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Policies and Procedures

Procedure 503.1 – Collecting Past Due Accounts Receivable

Effective
January 23, 2004
Last Updated
February 18, 2016
Last Reviewed
February 18, 2016
Responsible University Officer
University Controller
Responsible Unit
Accounting Services

Procedure Statement

These procedures specify the steps that must be taken to ensure past due accounts receivable are collected in a timely, fair and cost-effective manner. Additionally, UNC General Administration has issued related procedural guidance for collection of past due receivables and write-offs.

These procedures apply to all University non-student accounts receivable.

Accounts receivable, referred to hereafter as accounts, or uncollected billings that may be submitted by the University for collection, include, but are not limited to, salary overpayments, contract work completed by the University for which the University has not received payment, fees owed to the University, deposited checks returned unpaid for insufficient funds, and nonpayment for goods or services purchased from the University.

The following is a list of the minimum information required for delinquent (past due) accounts, as applicable:

  • Full name (First, Middle Initial, and Last), and any previous name(s) or company name
  • Mailing Address
  • Telephone Numbers
  • Federal Employer Identification number for company
  • Social Security number for individuals (See Federal Privacy Act of 1974)
  • Details of the debt owed to the University (account number, amount owed, date of debt, etc.)

Age of accounts and collection of past due billings

  • Current: An account that is invoiced but not due. For example, an account is invoiced April 1 but not due until April 30. The period from April 1 through April 30 is considered current.
  • 1-30 days past due: In the above example, this period is from May 1 to May 30. The account is considered 30 days past due after May 30. Department will mail the first past-due letter (demand letter) to the debtor; make phone contact; and receive a promise to pay.
  • 31-60 days past due: In the above example, this period is from May 31 to June 29. The account is considered 60 days past due after June 29. Department will mail the second and final demand letter to the debtor and send a confirmation letter for repayment.

For amounts owed by patients, which are less than the federally-established deductible applicable to Part A of the Medicare Program, collection of the unpaid bills will be in accordance with the University’s debt collection procedure.

Skip Tracing and Assessment of Interest and Late Fees

Using information collected about the debtor, departments should skip trace debtors when attempts as outlined above are unsuccessful. In addition, departments should assess interest based on the rate established pursuant to GS 105 241.21 from the date the debt was past due until it is paid. In addition, the department must assess a late payment penalty of no more than 10% of the account receivable.

If, within the first 60 days, it is apparent that collection of an account will not be secured without legal assistance or that compromise of the claim is justified (i.e., a formal settlement is to be made by the Attorney General’s Office, with part of the debt paid and the remainder discharged), the account should be forwarded to the Office of the Attorney General (OAG) and a copy of the notification to Accounting Services.

If the debtor is paying a debt in periodic payments satisfactory to the University, the account may be retained beyond 90 days, until the account is satisfied.

  • 61+ days past due: At this point, refuse additional service to the delinquent debtor where this does not conflict with federal and state laws. When more than 61+ days past due, the following remedial options are available for collecting past due accounts due to the University. Proceed as directed below:

Additional options for collection and referral to the Office of the Attorney General

The OAG is the primary agency responsible for the provision of all legal services and advice related to the collection of accounts receivable. Uncollected billings due to the University should be turned over to the Attorney General for collection no more than 60 days after the due date of the billing. Prior to sending uncollected accounts to the OAG, the above mentioned collection efforts should have been made and documented in the account.

For detailed instructions, contact cash_management@unc.edu.The OAG will process collection/demand letters and further attempt collection. If the University receives moneys from the debtor in the meantime, the OAG should be informed immediately. After 60 days of collection efforts by the OAG, the University may turn the accounts over to a state contracted collection agency. It is important to note that the OAG and a collection agency should not both be collecting on the same accounts.

Use of Other Specific Collection Techniques

G.S. 147-86.22 - Statewide accounts receivable program states that the agencies and institutions may use, but are not limited to, the following practices or procedures for collecting accounts receivable:

  • Credit Bureaus – Typically used by collection agencies. State approved collection agencies are required to use credit bureaus.
  • Collection Agencies
  • Voluntary Payroll Deduction, Liens and Judgments
  • Administrative Offset – Use of the individual income tax setoff program.

Collection Agencies

Unless it can be shown not to be cost-effective, the University is required to contract with State-approved collection agencies to collect past-due accounts. The State has contracted through the OAG, with outside collection agencies to collect all statewide account receivables with the exception of UNC Faculty Physicians and UNC Hospitals accounts.

Voluntary Payroll Deductions, Liens, and Judgments

If deemed to be cost-effective, the University will obtain voluntary payroll deductions of debtor’s wages, liens against debtor’s assets, or judgments from the court in an effort to collect the funds due. Voluntary payroll deductions must be in writing and signed by the debtor.

Administrative Offset

Administrative Offset is reduction of an individual’s tax refund pursuant to the Setoff Debt Collection Act, (SODCA) Chapter 105A of the General Statues, or the State Employees Debt Collection Act (SEDCA) Chapter 142, or a reduction of another payment, other than payroll, due from the state to a person to reduce or eliminate an account receivable that the person owes the state.

