Avoiding Fumbles with Debt Management
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Department of Administrative Services Offset Programs
ISSUE REVIEW Fiscal Services Division January 5, 2017 Department of Administrative Services Income Offset Program ISSUE This Issue Review examines the Income Offset Program administered by the Department of Administrative Services (DAS). Money owed to the state and local governments is offset or withheld from individuals and vendors to recover delinquent payments. AFFECTED AGENCIES Departments of Administrative Services, Revenue, Human Services, and Inspections and Appeals, the Judicial Branch, Iowa Workforce Development, the Regents Institutions, community colleges, and local governments CODE AUTHORITY Iowa Code sections 8A.504, 99D.28, 99F.19, and 99G.38 Iowa Administrative Code 11.40 BACKGROUND The Income Offset Program began in the 1970s under the Department of Revenue (DOR).1 During that time, state income tax refunds were withheld by the Department for liabilities owed to the Department and other state agencies. In 1989, the Program expanded to include payments issued to vendors.2 In 2003, the Finance portion of the Department of Revenue and Finance became the State Accounting Enterprise (SAE) of the DAS and the new home of the Income Offset Program. Iowa Code section 8A.504 permits the DAS-SAE to recover delinquent payments owed to state and political subdivisions by withholding payments that would otherwise be paid to individuals and vendors.3 The DAS-SAE applies the money toward the debt an individual or vendor owes 4 to the state of Iowa or local governments. For example, if an individual or vendor qualifies for a 1 The Department of Revenue became the Department of Revenue and Finance in 1986 as a result of government reorganization and returned back to the Department of Revenue when the Department of Administrative Services (DAS) was created in 2003. -
II. the Onset of Insolvency Or Financial Distress
Reproduced with permission from Corporate Practice Series, "Corporate Governance of Insolvent and Troubled Entities," Portfolio 109 (109 CPS II). Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com II. The Onset of Insolvency or Financial Distress A. Introduction Because a Chapter 11 reorganization can be expensive and time consuming, a troubled corporation may seek to right itself through an out-of-court transaction—such as a recapitalization, merger or asset sale. These transactions and the directors' decisions concerning them are analyzed under state corporation law. Corporation law also provides a state law alternative to a Chapter 7 liquidation through procedures for voluntary and forced dissolution as well as ancillary remedies such as the appointment of a receiver to marshal a corporation's assets, sell those assets, distribute the proceeds to creditors, and take other steps to wind down a corporation. That said, as discussed below, state law insolvency proceedings have limitations that often make them an unsuitable alternative to federal bankruptcy proceedings. B. Director Duties in the `Zone of Insolvency' and Insolvency As discussed in Chapter I, § 141(a) of the DGCL gives directors the authority and power to manage a corporation, and in exercising that authority directors are subject to the fiduciary duties of care and loyalty. Under ordinary circumstances, these fiduciary duties require that directors maximize the value of the corporation for the benefit of its stockholders, who are the beneficiaries of any increase in the value of the corporation. When a corporation is insolvent, however, the value of the corporation's equity may be zero. -
How to Handle Bad Debts There Often Comes a Time When Businesses
How to Handle Bad Debts There often comes a time when businesses must account for nonpaying customers. This typically means deleting them from the company’s books and from regular accounts receivable records by writing off the outstanding receivable as a bad debt. Because bad debt write offs impact a firm’s cash flow and profit margins, credit professionals must use a combination of allowances and write-off guidelines, which must conform with Internal Revenue Service regulations, to handle this process. A firm’s general credit policy should include this information. Some companies establish allowance for bad debt accounts, contra asset accounts, to recognize that write offs are inevitable and to provide management with estimates of potential write offs. In 1986, the IRS repealed the use of the allowance method for tax purposes, taking the position that specific accounts are to be charged off only after they have been identified as uncollectible. Accountants, however, continue to prefer the allowance method, also known as the income statement method, since this method allows for matching bad debt expenses more closely with the time periods in which they were created. General accepted accounting principles rules require the allowance method to be used for external reporting. Allowances for Bad Debts Allowances for bad debts or uncollectible accounts accrue for bad-debt write offs in the accounting period that revenues are recorded, thereby matching revenues and expenses. They are contra-assets, reducing current assets (accounts receivable) accordingly on the company’s balance sheet. There, offsets give a more accurate picture of the outstanding receivables and provide a clearer picture of the firm’s performance. -
