STATE BOARD FOR COMMUNITY COLLEGES AND OCCUPATIONAL EDUCATION

Implementation of Accounts Receivable Collections Policy

BP 8-190

APPROVED: June 10, 2015
EFFECTIVE: July 1, 2015

REFERENCE: C.R.S. 23-5-113

APPROVED:

/ Richard E. Martinez, Jr. /
Richard E. Martinez, Jr., Chair

Policy Statement

In 2011, all higher education governing boards were granted exemptions and flexibility from state rules and protocol from the Department of Personnel and Administration (DPA), under HB 11-1301 and SB 10-003. The exemptions and flexibility included no longer requiring the approval of the State Controller for collections of loans and outstanding obligations for State Institutions of Higher Education when a governing board adopts and follows their own policy for such collections, including write-offs of debts or obligations. The standardization of these processes at the System level will allow for greater efficiencies, result in consistencies for students across the System Colleges, and allow for optimum automation of different points of the processes into the future that will lead to time and resource savings over the long term.

Scope

System Controllers, in conjunction with feedback from the System Business Officers, have designed the Accounts Receivable (AR) Collections Policy (attached as Exhibit A) to ensure systematic application of System AR recognition in our financial statements and collection processes, using the State Department of Personnel and Administration (DPA) Accounts Receivable Collections Administrative Rule as its basis. The attached AR policy will maximize timely and efficient collection of funds owed to the System.

Procedures

The attached Exhibit A constitutes and, is intended to memorialize formally, the written
Accounts Receivable and Collections policy that the System will follow in connection with the recording and collection of debts owed to the System. Furthermore, the policy contains reference to a System Accounting Procedure (SAP) that details the specific steps and criteria to apply in accordance with the policy requirements.

Colorado Community College System

ACCOUNTS RECEIVABLE COLLECTIONS POLICY

Effective July 1, 2015

PURPOSE

The purpose of these Accounts Receivable Collections Rules and Procedures (“A/R Rules”) is to establish policies and procedures for the collection of debts due to the Colorado Community Colleges System, a Higher Education Institution within the State of Colorado. The Colorado Community College System includes Arapahoe Community College, Community College of Aurora, Community College of Denver, Colorado Northwestern Community College, Front Range Community College, Lamar Community College, Morgan Community College, Northeastern Junior College, Otero Community College, Pueblo Community College, Pikes Peak Community College, Red Rocks Community College, Trinidad State Junior College, and the System Office herein after referred to as ‘the College’.

RESPONSIBILITY

It is the responsibility of the College’s Chief Financial Officer (“CFO”) (or the College Controller if delegated in writing) to ensure ongoing compliance with applicable statutory requirements and these A/R Rules.
The CFO shall:

1. Ensure that the college is following System Accounting Procedures (SAP’s) related to efficient debt collection and write-off, compromise, release of debt procedures for delinquent accounts including the processes for handing bankruptcy claims by debtors.
2. Seek the advice and approval of the System Office, when required, concerning the collection of debts due the College.
3. Subject to applicable statutory requirements, and with the consent of the System Controller, when required, write-off, release, or compromise any debt due the College.

DEFINITIONS

Unless otherwise stated in these Rules:
“Banner” means the ERP (enterprise resource planning) software utilized by the College in the administration of the Finance and Accounts Receivable Departments and other campus organizations for accounting, employee, student, and other campus-related operations.
“CFO” means the Chief Financial Officer of the College.
¹¹Claims in the Process of Collection” means any {1} Student debt in the possession of the College for thirty (30) days past census date of the subsequent term, or non-student debt in the possession of the college for ninety (90) days, or {2} Debt on which a civil action has been commenced for the purpose of its collection.
“Collection Agency” means Colorado Collection Services or any System approved private collection agency retained by the College for the purpose of providing services for the collection of a Debt.
“College” means the Arapahoe Community College, Community College of Aurora, Community College of Denver, Colorado Northwestern Community College, Front Range Community College, Lamar Community College, Morgan Community College, Northeastern Junior College, Otero Community College, Pueblo Community College, Pikes Peak Community College, Red Rocks Community College, Trinidad State Junior College, and the System Office.
“College Bursar” means any employee position determined by the college to manage the debt collection process.
“Colorado Tax Refund” means a State of Colorado tax refund, which the State Department of Revenue determines to be due to any individual taxpayer.
“Compromise of Debt” means a determination by the System Controller to absolve a debtor of responsibility for payment of an obligation to the College in exchange for value received by the College that is less than the account receivable balance owed. Compromise results in removal of a part or all of an account receivable balance from the general ledger and related subsidiary ledgers of the College. Compromise results in termination of collection efforts for the portion or all of the account receivable balance subject to the negotiated compromise. Compare to Release of debt and Write-off of debt.
“Debt” means any liquidated amount due and owing the College which has accrued through contract, subrogation, tort, or operation of law regardless of whether there is an outstanding judgment for that amount. This includes any overpayment to student or employees.
“Debtor” means any individual, corporation, or business owing money to, or having a delinquent account with, the College, whose obligation has not been adjudicated, satisfied by court order, set aside by court order, or discharged in bankruptcy.
“Delegate” means a College employee delegated to act for or represent another in the course of employment.
“Due Date” means the date on which a debt or amount must be paid to the College.
“Liquidated Claim” means a claim made for an agreed upon amount or a claim that can be determined precisely by operation of law or by the terms and conditions of an agreement or writing.
“Outside Counsel” means a private attorney or attorneys retained by the College for the purpose of providing legal services for the collection of a debt.
“Past Due” means a debt or amount that has not been paid by close of business on the due date.
“State” means the State of Colorado. “Release of Debt” means a determination by the System Controller to absolve a debtor of all responsibility for payment of an obligation to the College with no consideration received by the College. Release results in removal of an account receivable balance from the general ledger and all subsidiary ledgers of the College, and it terminates all collection efforts. Compare to Compromise and Write-off.
“System Controller” means the Controller of Colorado Community Colleges System
“Tax Offset” means a statutory method of collection of an overpayment of Colorado taxes as a payment in full, or partial settlement, of a debt.
“Write-Off of Debt” means the removal of an account receivable from the College’s general ledger. The account shall remain as a record in the College’s subsidiary accounts receivable system. Write-off does not absolve the debtor of responsibility for the obligation or terminate collection efforts by the State. Write-off shall only be approved by the System Controller or his/her delegate. Compare to Compromise and Release.
“Vendor Offset” means a statutory method to withhold and collect disbursements from the State to a vendor as a payment in full, or partial payment of a debt.
A “writing” or “in writing,” means a hard copy document or, unless expressly state, an electronic document such as email.

