Section 320.5  Scope

This Part establishes procedures for State agencies to follow in complying with the Illinois State Collection Act of 1986 (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 151 et seq.).  As used in this Part, the term "State agencies" shall have the meaning specified in the Illinois State Auditing Act (Ill. Rev. Stat. 1985, ch. 15, pars. 301-1 et seq.).

Section 320.10  Definition of Receivables

a)         Receivables represent amounts or claims owed to the State or State agencies either directly or in a trust or agent capacity by any individual or entity.  These claims are for the future receipt of cash.  There are two criteria essential to the creation of an account receivable:

1)         The transaction must be completed to the extent that payment is the only unconsummated act (i.e., the income is earned), and

2)         the claim must be measurable in terms of the assignment of a monetary value established by State law and administrative regulations.

b)         Receivables shall be recognized when such claim has been established pursuant to subsection (a) of this Section.

c)         For purposes of this Part, receivables includes claims under protest once the monetary value of the claim has been established under subsections (a) and (b) of this Section.

Section 320.20  Reporting Requirements

State agencies shall maintain internal records of accounts receivable and shall submit for each fiscal year quarterly summary reports of accounts receivables and uncollectible accounts on the forms prescribed by the Comptroller for this purpose.  For purposes of this Section, fiscal quarters end on September 30, December 31, March 31 and June 30.  Reports are due no later than 45 days after the end of the quarter.

Section 320.30  Standards for Aging of Accounts Receivable

a)         In order for an agency to effectively estimate the collectibility of its receivables and properly focus collection efforts, each outstanding receivable due the State must be "aged" relative to its formal due date.  A receivable is considered "current" (not past due) prior to the passage of its formal due date.  When the debtor's due date passes without full payment, the debt becomes "past due" and must be aged according to the number of days beyond the due date that the debt has been outstanding.

b)         For purposes of aging and reporting outstanding receivables, the following aging periods will normally be used:

Past due:  1-30 days

31-90 days

91-180 days

181 days-one year

Over one year

c)         When the above aging periods do not serve an agency's management needs, other reasonable aging periods may be utilized and shall be reported to the Comptroller.  Such other aging periods may be utilized where the different aging period is suited to the monitoring of that receivable, e.g., where specific statutory or administrative provisions preclude action until the completion of a "waiting period".  Also, in some instances a separate aging category will be determined by the agency to be necessary. For example, if an agency cannot begin collection efforts for a six-month period after the debt becomes past due, a separate category of aging should be set up for these receivables.

Section 320.40  Procedures for Estimating Uncollectible Receivables

a)         Each agency must maintain records of "uncollectible receivables" which are defined as an agency's estimate of outstanding receivables which will ultimately be uncollectible.

b)         In making its estimate of uncollectible receivables, an agency shall consider the following standards:

1)         estimates of uncollectibles must be based upon prior collection experience for each type of receivable maintained by the agency; and

2)         as a debt ages, the probability of collection decreases.

c)         Within the aging categories established pursuant to Section 320.30, each Agency shall develop a percentage factor for uncollectibility.  The percentage factor shall be calculated from the ratio of uncollectible receivables to total receivables, based upon the Agency's historical data for each receivable type.  The uncollectibilty factor shall be applied to future gross receivables within the aging categories to determine the "net receivables," which are defined as gross receivables minus uncollectible receivables.

Section 320.50  Collection through Use of the Comptroller's Offset Procedure

a)         State agencies may use the Comptroller's Offset System provided in Section 10.05 of the State Comptroller Act (Ill. Rev. Stat. 1985, ch. 15, par. 210.05) for the collection of debts owed to the agency.  All debts that exceed $1,000 and are more than 1 year past due shall be placed in the Comptroller's Offset System, unless the State agency shall have entered into a deferred payment plan or demonstrates to the Comptroller's satisfaction that referral for offset is not cost effective (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 155 (c)).

b)         The cost effectiveness test will be met where the total collection cost expended or anticipated will exceed the amount of the claim that would reasonably be expected to be realized as a result of those collection costs.  The determination of "collection costs expended" shall include the direct costs for processing the Agency's offset claims.  For the purposes of this Section, direct costs shall include, at a minimum the following: personnel and related fringe benefits, office space, equipment, supplies, and any other expenses determined by the agency to be directly associated with the processing offsets by the Agency.  The estimation of future collections shall be based upon the historical collection efficiency of the Comptroller's Offset System for the particular type of receivable.  The following examples set forth circumstances where referral for offset would not be cost effective:

1)         Excessive age of the debt (e.g., initial investigation discloses that the debtor has changed addresses or names, or will be impossible to locate);

2)         Ongoing negotiations with the debtor indicate that voluntary collection efforts will be successful;

3)         A debtor company has ceased operations for a long period of time;

4)         A debtor business has reorganized (e.g., from a sole proprietor to a partnership or corporation);

5)         A debt has been placed with a private collection firm, and based on the collection firm's past history, it is likely that they will collect the debt;

6)         The age or health of the debtor is such that is unlikely they will be receiving any payments from the State;

7)         Foreign Student debtors who have left or will soon be leaving the country; and

8)         Individuals and corporations in bankruptcy.

c)         Requests for offsets must comply with the rules established under 74 Ill. Adm. Code 285.

d)         State agencies or the Comptroller may remove claims from the Comptroller's Offset System, where such claims have been inactive for more than one year (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 155(e)).  Such claims shall be removed when the agency or the Comptroller determines that it is cost effective to do so (see subsection (b) of this Section for the standards for determining cost effectiveness) or where required by the doctrine of "due process of law" to do so.

e)         A State agency which has submitted a claim to the Comptroller for offset must notify the Comptroller as soon as possible, but in no case later than 30 days, upon the occurrence of any event which affects the existence or current collectibility of the debt, such as payments received other than through a successful offset or the filing of a bankruptcy petition.

