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Approve the write-off of accounts receivable due to Solano County over a twelve year period in the amount of $811,295 resulting from returned checks and unpaid permit fees, administrative enforcement orders, and code enforcement cases; Discharge the Department of Resource Management from further collection efforts; and Authorize the removal of these accounts from the County’s accounting records (4/5 vote required)
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Department of Resource Management recommends that the Board of Supervisors:
1. Approve the write-off of accounts receivable due to Solano County over a twelve year period in the amount of $811,295 resulting from returned checks and unpaid permit fees, administrative enforcement orders, and code enforcement cases (4/5 vote required);
2. Discharge the Department of Resource Management from further collection efforts; and
3. Authorize the removal of these accounts from the County’s accounting records.
SUMMARY:
The Department of Resource Management (Department) is charged with pursuing non-payment for permit fees, administrative enforcement orders, code enforcement cases and the reimbursement of returned checks. The Department collects several revenue sources listed under Licenses, Permits and Franchise to offset the cost of providing services to residents and businesses throughout the county. These revenues total an average of $8,000,000 per year and are collected for service delivery by divisions, including the Environmental Health and Building divisions. The various types of permits and fees which have not been fully collected are described below, and the request for write off totals $811,295 for the past 12 years, representing an average of $67,608 or roughly .85% in uncollected fees per year. This request addresses a 12-year span of recovery attempts and is requested by the Auditor Controller’s Office in order to clean up Department accounting records.
FINANCIAL IMPACT:
The costs associated with preparing the agenda item are nominal and are included in the department’s FY2023/24 Working Budget.
There is no additional cost to approve the write-off of these delinquent accounts. The amounts are for unpaid permits, code enforcement cases, administrative enforcement orders, returned checks, and accounting journal entry corrections over a period of twelve years. Those costs have already been incurred in the years 2010 to 2022. The Department and/or Pacific Credit Services (PCS), the department’s collection agency, have exhausted all recovery efforts for these amounts.
DISCUSSION
Environmental Health Division - Permits
The Department’s Environmental Health division invoices businesses and individuals annually for permit fees. While on average 97% of permittees pay their annual invoices, about 3% do not. Except for food facilities, delinquent businesses continue to operate without a valid permit. The Department sends an initial invoice sixty days prior to a permit’s annual expiration date. If payment is not received, a notice is sent on the date of expiration. The account becomes delinquent, and a notice is sent 30 days after expiration, 60 days after expiration, and 90 days after expiration. Payment is pursued through mail, email, and phone calls. If all attempts fail, the County pursues collection through a contracted collection agency, Pacific Credit Services (PCS). PCS uses their available resources to pursue collection. The Department periodically monitors progress with PCS. If any amounts are recovered, PCS forwards collections to the Department.
Of the accounts sent to collections from 2010 through 2019, there were 393 businesses and individuals for which PCS has exhausted all collection options. Some accounts no longer have valid leads, or the debtor has no income or assets. Some have claimed bankruptcy, and most are beyond the statute of limitations. These uncollectable accounts from unpaid annual Environmental Health permits total $448,432.95.
Environmental Health Division - Administrative Enforcement Orders
When the Hazardous Materials program determines a business is out of compliance with California Environmental Protection Agency regulations, depending on the severity of the non-compliance, they may issue an administrative enforcement order requiring the violation be corrected and impose a penalty fee. While most businesses come into compliance, there were two uncollectable accounts sent to collections in 2010 and 2011 totaling $71,010.
Building Division - Code Enforcement
Occasionally the County incurs significant costs for code enforcement cases and passes those costs along with penalties onto the property owner. If the County is not reimbursed, a lien is placed on the property, and the payment is received when the property is sold. However, even upon transfer of ownership, there are some situations where the total amount owed is not able to be recouped by the County. There are two uncollectable code enforcement cases from 2010 and 2013 totaling $73,930.07.
Returned Checks
When a customer’s check is returned from a bank due to insufficient funds, an accounting entry is made to track the returned check. The Department attempts to collect repayment from the customer and is usually successful. Upon receiving reimbursement, the accounting entry should be reversed. If valid payment is not received, the accounting entry should be reversed along with the recorded revenue. Unfortunately, this process was not followed consistently for a number of years, and there were many times the reversal accounting entry was not performed. From 2008 through 2022, the returned checks account accumulated a balance of $217,921.43, most of which has either already been recouped or the customer’s permit was never issued due to an unpaid balance, leaving this amount uncollectable. Since 2022, all accounting entries are handled immediately, and this condition has been resolved.
Authorization to Discharge
Government Code §25257 allows a County officer to request a discharge from accountability for the collection of amounts due and payable to the County if such amount is too small to justify the cost of collection, the likelihood of collection does not warrant the expense involved, or the amount thereof has been otherwise lawfully compromised or adjusted. Therefore, the Department of Resource Management is requesting the Board of Supervisors approve the write-off of the receivables from the attached list of debtors (Attachment A) in the amount of $593,373.02 and the returned check balance of $217,921.43, for a total of $811,294.45, and authorize the Department of Resource Management to remove these accounts from the County’s accounting records.
ALTERNATIVES:
The Board could choose not to write-off these accounts and require the Department of Resource Management continue to maintain these accounts in the accounting records. However, continuing to maintain the accounting records for these uncollectible accounts is burdensome and recovery is no longer possible.
OTHER AGENCY INVOLVEMENT:
The Department worked with PCS to obtain the most current information available on these delinquent accounts.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION