FIN-005: Extension and Collection of CreditDate: 07/19/2016 Status: Final
- Credit and Collection
- Accounts Receivable Systems
- Allowance for Doubtful Accounts
- Write-off of Uncollectible Accounts
- Reporting of Accounts Receivable
This policy describes how credit may be extended to students, faculty, staff, and other customers of the University and, once credit is established, how the receivable is to be collected. This policy and associated procedures are designed to minimize the number and amount of past due (delinquent) accounts receivable and the write-off of uncollectible balances.
Monies owed to the University that have not yet been received. This can include, but is not limited to, tuition and fees, student loans, notes receivable, amounts owed for goods or services provided, grants and contracts, cash advances, library fines, parking and transportation fees, and payroll overpayments.
Allowance for Doubtful Accounts:
Management’s estimate of the amount of gross receivables that will become uncollectible.
A department, division, school, or other unit that has been authorized to extend credit for the sale of goods and services, or that is responsible for the collection of accounts receivable.
Central Accounts Receivable (Central AR):
A unit within the Office of the University Comptroller that has the primary responsibility for generating invoices and dunning notices, and managing other collection efforts of accounts receivable processed through the Integrated System Accounts Receivable module (OAR), other than sponsored programs accounts receivable managed by the Office of Sponsored Programs (OSP).
Past Due (Delinquent) Accounts Receivables:
Receivables for which payment has not been received by the payment due date.
Amounts collected on accounts that were previously written off the accounting records of the University.
Student Financial Services (SFS):
The University department with the responsibility for billing, management, collection and reporting of student receivables. SFS is also responsible to act as the University’s agent for receivables assigned to collection agencies or credit reporting bureaus.
A transaction that removes from the University’s financial accounting records a receivable that management has determined to be uncollectible. Writing off the receivable does not relieve the debt; it remains owed to the University, but is no longer reported in the University’s accounting system as a receivable.
The Write-off Committee meets on a quarterly basis to review receivable balances proposed for write-off by billing departments, Central AR, and SFS to ensure that due diligence procedures have been completed. The Write-off Committee approves or disapproves write-offs based on the facts and circumstances of each account. The Write-off Committee is comprised of the University Comptroller or his designee, the Assistant Vice President for Student Financial Services or his designee, and other appointed Finance and SFS staff.
The Office of the University Comptroller and Student Financial Services have responsibility for the management, reporting, and collection of University accounts receivable (except for gift pledge receivables which are managed through University Advancement, and sponsored programs receivables which are managed through the Office of Sponsored Programs (OSP)). As a state agency, the University applies the Commonwealth of Virginia's policies, standards, and limitations to all accounts receivable transactions, regardless of the source of funds. The University's procedures are based on the Commonwealth Accounting Policies and Procedures (CAPP) Manual, which is published by the Virginia Department of Accounts (DOA) to provide guidance on the application of accounting policies, procedures and systems pursuant to Section 2.2-803 of the Code of Virginia.
The following requirements are designed to minimize past due (delinquent) accounts receivable and the write-off of uncollectible balances:
Whenever possible and practical, billing departments should require payment at or before the time goods or services are provided to students, faculty, staff or other customers. However, University departments can be authorized to extend credit to faculty, staff, students, and other customers for the goods and services they provide. Prior to extending credit to faculty, staff, students, or other customers, University departments must obtain approval from the Office of the University Comptroller in accordance with the University’s credit and collections procedures (hyperlink to come later). By extending credit, the billing department is assuming the risk of nonpayment by the customer and will absorb the cost of any uncollected revenues or bad debt expense.
Credit and Collection:
Any University department that issues credit and handles collection of accounts receivable must follow applicable laws and regulations related to credit and collections including, but not limited to:
- Virginia Debt Collection Act, Code of Virginia, Sections 2.2-4800 through 4809;
- Fair Debt Collection Practices Act, United States Public Law 95-109, as amended; and
- Fair Credit Reporting Act, United States Public Law 91-508, Title VI, as amended.
Billing departments authorizing the granting of credit or accounts receivable must assure that such transactions are necessary, reasonable, and directly related to the goals and missions of the University. Billing departments must take all appropriate and cost effective actions to aggressively collect accounts receivable including, but not limited to:
- Place a hold on grade transcripts for current and former student debtors;
- Put a block on registration for individuals with outstanding obligations who attempt to enroll as students;
- Delay or withhold services when not in conflict with Federal or State laws;
- Inform/notify credit reporting bureaus;
- Place debts with private collection agencies;
- Obtain garnishments, liens, and judgments; and
- Utilize administrative offset (Virginia Set-Off Debt Collection Program).
Accounts Receivable Systems:
In general, all receivables should be processed through the University’s Integrated System. Prior approval by the Office of the University Comptroller is required to utilize another system. Approval to utilize a different system is typically granted only to large, complex departments with business processes that require specialized applications or functionality not provided by the Integrated System. These systems must meet the minimum requirements as stated in the University’s credit and collections procedures (hyperlink to come later), and have adequate control and security processes in place.
Billing departments that do not utilize the Integrated System to bill customers and manage accounts receivable are responsible for all due diligence efforts to collect monies owed to the University, and for forwarding uncollectible accounts to the Virginia Set-Off Debt Collection Program. They are also responsible for forwarding accounts to collection agencies/credit reporting bureaus for further collection action in accordance with the University’s credit and collection procedures (hyperlink to come later). Additionally, on a quarterly basis, these departments must provide to Central AR the information necessary for the accrual and reporting of the accounts receivable balances in the University’s accounting records.
Allowance for Doubtful Accounts:
In keeping with generally accepted accounting principles, management should establish an allowance for doubtful accounts to reflect the amount of receivables that management estimates will become uncollectible. The Office of the University Comptroller is responsible for establishing the allowance for doubtful accounts, but billing departments are required to provide information, as requested by Central AR and Student Financial Services, to establish a reasonable estimate of uncollectible balances.
Write-off of Uncollectible Accounts:
Accounts should be written off the University’s financial accounting records when all collection actions have been completed, in accordance with the University’s credit and collection procedures, and management determines the receivable to be uncollectible. On a quarterly basis, Central AR, SFS and billing departments not utilizing the Integrated System will recommend write-offs to the Write-off Committee. Billing departments must develop documentation to support write-offs, and make it available to Central AR and auditors. The Write-off Committee will approve or disapprove write-offs based on the facts and circumstances of each account.
Upon approval by the Write-off Committee, the write-offs should be processed in the applicable accounts receivable system, and no longer recognized as collectible for financial reporting purposes. However, the legal obligation to pay the debt remains, and the University will process and record the recovery of any previous write-offs, should they occur. As an agency of the Commonwealth of Virginia, only the Office of the Attorney General has the authority to discharge a debt owed to the University.
Reporting of Accounts Receivable:
As an agency of the Commonwealth of Virginia, the University is required to report accounts receivable information to the DOA on a quarterly basis. (See Commonwealth Accounting Policies and Procedures (CAPP) Manual Topic 20505). Billing departments not utilizing the Integrated System, as well as the OSP and SFS departments, are required to provide Central AR with the information needed to complete institutional level accounts receivable reporting.
SFS must submit to the DOA a copy of the report transmitted to the Federal government on the status of Perkins loans (FISAP report) on the date required by the Federal government each year.
On an annual basis, the Office of the University Comptroller will submit a report to the University’s Board of Visitors of uncollectible balances approved for write-off by the Write-off Committee.