Corporate Debt Management Strategy
CORPORATE DEBT MANAGEMENT STRATEGY 1. Purpose of Strategy Stoke on Trent City Council is required to collect monies from both residents and businesses for the provision of a variety of goods and services. The council recognises that prompt income collection is vital for ensuring the authority has the resources it needs to deliver its services. The council therefore has a responsibility to ensure that appropriate mechanisms are applied to enable the collection of debt that is legally due. The council aims to achieve a high and prompt income collection rate. It endeavours to keep outstanding debt at the lowest possible level by instigating a payment culture which minimises bad debts and prevents the accumulation of debt over a period of time. 2. Scope of Strategy This Strategy covers all debts owed to the council including: Council Tax National Non Domestic Rates (NNDR, also known as Business Rates) Council House Rent Sundry Debt (general day to day business income including housing benefits overpayments and former tenant arrears). Whilst different recovery mechanisms may be used for different debt types all debt is recovered using the objectives below. 3. Objectives of Strategy The objectives of the Strategy are to: Maximise income and collection performance for the council Be firm but fair in applying this Strategy and take the earliest possible decisive and appropriate action Be courteous, helpful, open and honest at all times in all our dealings with customers Accommodate any special needs that our customers may have Work with -
Medicare Human Services (DHHS) Centers for Medicare and Provider Reimbursement Manual - Medicaid Services (CMS) Part 1, Chapter 3
Department of Health and Medicare Human Services (DHHS) Centers for Medicare and Provider Reimbursement Manual - Medicaid Services (CMS) Part 1, Chapter 3 Transmittal 435 Date: MARCH 2008 HEADER SECTION NUMBERS PAGES TO INSERT PAGES TO DELETE TOC 3-1 (1 p.) 3-1 – 3-2 (2 pp.) 0306 - 0310 3-5 - 3-6 (2 pp.) 3-5 – 3-6 (2 pp.) 0334 - 0334.2 (Cont.) 3-11 – 3-14 (4 pp.) 3-11 – 3-14 (4 pp.) NEW/REVISED MATERIAL--EFFECTIVE DATE: This transmittal updates Chapter 3, Bad Debts, Charity, and Courtesy Allowances to reflect updated references from HCFA to CMS, correction of typos, and replace Fiscal Intermediary with Contractor. Also, the Table of Contents has been revised to reflect deleted page numbers. EFFECTIVE DATE: N/A DISCLAIMER: The revision date and transmittal number apply to the red italicized material only. Any other material was previously published and remains unchanged. CMS-Pub. 15-1-3 CHAPTER III BAD DEBTS, CHARITY, AND COURTESY ALLOWANCES Section General Principle .................................................................................................................................300 Definitions..............................................................................................................................302 Bad Debts.........................................................................................................................302.l Allowable Bad Debts .......................................................................................................302.2 Charity Allowances..........................................................................................................302.3 -
Can't Pay Or Won't Pay? a Review of Creditor and Debtor Approaches to Non- Payment of Bills
CAN'T PAY OR WON'T PAY? A review of creditor and debtor approaches to the non-payment of bills Nicola Dominy and Elaine Kempson Personal Finance Research Centre, University of Bristol March 2003 No. 4/03 Can’t pay or won’t pay? A review of creditor and debtor approaches to the non-payment of bills Nicola Dominy and Elaine Kempson Prepared for the Lord Chancellor's Department February 2003 The Research Unit, Department for Constitutional Affairs, was formed in April 1996. Its aim is to develop and focus the use of research so that it informs the various stages of policy-making and the implementation and evaluation of policy. Crown Copyright 2003. Extracts from this document may be reproduced for non- commercial purposes on condition that the source is acknowledged. First Published 2003 ISBN 1 84099 050 3 Contents Page Executive Summary v 1. Introduction 1 Research Aims and Methods 1 Structure of the Report 4 2. A map of can’t pay won’t pay 5 Reasons for arrears 5 Distinguishing can’t pays from won’t pays 8 Payment withholders 10 Working the system 15 Ducking responsibility 19 Disorganised 22 Mapping can’t pay won’t pay 24 3. Arrears management and debt recovery 26 Industry Codes of Practice and Guidance 27 Overview of company approaches to arrears management and debt recovery 32 Holistic approach 35 Hard business approach 39 One-size-fits-all approach 42 Changes in creditor approaches to arrears management and debt recovery 44 Creditors’ use and views of the courts 45 Debt collection agencies 52 Creditor’s abilities to distinguish can’t from won’t pay 53 4. -