Section 320.60  State Agency Internal Offsets

a)         State agencies shall develop internal procedures whereby agency-initiated payments to its debtors may be offset without referral to the Comptroller's Offset System (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 155(d)).

b)         These procedures must include the following standards:

1)         A specified point at which a claim must be entered into the system; for example, claims more than $500 and over 120 days past due.  This point will vary by agency and nature of the receivables.

2)         Procedures for notifying the debtor of the amount and reason for a deduction.

3)         Procedures for removing a claim from the system.

4)         A procedure for reporting to the Comptroller whenever an offset is made between two different funds within the agency; this report must include:

A)        The name and Comptroller-assigned number of the fund to which the debt is owed;

B)        The amount owed;

C)        The name and Comptroller-assigned number of the fund from which the offset deduction was made;

D)        The amount deducted; and

E)        The date of the deduction.

Section 320.70  Accounting for Bad Debts and Uncollectible Claims

a)         For claims or accounts receivable of $1,000 or more, a State agency shall request the Attorney General to certify the account or claim as uncollectible pursuant to the standards established in Section 2 of "AN ACT in relation to uncollected claims and accounts receivable of the State agencies" (Ill. Rev. Stat. 1985, ch. 15, par. 102).

b)         Claims or accounts receivable of less than $1,000 may be certified as uncollectible by the agency when the agency determines that further collection efforts are not in the best economic interest of the State (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 102(c)).  In determining the best economic interest of the State, State agencies shall determine whether the total collection cost expended or anticipated will exceed the amount of the claim that would reasonably be expected to be realized as a result of those collection costs.

c)         Debts certified by the agency as uncollectible by the Attorney General may be reopened for collection by a State agency upon the approval of the Attorney General.

d)         Debts certified by the agency as uncollectible may be reopened for collection where the agency determines that it is in the best economic interest of the State to do so (see subsection (b) of this Section for the standards for determining the best economic interest of the State).

e)         After compliance with the procedures set forth in Section 2 of "AN ACT in relation to uncollected claims and accounts receivable of State agencies" (Ill. Rev. Stat. 1985, ch. 15, par. 102) and this Section, State agencies may delete from their records debts certified as uncollectible as follows:

1)         When the debt is less than $1,000, immediately upon certification by the agency;

2)         For debts of $1,000 or more that are less than 5 years old, when the agency determines that such deletion is in the best economic interest of the State.  In determining the best economic interest of the State, State agencies shall determine whether the total collection cost expended or anticipated will exceed the amount of the claim that would reasonably by expected to be realized as a result of those collection costs;

3)         For debts of $1,000 or more when, the debt is more than 5 years old (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 102 (i)).

Section 320.100  Accounts Receivable Funds

a)         Upon the written requests of a State agency, which meets a criteria established in this Section, the Comptroller, upon the concurrence in writing by the Governor, will establish an Accounts Receivable Fund for the State agency.

b)         An application for establishment of an Accounts Receivable Fund shall include:

1)         Agency name;

2)         Description of the receipts to be deposited into the Accounts Receivable Fund, including receipt codes;

3)         The percentage of such receipts estimated to be uncollectible by the creditor agency;

4)         The percentage of such receipts certified as uncollectible by the Attorney General;

5)         The potential increase in future receipts, as estimated by the State agency, if 25% of amounts collected from accounts more than 120 days past due are retained for collection efforts (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 156);

6)         The fund into which receipts are currently being deposited;

7)         Amount of receipts deposited in the most recently concluded prior fiscal year, including an estimate of the proportion of such receipts representing collections on accounts more than 120 days past due;

8)         Estimated deposits in the current fiscal year, including an estimate of the proportion of such receipts representing collections on accounts more than 120 days past due.

c)         Applications shall be submitted to the Comptroller addressed as follows:

Comptroller

State of Illinois

201 State House

Springfield, Illinois 62706

Attention:  Deputy Comptroller

d)         After initial review by the Comptroller, the application shall be forwarded to the Governor.  The Comptroller shall include a recommendation for approval or disapproval based upon the Comptroller's assessment of the impact of the establishment of the Accounts Receivable Fund on the relevant fund balances, the ability of the State to meet future obligations on a timely basis, and such related fiscal information that the Comptroller or the Governor may request.  Upon the concurrence of the Comptroller and the Governor, the Accounts Receivable Fund shall be established for the receipt types designated in the application.  Once established, all collections on accounts receivable which are more than 120 days past due for the receipt types designated in the approved application shall be deposited into the Accounts Receivable Fund.  Seventy-five percent of receipts deposited into the Accounts Receivable Fund shall be transferred by the State agency within 10 days after the end of each calendar quarter.  The remaining twenty-five percent of receipts into the Accounts Receivable Fund may be used by the State agency for collecting overdue accounts pursuant to appropriation by the General Assembly (Ill. Rev. Stat. 1986 Supp., ch. 15, par. 156).