Accounts can be remitted to North Carolina Department of Revenue (NCDOR) for collection through the SODCA program at the same time as OAG or collection agencies are attempting collection.

The following past due receivables are exempt from submission to the setoff programs:

  • From businesses or individuals in bankruptcy (See Bankruptcy Notice section)
  • From individuals, if the administrative cost of submitting the debt to the Individual Setoff program exceeds the debt; and, for which the responsible party has yet to be determined.

Setoff Debt Collection Act (SODCA)

The Act Provides that North Carolina individual income tax refunds are subject to State claims. A refund in whole or in part may be applied against any past due indebtedness owed the State, provided the debt and refund, if any, are at least $50.00. Effective Jan. 1, 2014, UNC Faculty Physicians are excluded from participation in recovering debts through SODCA (pending legal response on inclusion).

University departments with significant accounts receivable (in terms of number of accounts or amount) are set up in the administrative system to submit past due accounts to initiate administrative offset under SODCA. For administrative efficiency, Accounting Services assists other campus units in submitting past due accounts for administrative offset.

State Employee Debt Collection Act (SEDCA)

The second enactment, known as the State Employee Debt Collection Act (SEDCA), requires that employees whose salaries are paid in whole or in part by State funds must make full restitution of the amount owed to the State as a condition of employment or service. The employee can in writing request a payment plan for the debt owed.

Death/Dispute of Debt

If the debtor is deceased, management may discharge the debt. If, upon consultation with University Legal Counsel, the debt is determined to be legitimately in dispute and that collection of the debt is compromised or impaired, the debt may be discharged.

Refunds from Setoff Debt Collection Program in Settlement of a Debt owed to the University

Per G.S. Chapter 105A‑8, State agency notice, hearing, decision, and refund of setoff: Within 10 days after the University receives a refund of a debtor, the University must send the debtor written notice that the University has received the refund. The notice must explain the debt that is the basis for the University’s claim to the refund and that the University intends to apply the refund against the debt. The notice must also inform the debtor that the debtor has the right to contest the matter by filing a request for a hearing, must state the time limits and procedure for requesting the hearing, and must state that failure to request a hearing within the required time will result in setoff of the debt. The University that does not send a debtor a notice within the time required by this subsection must refund the amount set off plus the collection assistance fee, if any, retained by the University.

In order to comply with the G.S. Chapter 105A-8, a department directly receiving the refund in settlement of a debt owed is responsible for sending the debtor a written notice within 10 days after receiving the debtor’s refund. If the administrative offset was submitted by Accounting Services, then the refund would be received by Accounting Services on behalf of the department. In this case, Accounting Services would be responsible for sending a written notice within 10 days.

Statutes of Limitations

On federally funded loans, there is no statute of limitations.

In most instances, there is a three year statute of limitations for University receivables. It will vary depending on the type of account and other factors. If any questions arise, contact the University Counsel’s office for verification. This does not relieve the debtor of their responsibility to the University. Departments should be aware of this when considering legal action as the limitation rules offers a defense to the debtor. Therefore, all accounts receivable submitted for collection must be reviewed to ensure the status of the statute of limitations for that account.

The statutes of limitations in Chapter 1 of the General Statutes do not apply to the administrative procedures under Chapter 105A - the Setoff Debt Collection Act, and Article 60 – (State and Certain Local Educational Entity Employees, Nonsalaried Public Officials, and Legislators Required to repay Money Owed to State) of Chapter 143 - the State Employees Collection Act.

Forms and Instructions

Reporting Requirements

The University is required to send a complete report of the University's accounts receivable at least quarterly, or more frequently if required, to the North Carolina Office of the State Controller (OSC). The report should include, at the summary level, the following:

  • The type of accounts receivable owed to the University
  • An aging of the accounts receivable
  • Any attempted collection activity and any costs incurred in the collection process
  • Any accounts receivable that have been written off
  • Any additional information the State Controller considers useful

In order to comply with quarterly accounts receivable reporting requirements an Accounts Receivable Quarterly Activity worksheet should be completed and submitted electronically to financial_accounting@unc.edu. The quarterly reports are due to OSC within 45 days calculated from the last day of the quarter. For example, the due date for reporting accounts receivable is Nov. 15 for quarter ending Sept. 30. Accounting Services compiles this information from various units and sends one report to OSC for the University. In order to facilitate this process, completed worksheets must be received by Accounting Services at least five business days before the due date.

For year end accounts receivable reporting, the due date and the worksheet for providing the information will be announced by Accounting Services after the fiscal year-end.

Related Data

503.1rd – UNC Procedural Guidance on Collection of Past Due Accounts and Write-Offs
503.1.1f - Accounts Receivable Quarterly Activity Worksheet
503.2 - Writing off Uncollectible Accounts
503.3 – Managing a Notification of Bankruptcy

In 1979, the State enacted Setoff Debt Collection Act (SODCA – G.S. Chapter 105A) and the State Employees Debt Collection Act (SEDCA – Article 60 of Chapter 143), to facilitate collection of debts owned by an individual to a State Agency.
Federal Privacy Act of 1974

History

Revised:
February 18, 2016: Added Link for new Procedure 503.3.
June 29, 2015: Updated information on collecting accounts and added Related Data form.
July 1, 2010