Creating a Framework for Sovereign Debt Restructuring That Works 1
Creating a Framework for Sovereign Debt Restructuring that Works 1 Martin Guzman2 and Joseph E. Stiglitz3 Abstract Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings—but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution. Keywords: Sovereign Debt Crises, Sovereign Debt Restructuring, Debt Contracts, International Lending 1 We are indebted to Sebastian -
Budget Debt Management
1 We’ll begin by talking about budgeting. First, we’ll talk about all of the reasons why making and maintaining a budget is a good idea. Second, we’ll discuss what components go into creating a budget Once that’s done, we’ll focus on actually establishing a budget Then, we’ll talk briefly about the importance of building savings. 2 Then we’ll move on to Debt Management. First, we’ll start by discussing why debt management is so important. From there, we’ll break down the difference between good and bad debt Third, we’ll then analyze different kind of debt to determine whether it’s good or bad. Once we know that, we can then prioritize any debt you might be holding We’ll then talk a bit about your credit. We’ll cover why it’s so important to monitor your credit… …and finally, what factors affect your all‐important credit score. 3 making a budget and sticking to it will help provide you with freedom from debt…and uncertainty. 4 Budgets don’t HAVE to be restrictive. YOU set them, and YOU control them, so you can make sure to factor in the “fun” items that are important to you, like taking a vacation, going out to dinner, or buying a new gadget you’ve been dreaming about. 5 A spending plan isn’t just a good idea…sometimes it can actually improve lives! Research shows that people who create a budget: 1. Are able to prepare for the future more than non‐budgeters, who tend to focus on and worry more about short‐term finances. -
Insolvency, Security Interests and Creditor Protection Paul J. Omar
INTERNATIONAL INSOLVENCY INSTITUTE Insolvency, Security Interests and Creditor Protection Paul J. Omar From The Paul J. Omar Collection in The International Insolvency Institute Academic Forum Collection http://www.iiiglobal.org/component/jdownloads/viewcategory/647.html International Insolvency Institute PMB 112 10332 Main Street Fairfax, Virginia 22030-2410 USA Email: [email protected] 1 Insolvency, Security Interests and Creditor Protection 1 10 Insolvency, Security Interests and Creditor Protection PAUL OMAR Introduction The purpose of this outline, featuring the relationship between insolvency, security and the protection of creditors’ interests, is to first ask what constitutes the essence of the procedures, known collectively as insolvency, and to outline the role of the creditor in the process. This chapter then looks at the role of debt in the financing of enterprises and its primary use for the acquisition of assets as well as the means by which creditors seek to protect their interests by agreements with their debtor envisaging the use of security. It continues by analysing the nature of security and differences in legal cultures to the protection of the most fundamental of creditors’ interests, the recovery of either physical assets the subject of the agreement or a sum representing the value of the debt. This outline follows this by sketching some of the hurdles facing creditors seeking to protect their interests when the debtor-creditor relationship transcends national boundaries. Because this inevitably involves potential conflict between legal rules and courts asserting jurisdiction, this outline will illustrate specific aspects of the conflict, where choice of law rules have had to be adapted to the specificities of insolvency. -
TR19/1: Debt Management Sector Thematic Review
