2 - Collections

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Credit Worthiness

Credit Granting and Control Directive No: 31011. INTRODUCTION

The Government grants credit in order to support program delivery. Inorder to minimize bad debt losses, Government departments and publicagencies must control credit granting carefully, following good businesspractices. Credit must be granted selectively, based on borrowercreditworthiness, except where directed otherwise in legislation,regulation or by order of the Comptroller General. The Governmentnotifies credit applicants that it reserves the right to provide creditinformation to credit bureaus.

The Financial Reporting and Collections Section, Financial ManagementBoard Secretariat (FMBS), is available to advise and assist Governmentdepartments and some public agencies in assessing the creditworthinessof potential borrowers. It gathers, analyzes, and provides creditinformation from varied sources inside and outside the Government,including credit bureaus. It may, if appropriate, assist departments andpublic agencies with collections


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Credit Worthiness

2. DIRECTIVEExcept as permitted in the following Provisions, credit may be granted onlywhen there is a reasonable assurance of timely recovery from the potentialdebtor.

3. PROVISIONS3.1 Credit Information3.1.1 Before a Government department or public agency issues goods,services, or money on credit, makes a contract prepayment oraccountable advance, or issues goods on consignment, the approvingofficer shall:

a) ensure that the potential debtor is not on the listing of write-offsmaintained by the Financial Reporting and Collections Section of theFMBS (see 3.13 and 3.14);b) ensure that the potential debtor or consignee is sufficientlycreditworthy; and,

c) be accountable for credit granting decisions.


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Credit WorthinessDirectors of Finance and Program Managers are:

d) accountable for effective credit granting and control; and,e) responsible to ensure that credit approving officers in their

departments and public agencies have the information andresources necessary to make good credit-granting decisions.

3.2 Application for Credit3.2.1 Every credit application must provide enough information on the

applicants credit history, current financial position and current addressto enable the approving officer to determine the applicants ability andlikelihood to fulfil the repayment terms.

3.2.2 Every credit application from a business entity must provide the name

and address of the business entity and every individual who is a principalof that entity.3.2.3 Credit applicants shall be notified that, as a condition of granting

credit, the Government reserves the right to provide to established creditbureaus the details of every credit application, the details of any creditgranted, and the details of the debtors previous, current, and futurerepayment performance. Credit must not be granted without such notice.


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Delinquent Accounts Receivable

Collection of outstanding receivablesmust be Actively and VigorouslyPursued, so that the credibility ofprograms, which generate revenues andrecoveries, may be maintained andreceivables may be realized in cash asquickly as possible.


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Collection of Delinquent Accounts ReceivableDirective No : 3102.The Office of the Comptroller General, through the

Financial Reporting and CollectionsSection, Financial Management Board Secretariat

(FMBS), shall collect del inq uent accou nts rece ivable inaccordance wi th the fo l lowin g Provis ion s and p rovideGovernm ent depar tments and public agencies withadvice on record keeping and procedures for thepurpose of collecting receivables and o verdu ereceivables.


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PROVISIONS4.1 Responsible Government departments and

public agencies shall collect all receivables andov erdu e receivables pro m ptly, eff ic ient ly, and in atho rough ly accountable manner. Unless directedotherwise within this 3103 series of directives,departments and regional offices of the FMBSshall transfer immediately to the FinancialReporting and Collections Section, FMBS, thecollection of:

a) any del inqu ent accou nt rece ivable ; and ,b) any receivab le , ov erdu e receivable , or d el inq uent

acc ou nt receivable tha t is o w ed by a debtor whohas begun bankruptcy or liquidation proceedings.


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4.3 Collection procedure for receivablesa) Except as described in (e) below, an invoice must be prepared,

recorded, and delivered to the debtor as soon as a receivable iscreated and th e debtor m ust b e given 30 calendar days from thedate of the invoice to return payment to the Government.

b) If payment is not received within in 30 days of the date of theinvoice, the responsible department or public agency shallattempt to collect by notifying the debtor in writing that payment isoverdue and payable immediately. At this point, the debt hasbecome an ov erdue receivable.

c) If payment is not received during the next 30 days, i.e., within 60days of the date of the invoice, the responsible department orpublic agency shall attempt to collect again by notifying thedebtor in writing that payment is now 30 days overdue andpayableimmediately.


