TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Ruben Romero, Accountant
SUBJECT:
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Rescind Resolution No. 08-1916 and Change the Uncollectible Receivable Policy to an Administrative Policy
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RECOMMENDATION
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Adopt Resolution No. 25-4834, A Resolution of the City Council of the City of Murrieta, California, Rescinding Resolution No. 08-1916 and Change the Uncollectible Account Receivable City Council Policy to an Administrative Policy.
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PRIOR ACTION/VOTE
On January 15, 2008, the City Council adopted Resolution No. 08-1916, approving the Policy for Uncollectible Accounts Receivable (Vote: 5-0).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
The City of Murrieta (City) currently has outstanding delinquent accounts. As is the case with all municipalities, the collection of uncollectible accounts receivable is an ongoing occurrence. The City established its initial policy in 2008, recognizing the importance of sound fiscal management by ensuring that amounts owed to the City were collected through diligent efforts.
The current policy outlines procedures for staff and requires City Council approval for write-offs exceeding $50. After the City has completed its due diligence, the Director of Finance is authorized to write off amounts of $50 or less. As part of best management practices, periodic updates to policies and procedures are necessary to enhance efficiency and align with industry standards.
Following a review of uncollectible accounts receivable policies from other municipalities and best management practices, the Finance Department found that most policies were administrative and approved by the City Manager. As a result, staff requests City Council authorize this as an administrative policy.
Industry comparisons also indicated that municipalities generally allow the Director of Finance to approve write-offs ranging from $1,000 to $5,000, while City Managers may approve amounts between $5,000 and $10,000. Given these benchmarks, the Finance Department opted for a more conservative approach to ensure fiscal responsibility. The proposed policy suggests write-off thresholds be established as follows:
• Write-offs up to $1,000 may be approved by the Director of Finance;
• Write-offs up to $5,000 may be approved by the City Manager; and
• Write-offs exceeding $5,000 will require City Council approval.
Additionally, the proposed policy clarifies the write-off criteria for a past-due account and requires an annual report to be provided to the City Council summarizing all written-off accounts.
The Finance Department is actively issuing notices to past-due accounts in compliance with the proposed policy. Additionally, a list of past-due accounts that qualify for write-offs is being compiled for accounts at the Director of Finance and City Manager levels, which will be finalized by the end of the Fiscal Year 2024/25. A report of the accounts that meet the criteria for write-off for Fiscal Year 2024/25 will be brought to the City Council.
The proposed policy has been reviewed and approved by the City Attorney. It has also been reviewed by the City Manager. Staff recommends reclassifying the policy as an administrative policy, so that any future amendments will be reviewed and approved by the City Manager.
FISCAL IMPACT
There is no fiscal impact associated with the recommended item. The policy update may lead to the recognition of bad debt expense and adjustments to the amounts reported as accounts receivable on the City's balance sheet.
ATTACHMENTS
1. Resolution No. 25-4834
2. Uncollectible Accounts Receivable Administrative Policy - Clean Version
3. Uncollectible Accounts Receivable Administrative Policy - Redline Version
4. FY08 Uncollectible Accounts Receivable Policy and Resolution No. 08-1916