Debt management sector thematic review Thematic Review TR19/01 March 2019 TR19/01 Financial Conduct Authority Debt management sector thematic review Contents 1 Executive summary 3 2 Background 6 3 Focus, scope and methodology 7 4 Our findings 8 5 Outcomes from the review 39 Annex Abbreviations used in this paper 40 2 TR19/01 Financial Conduct Authority Section 1 Debt management sector thematic review 1 Executive summary Background 1.1 The debt management sector is a priority area for the FCA and has been since the transfer of consumer credit regulation on 1 April 2014. 1.2 The FCA pays close attention to the sector, with regular intervention. This includes a thematic review in 2014/15 (TR15/8, ‘Quality of debt management advice’ (June 2015)) and sector-wide communications in 2015 and 2016. 1.3 Our previous thematic review in 2014/15 found that debt advice received by customers was very poor, and firms were treating customers unfairly. Firms were carrying out poor assessments of customers’ circumstances, both personal and financial, before giving advice. This led to interventions across the sector including past business reviews and remedial actions by firms. 1.4 We committed in our 2017/18 Business Plan to assess how the market is operating and whether firms are meeting customer needs and our standards. This review included both commercial debt management firms and not-for-profit debt advice bodies. Key findings 1.5 Our findings show many improvements have been made since the 2014/15 thematic review, but firms need to work harder to make sure they consistently deliver good outcomes. -
Allowance for Doubtful Accounts Receivable and Loans Receivable
FIN 08-30 Reclamation Manual Directives and Standards Subject: Allowance for Doubtful Accounts Receivable and Loans Receivable Purpose: Establishes the Bureau of Reclamation’s procedures and responsibilities for estimating potentially uncollectible accounts receivable and uncollectible loans receivable. The benefit of this Directive and Standard (D&S) is to provide proper accounting of uncollectable accounts and loan receivables Reclamation-wide. Authority: Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 1, Accounting for Selected Assets and Liabilities; FASAB SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees; FASAB SFFAS No. 18, Amendments to Accounting Standards For Direct Loans and Loan Guarantees in Statement of Federal Financial Accounting Standards No. 2; FASAB SFFAS No. 19, Technical Amendments to Accounting Standards For Direct Loans and Loan Guarantees in Statement of Federal Financial Accounting Standards No. 2; Department of the Interior, Departmental Accounting Manual (Section 8-30) Approving Official: Director, Mission Support Organization Contact: Business Analysis Division, Compliance and Audit Team (84-27410) 1. Introduction. In order to provide complete and accurate financial information, Reclamation must analyze delinquent debts and provide a current estimate of the uncollectible accounts receivable and uncollectible loans receivable on the financial statements. It is a normal part of doing business that not all receivables are actually collected, therefore, Reclamation establishes an allowance for doubtful accounts to reduce the gross amount of receivables to the estimated net realizable value. 2. Applicability. This D&S applies to all Reclamation employees who are responsible for the calculating, recording, and reporting of an allowance for uncollectible accounts receivable or allowance for uncollectible loans receivable. -
Insolvency Arrangements and Contract Enforceability
I. Introduction In the recent past, several large, internationally active firms have entered formal insolvency proceedings, among them Drexel, TWA, Barings, Maxwell, Olympia & York, Enron and Global Crossing. Others have come close to doing so, for example Long-Term Capital Management. The asset size of these actual or potential failures is increasing, and with it the risk of a disorderly and contentious outcome. Since Herstatt, no major financial insolvency has been disorderly, although there have been some close calls. This is due to several contributing factors: a combination of improved risk management, greater transparency, a vastly superior legal framework, international cooperation among authorities, and good luck. This positive history, however, offers few reasons for complacency. The failures to date have been of firms of moderate and intermediate complexity. Firms and markets become ever more complex, more interrelated, and ever larger. An increasingly deregulated market environment is a less cosseted one: greater competition entailing greater risk of failure. Sovereignty remains a fact of life, but business operations are increasingly cross-border, placing greater strain on the legal system. Therefore, the underpinnings of insolvency law are especially salient for large, complex and internationally active financial institutions, and the Financial Stability Forum has been considering issues in anticipating and managing such problems. Both general and financial firm- specific insolvency regimes are relevant. While the principal operations of such institutions are primarily housed in supervised entities, such as banks and securities firms, significant activities may take place in unsupervised holding companies or affiliates. Furthermore, there are now non- financial companies that undertake financial activities on a scale that approaches those of major financial institutions.