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d) If payment is not received during the next 30 days, i.e., within 90 days ofthe date of the invoice, the overdu e receivable becom es a del inqu entacco un t receivable. The responsible department or public agency shall:

i) attempt to collect again by notifying the debtor in writing that payment isnow 60 days overdue and payable immediately; and,

ii) transfer collection to the Financial Reporting and Collections Section,FMBS, immediately, as directed in 4.4 below. (For departments only.Public Agencies will still be responsible for collection of their delinquentaccount receivables).

e) Invoices are not required for receivables wi th in pre-determined p ayments t reams such as lease payments. Still, departments and public agenciesshall maintain aged schedules of accounts for non-invoiced receivabless im i lar to tho se used for inv oiced receivables . As a m eans to t r iggerautom ated accoun t agin g in the Financia l Information System,departments may elect to use the invoicing mechanism to generateperiodic statements or reminder notices in lieu of true invoices.


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4.4 Unless directed otherwise within this directive, departments andregional offices of the FMBS shall transfer immediately the collection ofany del inqu ent accou nt receivable to the Financial Reporting andCollections Section, FMBS. The public officer responsible for the transfershall provide a copy of the record of all action taken to collect the amountowed, including a record of any partial payment received, and shall verifythat:

a) a debt is still owed to the Government;b) four documented attempts to collect have been made, i.e., an undisputed

initial invoice has been supplied to the debtor and three subsequentwritten overdue payment notices have been sent at 31, 61, and 91 days

past the invoice date;c) the actual amount owing is accurate, any partial payment having been

deducted; and,d) in the case of a disputed or refused invoice, the debtors statements have

been considered and a reasonable attempt has been made to agree onthe amount owing.


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Setoff Action

Financial Administration Act

Section 22(1) The Comptroller General may retainmoney by way of deduction or setoff of any moneypayable to a person by the Government out of the

Consolidated Revenue Fund where:a) That person owes money to the Government

b) The Government has made an overpayment to thatperson

c) That person received an accountable advance and hasnot repaid or accounted for it.


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Setoff Action

Directive Title: Setoffs Directive No: 31063. PROVISIONS3.1 The Government may set off part or all of a debt,

including a non-monetary obligation, which a personowes to the Government when:a) payment of the debt or fulfillment of the obligation is

overdue and has not been forgiven; or,b) the person has commenced bankruptcy or

liquidation procedures.An overdue repayment of an accountable advance is an

overdue debt.


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Setoff Action

3.2 The Comptroller General may set off overdue debt which a person owesto a public agency by deducting from or withholding payment of debtwhich the Government owes to that person. Public agency is defined inthe Financial Administration Act.

3.3 The Government has a statutory right to set off an overdue debt which apublic agency owes to the Government. (A public agency is a person bydefinition.)

3.4 The Government may set off a Government employees debt to theGovernment by deducting or withholding salary, wages or other earningsin accordance with the Collective Agreement provisions when:

a) the employee has not paid a Government invoice or bill when due;b) the employee has resigned and owes a debt to the Government;c) the employee agrees to deduction from salary payment;d) the employee has not fulfilled an obligation due to the Government; or,e) the debt has been written off pursuant to Section 24 of the Financial

Administration Act (write-off does not constitute remittance, satisfactionor forgiveness).


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Doubtful Accounts, Write-Offs & Forgiveness

DEFINITIONS

Allowance fo r Doub t fu l Accou ntsAn allowance for doubtful accounts is the best estimate of theamount of a debt, for which there is not reasonable assurance ofcollection considering all relevant factors. The allowance providesfor a valuation of receivables at their net realizable value. It does notrepresent a write-off of the accounts receivable.

Write-offThe removal of a receivable from the accounts of the Government ofthe Northwest Territories. Unlike forgiveness or remission, a write-off does not cancel the debt or the Government's right to collect.

ForgivenessThe deletion of all or part of a debt that is rightfully due to theGovernment. Forgiveness cancels the debt and the Government'sright to collect. Forgiveness shall not apply to a debt resulting froma tax or penalty. For a tax or penalty, remission is required.


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INTEREST

The new Financial System will be able to calculateand charge interest on delinquent accounts.

This will change the dynamics of collections in thefuture, debtors will want the ability to forgo ornegotiate interest charges or they may not remit theinterest charges when payment is made.

FAM will require updating to deal with outstandinginterest when the new system goes live.


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QUESTIONS

If you have questions, please contact any of thefollowing Collectors:

Val Pond Senior Collection Officer 920-3445Mary George Collection Officer 920-6145Julie Forget Collection Officer 920-8002Janice Hagen Encumbrance Officer 920-8923


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References

Quick References for Collections

Financial Administration Act Sections 12 & 22

Financial Administration ManualDirectives 2700, 2702, 2703, 2704, 2705

Directives 3100, 3101, 3102, 3103, 3104, 3105, 3106

Write-Off & Forgiveness Listing J:\FMBS\Prior Write-offs and Forgiveness List

Documents

2 - Collections