes the Treasurer to write-off amounts up to $500,000 where the City Solicitor has been asked to try to recover the amount owing and the City Solicitor concludes that the amount is uncollectible. Following is the link to Chapter 71, Toronto Municipal Code, Financial Control: http://www.toronto.ca/legdocs/municode/1184_071.pdf On an annual basis, the Treasurer reports to Committee and Council on accounts receivable amounts written off as uncollectable under delegated authority, and if required, to seek approval for the write-off of uncollectible amounts in accordance with the provisions of the Financial Control By-law (Toronto Municipal Code, Chapter 71). Following is the link to the 2013 Accounts Receivable Write-off Report received by Government Management Committee at its meeting held on April 7, 2014 (re: GM29.8). http://app.toronto.ca/tmmis/viewagendaitemhistory.do?item=2014.gm29.8 ISSUE BACKGROUND All City Divisions are required to review their outstanding receivables on a regular basis and establish appropriate allowances for all accounts where collection is considered doubtful. The Accounting Services Division reviews these provisions annually for adequacy and recommends adjustments where appropriate. As a general practice, all amounts over $1,000 are forwarded to Legal Services for collection action which may include litigation or small claims court action. Legal may recommend settlement based on the information available. Amounts under $1,000 are sent to two collection agencies. If the first collection agency is unsuccessful within six (6) months the amount is sent to the second collection agency for another six (6) months. Once all collection efforts have been exhausted and senior management staff, Legal Services and/or the City's contracted collection agencies have deemed the amount(s) to be uncollectible, a write off request is initiated and the required approvals are obtained from the appropriate Division, Director of Accounting Services and the Treasurer. This report does not include Council authorized settlements delegated to the City Solicitor on specific matters. Staff report for action on 2014 Accounts Receivable Write-off 2
COMMENTS In 2014, the Treasurer approved the write off of individual accounts receivable balances of $50,000 or less, as summarized in Table 1 below. Table 1: Amounts Approved for Write-ff by Treasurer in 2014 Transportation Services $ 727,287.19 Solid Waste 220,260.28 Toronto Water 187,303.48 Long Term Care Homes & Services 98,740.27 Municipal Licensing & Standards 81,597.60 Parks, Forestry & Recreation 31,324.93 Children's Services 28,191.58 Other divisions 24,334.83 TOTAL written off $1,399,040.16 Transportation Services Transportation Services recommended that the Treasurer approve write-offs of $727,287.19, including: $35,274.35 for various invoices pertaining to bore holes, utility cuts, other miscellaneous invoices and late payment charges, represents less than 0.1% of the total revenues. $154,723.23 for invoices billed to third parties for repairs made to the Transportation infrastructure (poles, guide rails, traffic signals etc.). These are the result of motor vehicle accidents for which reports are obtained from Toronto Police Services supporting the invoicing for the damages. The major portion of write-offs relates to the difference between the cost to replace equipment and the equipment's depreciated value. These write-offs represent approximately 0.2% of total charges. $362,981.98 for an invoice of $847,590.98 for recovery of costs relating to a water main rupture and consequential road damage on Bermondsey Road in 2009. The company refused to pay due to a pricing dispute and the account was forwarded to Legal Services. A settlement was accepted and Legal Services recommended that the remaining amount including late payment charges be written off in accordance with City's Financial Control By-law. $174,307.63 for various invoices for front yard and boulevard parking. During 2014 front yard and boulevard parking reporting and monitoring was centralized to provide better management and collection. The former Street Allowance Rental Application (SARA) system had 519 accounts that were terminated between 2000 Staff report for action on 2014 Accounts Receivable Write-off 3
and 2014, but were never officially closed, adjusted, sent for collection and/or written off. These files represent only 1.2% of all front yard and commercial boulevard parking licenses accounts. The front yard parking collections protocols have been centralized and updated to ensure better monitoring and collection of outstanding accounts. Solid Waste Management Solid Waste Management recommended that the Treasurer approve write-offs totalling $220,260.28, largely comprised of the following: $180,701.81 consisting of the net amount of invoices and late payment charges disputed by a company that was a contractor to the City of Toronto for the removal of old large appliances and scrap steel from the City's waste transfer stations in 2008 and 2009. A legal settlement of the action was reached at a mediation session held on January 20, 2014 wherein the City accepted a total of $145,000 in full satisfaction of the outstanding invoices and late payment charges totalling $325,701.81. $26,065.00 for invoices from one company for use of the City's