Business Procedures Manual

Fiscal Affairs Division

10.3 Uncollectible Accounts

(Last Modified on April 9, 2019)

Generally accepted accounting principles (GAAP) requires a determination of accounts receivable deemed uncollectible. These amounts must be reported as an Allowance for Doubtful Accounts in the general ledger (Actuals ledger) and on the institution鈥檚 annual financial statements.

Uncollectible amounts must also be accounted for in State statutory (budget) basis reporting, which requires a different presentation than GAAP reporting. In Statutory Basis budget compliance reporting (BCR), the uncollectible amounts are recorded as reserves of fund balance instead of Allowance for Doubtful Accounts. Year-end budget reporting instructions necessary provide conversion entries.

10.3.1 Provision for Uncollectible Accounts (Bad Debts) GAAP Basis

(Last Modified on April 9, 2019)

In most cases, the Governmental Accounting Standards Board (GASB) provides that uncollectible receivables should be treated as a contra asset (Allowance for Doubtful Accounts) and contra-revenue.

Uncollectible receivables, that are a result of revenue generating activities, should be recorded as a contra revenue so as to reduce the related revenue accounts. Tuition and fees would be an example of revenue generating activities.

Note:An exception to this general rule will be when an uncollectible is not related to revenue generating activity (non-revenue receivable). In those instances, a bad debts expense will be recorded as the offset to the Allowance for Doubtful Accounts. Vendor Overpayments would be an example of non-revenue activity.

When to record as Allowance for Doubtful Accounts

Allowance for Doubtful Accounts will be recorded in the Actuals Ledger in accordance with generally accepted accounting principles, as follows:

  1. Once internal collection efforts prove unsuccessful and/or once accounts receivable have aged more than one hundred eighty (180) days from the due date, the receivables in question should be recorded as an Allowance for Doubtful Accounts.
  2. If an invoice is determined to be uncollectible before the one hundred eighty (180) day past due date, that amount should immediately be recorded as Allowance for Doubtful Accounts.

10.3.2 Statutory (Budget Basis) Reserve for Compliance Reporting

(Last Modified on April 19, 2019)

An Allowance for Doubtful Accounts in not recognized under statutory/budget basis reporting. Accounts receivable must be reported at the total gross amount due, not netted for uncollectible amounts. However, the uncollectible portion should be recorded on the Budgetary Compliance Report (BCR) as a reserve of fund balance (Reserve for Uncollectible Accounts Receivable).

Determining the Statutory (Budget Basis) Reserve

As a general rule, the Budget Basis reserve should be the same amount as the Allowance for Doubtful Accounts reported on the GAAP basis, however if an institution does not have adequate unreserved fund balance in the appropriate budget basis fund to reserve the total amount reported on the GAAP basis, the fund cannot be reserved into a deficit position, therefore, the Budget Basis reserve must be calculated as follows:

  1. When reporting accounts receivable on the budget basis, the uncollectible portion may only be reserved to the point where available unreserved fund balance (on budget basis) is reduced to a zero balance. In these instances, the Budget Basis 鈥淩eserve for Uncollectible Accounts Receivable鈥 on Statutory Basis statements will be less than amounts reported as Allowance for Doubtful Accounts on the GAAP basis.

If an institution finds itself in a position where fund balance is not sufficient to cover budget basis uncollectible amounts, a funding plan must be devised to address the reserve inequity on the Budget Basis. The institution鈥檚 original budget submission must contain an amount set aside for this purpose. Institutions should budget this activity within a unique department created to clearly identify the planned contributions towards reducing the reserve inequity. Along with the original budget, institutions will be asked to submit a plan of funding projections for future years until the remaining reserve inequity is funded. This plan will be reviewed during budget development and discussed during the annual budget hearing.

10.3.3 Assigning Uncollectible Receivables to Third Party Collection Agencies

(Last Modified on April 9, 2019)

After internal collection efforts have been determined ineffective, amounts due should be turned over to a collection agency. See Section 10.6.1 for requirements on past due notices. Once the collection agency notifies an institution that collection efforts have been exhausted, amounts that are less than or equal to $3,000, should be forwarded to SAO requesting permission to write-off the uncollectible amounts. See section 10.6.2 for additional information on format of write-off requests. Generally, uncollectible amounts should only be assigned to a collection agency for 12 months, unless there is evidence that collection is imminent. After 12 months, accounts should be assigned to another collection agency or returned to the institution. Institutions may rotate to alternative collection agencies as long as amounts are deemed collectible. However, once collection efforts are no longer economically practical, they should be removed from third party collections.

