To view or download this policy as a PDF click Finance and Administration Policies Documents

Purpose

The purpose of this policy is to ensure that all monies owed to Council are collected efficiently and effectively. It outlines the principles that will apply in the management and recovery of Council debt and other key matters that Council’s Officers must take into account when:

• Entering into transactions that create general debtors,
• When collecting those debts, and
• When reviewing the likelihood of collection, the need for providing for doubtful debts or the writing off of bad debts

Scope

This policy applies to all debts owed to Council.

This policy applies to all Council’s Officers when creating, collecting and providing for/writing off general debts owed to Council and to ensure Council manages those debts in sound credit management principles that permit the recovery of debtors in a timely manner.

Definition and Terms

Debt: refers to all/any amount owed to 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.

Service: refers to any matter giving rise to a fee or charge being made by Council including goods supplied or delivered, admission, sale of items, hire of facilities or items and or supply of information.

Legislation and Reference

Local Government Act, 2019
Local Government (General) Regulations 2021
Australian Accounting Standards

Policy Statement

General Debtors

1. Standard Payment Terms
   1. The Council’s standard payment terms for general debtors are 30 Days from Date of Invoice.
2. Credit terms and Reference Checks
   
   • Council will allow the issuing of credit terms (creation of debtor accounts) without reference check for all commercial transactions where the total value is less than $100.
     Where the value resulting from a commercial transaction exceeds $100, the following checks need to be undertaken before the issuing of a debtor’s account and provision of Council services:
     Lines of Credit < $1,000 per Month
     
     • Determine whether the debtor has previously used Council services or is a ratepayer and assess their payment history.
     • If determined to have a poor payment history for services or rates, then credit should be assessed on a case−by−case basis with the service unit.
     • If the debtor has not previously used Council services or is not a ratepayer then the Accounts Receivable Officer needs to satisfy themselves of the debtors risk through reference checks.
     Lines of Credit > $1,000 per Month
     
     • The Accounts Receivable Officer needs to ensure the debtor completes Council’s credit request form.
     • A credit limit equal to 2 months purchases will be initiated for a period of 6 months upon verification of credit references and application details.
     • Should the demonstrated payment history of an approved debtor highlight slow or poor credit history during the first 6 to 12 months, credit status should be reviewed.
     The Finance Manager will determine whether credit is provided to the potential debtor following assessment of the information gathered.
3. Issuing of Debtor Invoices
   
   1. The Accounts Receivable Officer will raise all invoices for service fees and charges in accordance with the Statement of Fees and Charges, as required to recover the cost of services rendered or to maintain/replace Council assets and for goods delivered.
4. Debt Collection of Process
   
   • Council will undertake all efforts to collect outstanding monies for all services rendered, works completed and goods delivered.
     The manager that requests the creation of the debtor and that provides the service is responsible for ensuring that Council is legally entitled to collect the debt when the invoice is raised.
     Business units must not provide the service until credit reference checks are completed and the debtor has been created (except where credit reference checks are not required).
     The Accounts Receivable Officer is responsible for debtor follow up and collection of outstanding debts and will liaise with manager on outstanding debts.
     The Accounts Receivable Officer is responsible for providing relevant business units with Aged Debtors Reports each month. The process for collecting overdue debtors’ accounts is as follows:
     • 30 Days The Accounts Receivable Officer must make a reasonable attempt to collect the outstanding balance keeping an accurate record of all action taken.
       The Accounts Receivable Officer will send the monthly statement to the debtor.
     • 60 Days The Accounts Receivable Officer will send a standard letter that explains the particulars of the debt and invites contact and/or payment−in−full by a set date.
       The letter also warns that, if there is no satisfactory response from the debtor, the matter will be referred to Council’s debt collection agency and that legal action may be taken to recover the debt without further notice.
     • 90 Days Council’s debt collection agency will be instructed to send a Final Demand Letter in an attempt to prompt a response from the debtor.
     • 15 Days > 90 After approximately 15 working days Council’s debt collection agency will refer unpaid debts back to Council for further instructions.
     • Final Action At this stage a recommendation is made to Council to decide on the appropriate course of action.
       This may be a Field Call or a Complaint depending on the amount of the debt.
       The Finance Manager may consider the option of writing off the debt and therefore make a recommendation to Council.
5. Payment Arrangements
   
   1. Payment arrangements will only be considered for debts greater than $1,000.
      Payments under the payment arrangement are to be received by the due date specified.
      Two payment defaults will result in immediate withdrawal of the payment arrangement and the steps for the 90 days apply immediately.
6. Freeze Credit
   
