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2019 A​Ccounts Receivable ​Management Report

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2019 A​Ccounts Receivable ​Management Report STATEWIDE ACCOUNTS RECEIVABLE MANAGEMENT REPORT FISCAL YEAR ENDING JUNE 30, 2019 Department of Administrative Services Chief Financial Office Kate Brown, Governor 155 Cottage Street NE Salem, OR 97301 PHONE: 503-378-3106 FAX: 503-373-7643 December 23, 2019 To the members of the Oregon Legislative Assembly, Enclosed is the Statewide Accounts Receivable Management Report as required by Oregon Revised Statute 293.252(1)(e). The report identifies important issues and significant trends in state agency debt collection practices and describes efforts by state agencies to improve the collection of liquidated and delinquent debt. This is the fourth report issued under the statute mentioned above. Also enclosed as Appendix B, is the report of liquidated and delinquent accounts written off, abated, or canceled as required by Oregon Revised Statute 293.234. The following report and appendices reference liquidated and delinquent account activity reported by state agencies for the fiscal year ending June 30, 2019. Sincerely, George Naughton Chief Financial Officer i Fiscal Year 2019 Statewide Accounts Receivable Management Report Executive Summary “What gets measured, gets managed” is a business principle that means simply examining an activity changes the activity by forcing one to pay attention to it. Executive Branch agencies track performance measures related to accounts receivable management and report progress quarterly and annually. The establishment of these measures brought attention to accounts receivable practices within the agencies so they can better manage and improve those practices and the quality of data reported to the Legislative Fiscal Office (LFO). In January 2018, Governor Brown established a performance benchmark that by June 30, 2019, state agencies would increase liquidated and delinquent (L&D) accounts receivable collections by $50 million over the baseline established in fiscal year (FY) 2017. Overall, state agencies exceeded the benchmark by increasing L&D account collections by $66.5 million over the two years. FY 2019 was the first complete year for policy and legislative changes that are now part of a new normal for state agency accounts receivable management. Third party debt collection functions for Executive Branch agencies have been centralized at the Department of Revenue - Other Agency Accounts unit, which streamlined the process of collecting delinquent debt and resulted in account assignments to private collection firms occurring six months faster than before centralization. Additionally, debts owed to the state may now be recovered from vendor payments made by state agencies. In FY 2019, $418 thousand in vendor payments were intercepted and applied towards a debt owed. The statewide ending balance of L&D accounts for FY 2019 was $3.5 billion, a 1.8% decrease from FY 2018. Executive Branch agencies reported an FY 2019 ending balance of $1.6 billion, a 6.8% decrease from FY 2018. The primary drivers of this decrease were higher amounts of reversals ($139.5 million) and write-offs ($57.7 million) offset by increased additions ($86.7 million). State agencies reported that $2.1 billion (59.4% of the $3.5 billion ending balance of L&D accounts) were doubtful to ever be collected. These doubtful accounts continue to receive collection efforts until: a payment is received; the account is determined to be uncollectible according to state policy; or the account is canceled in accordance with statute. Executive Branch agencies collected $543.4 million in L&D accounts receivable during FY 2019, a 5.3% increase over FY 2018. Often when an agency reports an increase in L&D additions there is also an increase in the reported collections. Both additions and collections increased in FY 2019 when compared to FY 2018 ($86.7 million and $27.5 million respectively). Executive Branch agencies reported $30.1 million in accounts that were unassigned, non- exempt, without a payment in more than 90 days, a $230.3 million decrease compared to FY 2018. Two agencies accounted for 68.4% of these accounts: due to a system programming error identified at the Oregon Employment Department, assignment of accounts did not occur ii Fiscal Year 2019 Statewide Accounts Receivable Management Report as expected ($14.5 million); and the Department of Revenue delayed assigning accounts due to a pending garnishment or payment plan ($6.1 million). The Statewide Accounts Receivable Management (SWARM) team is encouraged by the progress made over the past four years in collecting L&D accounts receivable. FY 2020 brings opportunities for continued partnership between SWARM and state agencies to improve the collection of accounts receivable including a focus on billing practices, alternative payment options, and operational efficiencies with debt centralization. SWARM remains committed to collaborating with state agencies to improve accounts receivable management and debt collection statewide. iii Fiscal Year 2019 Statewide Accounts Receivable Management Report Table of Contents Background ............................................................................................................................... 1 Statewide Efforts to Improve Collections ................................................................................... 1 Governor’s Benchmark for Increased Collections .................................................................. 1 Accounts Receivable Performance Measures ....................................................................... 2 Centralized Debt Collections .................................................................................................. 4 Vendor Coordination .............................................................................................................. 5 Training .................................................................................................................................. 6 Accounts Receivable Honor Roll ............................................................................................ 6 SWARM Efforts ...................................................................................................................... 7 Data Analysis ............................................................................................................................. 8 Liquidated and Delinquent Account Analysis by Branch ........................................................ 8 Executive Branch Liquidated and Delinquent Accounts ......................................................... 9 Changes in Liquidated and Delinquent Account Balances ................................................... 10 Unassigned Accounts Over 90 Days.................................................................................... 15 Future of State Debt Collections .............................................................................................. 15 Acknowledgments ................................................................................................................... 17 Appendix A – Accounts Receivable Management Overview ............................................. 18 How the State Collects Debt ................................................................................................ 18 Collection Issues and Challenges ........................................................................................ 21 Statewide Accounts Receivable Management ..................................................................... 23 Factors in Collecting Receivables ........................................................................................ 25 Collection Tools ................................................................................................................... 27 Appendix B – Report of Accounts Written off, Abated, or Canceled ................................ 30 Appendix C – LFO Data by Branch of Government ............................................................ 34 Appendix D – Glossary of Terms ......................................................................................... 35 iv Fiscal Year 2019 Statewide Accounts Receivable Management Report Background As required by Oregon Revised Statute (ORS) 293.252(1)(e), the Department of Administrative Services (DAS) hereby submits the annual Statewide Accounts Receivable Management Report to the Legislative Assembly in conjunction with the Legislative Fiscal Office’s (LFO) Report on Liquidated and Delinquent Accounts Receivable. This report identifies important issues and significant trends in Executive Branch agency debt collection practices and describes efforts by those agencies to improve the collection of delinquent debt. Also included within this document, is the Report of Liquidated and Delinquent Accounts Written off, Abated, or Canceled as required by ORS 293.234(1). The accounts receivable data referenced in this report represents liquidated and delinquent accounts as of June 30, 2019, as reported by state agencies to LFO. The accounts include debts owed to state agencies by an individual or entity in which the debt was not paid by the original due date and the debtor was notified of the debt and given an opportunity to dispute the debt. For reference purposes, background information about state agency collection processes and challenges are provided in the Accounts Receivable Management Overview (Appendix A); amounts certified by state agencies under ORS 293.234 are included in the Report of Accounts Written off, Abated, or Canceled (Appendix B); the LFO
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