PROCEDURES

The College shall maintain collection procedures to collect all debts in an efficient and timely manner.

DESIGNATED RESPONSIBILITY

If delegated in writing, the College Controller may act on behalf of the CFO to manage the collection process, procedures, and operations.
The College Bursar is the individual responsible for the collection of the loans and accounts receivable for student-related debt.
The College’s General Accounting Department, under the direction of the College Controller, will be responsible for collection of overpayments to vendors, overpayments to sub-recipients, and amounts due from other non-student related debts.

DETERMINATION OF PAYMENT PLAN

At or prior to the time the College furnishes goods or services, or loans money, it shall establish with the recipient, a definite schedule for repayment of the Debt. The College shall clearly communicate payment plan expectations and the consequences of non-payment including additional fines, fees or charges. The recipient or responsible party shall acknowledge in writing an understanding of the obligations under the plan.
Arrangements for repayment shall be reasonable and timely in accordance with the SAP’s.

INTERNAL COLLECTIONS

In pursuance of the collection of the Debt, the General Accounting Department shall at a minimum:  Make contacts in writing to notify the debtor of past due amounts, confirm the validity of the debt, and provide the debtor with an opportunity to dispute the debt.

DEBTS REFERRED TO COLLECTION AGENCIES

If the Debtor has not paid their debt when due and internal methods used to collect the Debt have not been successful or efforts to locate and/or contact the Debtor have been unsuccessful, the College shall take appropriate measures to collect the Debt. These measures may include:

1. Referring the Debt to a Collection Agency
2. Compromising all or part of the debt, with System Controller approval, where it appears advantageous in order to liquidate the debt, and/or

When a Debt is referred to a Collection Agency, the College shall retain the debt on its books.

REQUIREMENTS RELATED TO OUTSIDE COLLECTION AGENCIES

Before utilizing Collection Agencies to collect a debt, the College shall determine that the debt is a liquidated claim.

Collection Agencies shall obtain prior approval from system office legal counsel before a civil action is filed for the purpose of collecting a debt.

Costs and expenses associated with any civil action filed on behalf of the College, must be pre-approved by system office legal counsel.

A Collection Agency that has been assigned a debt for collection shall not compromise or release any such debt without prior written approval of the System Controller.

Collection Agencies shall consult with System Office General Counsel for legal advice on questions of practice, policy, and procedure related to the legal representation of the College and shall not represent the College or the State of Colorado in any litigation unless authorized to do so.

Every Collection Agency utilized by the College to collect a debt shall agree to comply with the applicable provisions of State and Federal statute, regulation or rule regarding the collection of a debt.

The amount retained by Outside Counsel or by a Collection Agency for collection of a debt shall be at a negotiated rate and shall not exceed the percentage amounts set in CRS §23-5­113(1).

REMITTANCE OF PROCEEDS RECOVERED FROM DEBTS AND REPORTING REQUIREMENTS

Collection Agencies utilized to collect debt shall account for and remit to the College the net proceeds recovered on such Debts at least once every thirty (30) calendar days. Collection Agencies shall provide the College a written report or access to electronic reports, by month and by fiscal year to date, of collection activities including, at a minimum, the following information with respect to each debt:

• The reference number or student ID number, dollar value of each debt, the name of the debtor, the nature of the debt, and the month in which the debt was received for collection.
• All amounts actually collected on each debt, or a statement that the debt was adjusted or that a debt is not collectible, if such is the case.
• The average total debt balance of all accounts, dollar amount collected, recovery rate, and commission percentage and amount. All figures shall be related to the month in which the debt was received.