   • The Accounts Receivable Officer is responsible for monitoring all outstanding debtor balances.
     Where debtors do not make payment within 90 days and do not contact the Accounts Receivable Officer to enter special payment arrangements, the Finance Manager is authorised to freeze the debtor’s credit with Council.
     The business unit manager is to be advised immediately and must ensure that no further services are provided to the debtor.
     Services may be provided, and credit extended, where debtors with frozen accounts repay the amount outstanding in full and subject to an analysis of the credit.
7. Recognition of Debts for Provision or Write-Off
   
   • Council must assess the probability of collecting long outstanding debts and provide for the
     possibility of non−receipt of monies or writing off amounts as “Bad Debt”. The Finance Manager will undertake this assessment.
     The Finance Manager will determine the provision or write off of debt based on the following criteria:
     • All General Debtors sent for debt collection will be reviewed to determine their likelihood of receipt and provided as Doubtful Debt if deemed as uncertain.
     Doubtful debts will be raised against the service unit that provided the service. This will show as a cost that offsets their revenue in their budget.
     Bad Debts will be recognised only after all collection procedures have been exhausted. All debt write−offs will adjust the debtor’s account against the provision for doubtful debts.
8. Approval and Conditions for Writing-off Bad Debts
   
   • One of the following conditions must be satisfied before a debt can be regarded as irrecoverable:
     • The debtor cannot be located;
     • It is uneconomic to finalise recovery action due to the relatively small value of the debt and/or the potential costs of recovery;
     • The medical, financial or domestic circumstances of a particular debtor at that time does not warrant the taking of recovery action or further recovery action; and
     • Legal proceedings through the courts have proved, or on legal advice would prove, unsuccessful.
     • The debtor is bankrupt, in receivership or in liquidation.
     Further action may be taken if funds subsequently become available - Subsequent collection of all amounts provided for as Doubtful Debts or written off as Bad Debt will be recognised as revenue in the year in which they are received.
     All information relating to the process undertaken by Council staff in attempting to collect this amount will be available upon request.
9. Rates Debtors
   
   • Rates debtors are to be handled in the following ways:
     1. Less than 1 year A letter of demand to the principal ratepayer is to be sent by registered mail.
        Where registered mail is not feasible, an email with a read receipt to the debtor may be sent, and where this is not possible, standard mail may be used. The letter is to include the total amount outstanding including the accrued interest due to that date.
     2. Greater than 1 year A second letter of demand is to be sent which includes the total amount outstanding including the accrued interest due to that date and advises that should full payment for outstanding rates and interest not be received within four (4) weeks then an overriding statutory charge will be registered on their property/lease (S256,S257) and the registration authority will notify all persons with a registered interest in or over the land of the registration of the charge.
     3. Greater than 2 years Another letter of demand is to be sent to the principal ratepayer (and copies to any other person with a registered interest in or over the land or if the land is a pastoral or other lease granted by the Territory, the relevant Minister) which includes:
        1. the period for which rates have been in arrears
        2. the total amount currently outstanding on the land (including the accrued interest)
        3. warning that if that amount is not paid within a stated period (at least 1 month) after the date of the notice, Council will sell the land for non−payment of rates. This stated period is to be to the three year anniversary date of the due date of the oldest rate debt.
        If the whereabouts of the principal ratepayer is not ascertained, the notice must be published in the NT News and affixed to the front gate of the property.
     4. Greater than 3 years A letter of demand is to be sent to the principal ratepayer which includes the total amount outstanding including the accrued interest amount due to that date and advise that Council will be selling the property/lease due to non-payment of rates as per the Act and previous notice.
        Elected member approval will then be sought via a report to Council and when granted the appropriate process for sale of the land will then be initiated.
10. Responsibilities
    
    • The Accounts Receivable Officer is responsible for debt recovery and the Finance Manager authorised to negotiate payment arrangements.
      The Directors will have the discretion to write off any single debtor with total amount of less than $5,000.
      The Chief Executive Officer will have the discretion to write off any single debtor with total amount of less than $10,000.
      Any instance where this discretion is exercised will form part of the Reports to Council/Finance Committee and will contain a summary of the number of invoices and amount of debt written off.
      Where the value of a debt is greater than $10,000 and it is considered to be a Bad Debt, Council will receive a report prepared by the Finance Manager as to the nature of the debt, all collection processes undertaken to recover outstanding monies and a recommendation to write off the value.
11. Reporting
    
    • A report to Council will be provided as part of the Monthly Financial Reports detailing the following:
      
      • a summary of Aged Debtors;
      • a summary of Aged Rates.
      A report to the Director of Corporate Services and the CEO will provide a list of debtors outstanding over 90 days and will include an explanation of the status of the outstanding debts and the steps taken to recover these debts.

Review History