transfer station for waste disposal in the years 1999 and 2000. Although the City obtained a default judgement against the company and filed Write of Seizure and Sale, no amounts were recovered as the company is no longer in operation. Overall, the write offs for Solid Waste represent less than 0.1% of annual revenues. Toronto Water Toronto Water recommended that the Treasurer approve write-offs totalling $187,303.48, largely comprised of the following: $41,910.37 for various invoices and late payment charges for balances owing by contractors for water usage during construction projects. $28,876.54 for various invoices and late payment charges for balances owing on damages to water service lines. $40,742.49 of late payment charges written off as part of settlement agreements. $24,126.92 for various invoices and late payment charges for various balances owing on sanitary and water installation invoices. All of the aforementioned amounts for Toronto Water were written off after collection efforts (including issuing to two separate collection agencies) failed. $17,899.44 for an invoice dated 2008 to recover the cost to repair water street line valve allegedly damaged by the company when conducting construction activities at 188 Cartwright Avenue. The company denied liability for the damages. The file Staff report for action on 2014 Accounts Receivable Write-off 4
was referred to Legal Services, which investigated the matter and recommended write off. $16,759.45, including late payment charges, for costs incurred to repair a blocked sewer at 18 Lower Jarvis in January 2011. The file was referred to Legal Services, which investigated the matter and recommended write off. $15,988.27, including late payment charges, invoiced to a company that was contracted by the City for replacing water-boxes and lead water service lines at various location throughout the City. The City alleged that the company caused damages to the water service line and water boxes at three (3) locations. The company denied the claim and the account was referred to Legal Services, which investigated the matter and advised that there were insufficient evidence to substantiate the City's claim. The total write offs for Toronto Water represents less than 0.1% of annual revenues. Long-Term Care Long Term Care (LTC) Homes & Services recommended that the Treasurer approve write-offs in the amount of $98,740.27. Ontario Regulation 79/10 and prior legislation prohibits the Long-Term Care Homes from discharging a resident based on the resident's financial situation, including the non-payment of accommodation fees. Referrals for write-off are not made while the resident is living in the Home; all accounts referred for write-off from the Long-Term Care Homes & Services Division are accounts of deceased or discharged residents, the majority being deceased residents. When a debtor resident passes away, the City's Legal Services Division conducts estate searches, and may conclude that the estate is insolvent and the account is recommended for write-off. The total write offs for Long-Term Care represents 0.2% of the total annual revenues. Municipal Licensing and Standards Municipal Licensing and Standards recommended that the Treasurer approve write-offs of $81,597.60, including: $46,776.72 of unpaid invoices from 2009 to 2014 for various companies for the removal of illegally placed signs and remedial action resulting from non-compliance with orders issued by the City. $34,820.88 for permitting and enforcement of encroachment fees carried over from 2008 from various older systems. Parks, Forestry & Recreation Parks Forestry and Recreation recommended that the Treasurer approve write-offs of $31,324.93, representing $21,756.66 plus post-judgement interest from a tenant evicted from the property without paying any of the amounts outstanding. The tenant was Staff report for action on 2014 Accounts Receivable Write-off 5
unemployed, on assistance, and owned no property. Following investigation, Legal Services has recommended this be written off. Children's Services Children's Services has recommended that the Treasurer approve write-offs in the amount of $28,191.58, representing unpaid fees from various families using City of Toronto run daycare centres. When a family leaves Child Care Services and has an outstanding balance, Children's Services sends out three (3) letters to the address on file. Collection agencies are used when the family's income is higher than the low income cut-off (LICO) and the amount outstanding is being between $5 and $1,000. Any account that is greater than $1,000 is sent to Legal. These accounts were referred to Legal Services or collection agencies, as appropriate, however collection efforts were unsuccessful. The total write offs for Children Services represents less than 0.1% of the total annual revenues. Other Divisions Other Divisional amounts totalling $24,334.83 include various amounts deemed uncollectible by the respective Division, Accounting Services and either Legal Services or the collection agencies. These write-offs represent less than 0.1% of charges. CONTACT Mike St. Amant, Director, Accounting Services, Tel: (416) 397-4438, Fax: (416) 392-8003, Email: mstaman@toronto.ca SIGNATURE Giuliana Carbone Treasurer Staff report for action on 2014 Accounts Receivable Write-off 6