Item 288/2024
Final
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
To:
Lisa L. Kim From: Patricia Song
Dept:
City Manager Dept: Finance
Date: 7/9/2024
Subject: Approval of writing off certain delinquent obligations owed to the City as uncollectible debt. (Action Item)
OBJECTIVE
To request that the City Council approve to write off certain delinquent obligations owed to the City in excess of $10,000 as uncollectible debt.
BACKGROUND
The City maintains a billing system that records and track s amounts owed to the City (receivables). Occasionally, the obligor does not pay and the receivables become delinquent. Resolution 9666-20 provides the Finance Director the authority to use available lawful methods to obtain prompt and full recovery of all amounts owed to the City, and outlines how uncollectable debt may be written off. Delinquent receivables in excess of $10,000 may be written off as uncollectible debt with the approval from the City Council.
After exhaust ing good faith efforts to collect the receivables, a delinquent receivable becomes uncollectible debt if one or more of the following criteria is met:
• The debtor is deceased;
• The debtor cannot be identified;
• The debtor cannot be found;
• The debtor has no assets; or
• The statute of limitations to pursue a legal remedy for collection has passed.
Writing off uncollectible receivables is a standard practice to maintain accurate accounting information and is required by both accounting principles and auditing standards.
DISCUSSION
The following six delinquent accounts with balance s over $10,000 are considered uncollectible for Fiscal Year 2023-24:
Item
Debtor Name Amount Owed Description
1. Vanhoepen, Joseph $13,169.00 Subrogation – Auto accident
2. Feliciano, Favian $19,380.28 Subrogation - DUI
3. Nguyen, Hoai Manh $14,429.54 Subrogation – DUI
4. Cedillo Martinez, Giovanny $15,659.75 Subrogation – Auto accident
5. Melgoza, Rosa Maria $13,918.89 Subrogation – Felony crime
6. Perez, Britney Marie $20,331.66 Subrogation – DUI
All six uncollectible receivables resulted from the City’s subrogation proceedings, where either DUI, traffic accidents, or a felony crime were involved . These incidents consumed various City resources including labor and damages to City properties. It is the City’s policy to pursue cost recovery efforts. The City uses a third party administrator to facilitate subrogation cases. Collection efforts were exhausted for the above cases, and the delinquent receivables are over six months old. Per Resolution No. 9666 -20, Article II, Collection of Delinquent Obligations Owing to the City, staff is requesting the City Council’s approval to write off these delinquent receivables as uncollectible debt.
FINANCIAL IMPACT
Amount requested to be written off in FY2023-24 totaled $96,889.12. These funds were previously recorded as “Allowance for Doubtful Account,” and revenue was reduced at the time of recordation. Therefore, there is no financial impact to approve the write-off of these delinquent receivables as uncollectible debt . The related records including the write -offs will continue to be maintained in the City’s billing system.
RECOMMENDATION
It is recommended that the City Council:
• Approve the write -off of the above six delinquent accounts with a total amount of $96,889.12 as uncollectible debt in Fiscal Year 2023-24.