10.3.4 Write-Off of Uncollectible Accounts Receivable

(Last Modified on April 9, 2019)

The Constitution of the State of Georgia generally prohibits writing off obligations due to the State. However, OCGA Section 50-16-18, provides state agencies with a mechanism for writing off selected obligations of an immaterial nature when the collection has been deemed unlikely after appropriate effort has been made, and costs of continued collection efforts would exceed value owed to the institution.

The legislation authorizes units of the 六合彩资料大全 with a means of discharging any obligations of $ 3,000 or less providing that appropriate collection efforts have been unsuccessful. Therefore, when accounts receivable of $3,000 or less are ultimately determined uncollectible and all required due diligence collection efforts have been exhausted, the institution should request permission from the SAO to officially write off uncollectible amounts. Once the SAO approves request, the uncollectible amount(s) should be eliminated from the accounting records of the institution.

Note: Due diligence is defined as the performance of both:

    • Collection efforts by the institution according to the minimum guidelines in Section 10.6, and
    • Collection agency efforts, subject to cost vs. benefit assessment by the institution.

Write-off of a receivable is based upon the aggregate amount due from a debtor, not on an individual transaction. Also, if an institution uses multiple subsystems to capture accounts receivable balances, the amounts in the various subsystems must be aggregated by student/vendor. If aggregated amounts exceed $3,000, write off may not be requested. For example, if a student owes a total amount $4,000, which is made up of several transactions from various subsystems, where no single transaction exceeds $3,000, then, no portion of the $4,000 may be written-off.

The writing off of federal receivables, resulting from contract and grant activity, will be treated as disallowed charges. Therefore, instead of actually writing off these amounts, they will be funded from indirect cost recoveries (revenue). The account number/code for indirect cost recoveries-federal is 472100.

Other receivables from the federal government related to revenue generating activities such as tuition, fees, veterans鈥 processing allowances, etc., that result in uncollectible accounts will be handled in the same manner as uncollectible amounts discussed in section 10.3.1.

For nominal uncollectible balances, the institution may determine that it is not cost effective to pursue collection beyond a certain point. At that point, those amounts should either be funded from available funding sources or submitted for write-off. See section 10.6.1 for more information on required due diligence for nominal balances.

Receivables due from another state agency, foundation or another unit of the university system should not be written off. These receivables should be worked until collected. The 六合彩资料大全 Office of Fiscal Affairs should be contacted for assistance if item is over 120 days old.

Journal Entries

GAAP Basis 鈥 AFR Reporting 鈥 Actuals Ledger

1)Allowance for Doubtful Revenue (Contra Revenue)3,000 
           Allowance for Doubtful Accounts (Contra Asset) 3,000
 To reverse revenue and set up contra asset for A/R after internal collection efforts have been exhausted. This entry occurs at point institution considers amount due to be likely be uncollectible, normally around 180 days when sent to collection agency.
2)Allowance for Doubtful Accounts (Contra Asset)3,000 
           Accounts Receivable 3,000
 To perform actual write-off of A/R after approval received from SAO.
Note:If collections are made after recording the allowance entry (1) above, the allowance entry should be reversed and revenue recognized against the receivable balance. If recovery occurs after the revenue has been removed from the accounting records, entries (1) and (2) above, the amount recovered should be recognized as miscellaneous revenue in period received.

Any recoveries, received in a subsequent period, which are associated with non-revenue generating accounts receivable write-offs (vendor overpayments) will also be reflected as miscellaneous revenue in period received.

Statutory Basis (Budget Basis) Reporting 鈥 BCR Ledger

BCR reporting instructions provides a list of entries necessary to convert from GAAP reporting to Statutory Basis reporting. Within that listing, entries BCR 6 through BCR 10 are necessary to convert the receivables to Statutory Basis. In essence, these entries negate the effects of the Allowance for Doubtful Accounts and reports Accounts receivable on a statutory (grossed up) basis, with an offsetting Reserve for Uncollectible Accounts Receivable as discussed is section 10.3.2 above.

Statutory Basis entries are only required for funds with lapse provisions (10000, 10500, 10600 and 50000). For consistency in reporting, schools may choose to report accounts receivable for the remaining budget basis funds (14000, 15000 and 16000) on the Statutory Basis.

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