Any threatened or actual legal action by the debtor naming the State, the College or their officers, employees or agents as parties.

DEBT OFFSET AGAINST TAXPAYER’S COLORADO TAX REFUND

The College will certify and submit to the Colorado Department of Revenue a list of Debtors who owe past due accounts to the College to determine if the Debtor is due any Colorado tax refunds against which the Debt may be offset.

The College shall review and reconcile past due accounts sent for tax offset each month. Updates to balances, changes of account balances due to received payments, and balances paid in full shall be submitted to the Colorado Department of Revenue as soon as possible when changes occur.

NOTIFICATION OF INTENT TO OFFSET

The College shall make a final determination so that the Debtor may not dispute the validity of the Debt at the tax offset hearing, in accordance with applicable State statutes.

The Department of Revenue (DOR) notifies the debtor on behalf of the College in writing of the State’s intent to offset. The notice states the name of the debtor, the manner in which the debt arose, the amount of the debt, and the intention to offset the Colorado tax refund against the debt. The notice shall fully describe the manner in which the debtor/taxpayer may request a hearing if they choose to dispute the debt.

APPORTIONMENT OF REFUND

Where a joint return has been filed in which only one person is the debtor, the DOR shall notify the taxpayer that the non-debtor spouse may file an “Innocent/Injured Spouse” claim for payment. Based upon such claim, the DOR shall issue a refund to the non-debtor spouse. For such computation, the DOR shall apportion the overpayment based on the respective shares of the Colorado adjusted income. If an Innocent/Injured Spouse claim is processed by the DOR after the offset has occurred, DOR reduces further compensation to the College. The College removes the payment from the debtor account and initiates further collection efforts.

DISPOSITION OF PROCEEDS COLLECTED

If a debtor is determined by the DOR to be entitled to a refund, the DOR shall transfer to the State Treasury the lesser of the refund amount or the amount owed by the debtor. The State Treasurer shall disburse such amount to the College. The Debtor has the right to request an agency review of the offset, in writing, within thirty (30) calendar days of the Debtor’s notice from the Department of Revenue. The debtor’s account with the college will remain in suspense for thirty (30) calendar days after a tax offset has been received by the College.

FINAL DISPOSITION AND NOTICE OF OFFSET

At the end of the thirty {30} day suspense period as mentioned above, the College shall make final disposition of the offset by refunding any remaining balance due the debtor.

Upon transfer of funds to credit the debtor’s account, the College shall notify the debtor, in writing, of the final disposition of the offset and their revised or satisfied obligation to the College. Such notice shall include relevant information provided to the College by the DOR. Upon the debtor’ s request, the College shall obtain from the DOR, and provide to the debtor, a final accounting of the Colorado tax refund which was offset, including the amount of the Colorado tax refund to which the debtor was entitled prior to offset and the amount of the debt reported as due to the College. A partial offset is not a release of the balance remaining after the tax offset.

PRIORITIES IN CLAIMS TO OFFSET

Multiple claims to DOR refunds allowed to be offset shall be apportioned to each state agency in accordance with CRS §39-21-108(3)(b).

WRITE-OFF, COMPROMISE AND/OR RELEASE OF ACCOUNTS RECEIVABLE

Every write-off, release, or compromise of an account receivable must have a recommendation for and approval of write-off, release, or compromise by the CFO of the College. This recommendation must then be approved by the System Controller.

All collection processes shall cease if a Debt is released and/or for the portion of a Debt that is compromised.

ALLOWANCING ACCOUNTS RECEIVABLE FOR FINANCIAL STATEMENT PRESENTATION

The College shall record an allowance that offsets the accounts receivable for financial statement reporting purposes in accordance with Generally Accepted Accounting Principles. Such allowance (which may be estimated) shall be recorded in the College’s accounting system in accordance with the SAP’s.

COST OF COLLECTION

Costs of collection shall be added, including attorneys’ fees, to all debts due the College as required or permitted by law or agreement with the Debtor. Agreements for loans made between students and the Federal Government or private agencies may have different rules regarding interest and collection fees.

BANKRUPTCY

Understanding the fundamental principles of bankruptcy law is vital for an institution’s effective financial administration. Please refer to SAP 29 – Accounts Receivable and Collections for procedures on dealing with bankruptcy notifications.

SELECTED STATUTORY AUTHORITY

CRS §23-5-113. Collection of loans and outstanding obligations -state educational institutions
Note: 5810-003 removed the approval of the state controller from the statute.
CRS. §24-30-202.4. Collection of debts due the state -controller’s duties -creation of debt collection fund -definitions
Note: 5810-003 exempted higher education from the statute.
CRS §23-5-115. Loans or outstanding obligations offset
CRS §39-21-108. Refunds
Note: The provision for the department of revenue to withhold disbursements is commonly referred to as “tax offset”. The College participates in this activity.