3. GENERAL ACCOUNTS –
WRITE-OFFS 2009
COMPETES GéNéRAUX – RADIATIONS POUR 2009
That Council receive this report on 2009 general accounts written off as
required by Schedule A, section 21 and 23 of the Delegation of Authority
By-law 2009-231 for information.
Que le Conseil prennent connaissance du présent rapport concernant les
comptes généraux de 2009 radiés conformément à l’annexe A, article 21 et 23, du Règlement sur la
délégation de pouvoirs.
Documentation
1.
City Treasurer’s report dated 25January 2010 (ACS2010-CMR-FIN-0006).
Corporate Services and Economic Development
Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
25 January 2010 / le 25 janvier 2010
Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière
municipale
Contact
Person/Personne ressource : Ken Hughes, Deputy City Treasuruer, Revenue/
Trésorier Municipal Adjoint
Finance Department/Département
de finance
(613)
580-2424 x 13485 Ken.Hughes@ottawa.ca
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Ref N°: ACS2010-CMR-FIN-0006 |
SUBJECT:
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OBJET :
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That
Corporate Services and Economic Development Committee and Council receive this
report on 2009 general accounts written off as required by Schedule A,
section 21 and 23 of the Delegation of Authority By-law 2009-231 for
information.
Que le Comité des services
organisationnels et du développement économique et le Conseil prennent
connaissance du présent rapport concernant les comptes généraux de 2009 radiés
conformément à l’annexe A, article 21 et 23, du Règlement sur la délégation de
pouvoirs.
The Finance Department is responsible for the collection of all accounts billed through the City’s Financial System. The City invoices for a variety of services such as residential and commercial rents, OC Transpo fare media, damage to City property, returned cheques, salary overpayments and paid duty police service. The services mentioned are only a few examples of the hundreds of services or reasons the City prepares and sends invoices.
The Revenue Branch has implemented a rigorous process for follow-up, prescribed collection activities as well as partnering with three private collection agencies to collect outstanding balances. This report addresses the accounts recommended for write-off in 2009 where collection was not successful due to a variety of reasons.
In 2009, the City invoiced approximately $180 million for a variety of services such as residential and commercial rents, OC Transpo fare media, damage to City property, returned cheques, salary overpayments and paid duty police service.
The Finance Department makes every effort to collect all accounts receivable due to the City of Ottawa. Efforts include letters, telephone calls, service denial, accounts payable set-offs, referral to City Clerk and Solicitor Department to initiate a claim and assignment to private collection agencies. In some instances for reasons that are often beyond the City’s control, full or partial amounts due cannot be paid. Some of the reasons are death, bankruptcy, indigence, legal recommendation, expiry of the limitation period to commence a legal claim and administrative errors relating to the billing. The limitation period for initiating litigation to collect amounts owed as prescribed by the Limitations Act, is two years from the date of the incident. This Act binds the City.
In accordance with sections 21 and 23 the Delegation of Authority by-law, 2009-231, the City Treasurer is authorized to write-off general accounts receivable and salary overpayments, which the City Treasurer has determined to be uncollectible and must report annually to the appropriate Standing Committee a list of amounts that have been written off over the previous year and the financial implications of writing off each item reported.
Document 1, on file with the Deputy City Treasurer, Revenue, outlines the accounts deemed uncollectible in 2009 that have been removed from the City’s financial system. Items include approximately 220 corporate accounts receivable totalling $602,524, (excluding Transit Services and Police Services) and approximately 250 salary overpayments totalling $60,759 and the Payments in Lieu of Taxes (PILT) accrual reversal of $4 million. The amounts to be written off total $4,663,283. The Finance Department policy is that most write-offs are charged back to the originating departments, where the revenue was booked originally and only items of a corporate nature are charged back against the allowance for doubtful accounts (AFDA).
Generally, the City budgets an annual allowance of $500,000 for doubtful accounts. With respect to the PILT account, $500,000 was written off against the AFDA and the remaining balance of $3.5 million forms part of the deficit for 2009. The remaining amounts totalling approximately $663,283 were charged back to the applicable department or written off against the AFDA. Details regarding the reversal of the PILT accrual follow.
Failure of Province to reimburse Municipalities for loss of PILT
Revenue
Federally owned properties are exempt from
both local (city) and Provincial (education) property taxes. The Federal government does however make
payments to municipal governments in lieu of the taxes that would be applicable
to their property if their properties were owned privately. These payments, made under the Payment in
Lieu of Taxes Act, are known as payments in lieu of taxes (PILT’s). They are made to contribute to the costs
incurred by Municipal governments to deliver services in the municipality where
the Federal properties are located. The
PILT payments are generally calculated using the same rules applicable to
privately owned properties.
Municipalities are not required to remit the education portion of PILT
payments for non-residential tax classes from Federal properties to the
Province.
Policy changes at the Federal level have adversely affected City of
Ottawa PILT revenues. Staff has
previously reported these changes and their financial impacts to Committee and
Council numerous times over the past few years.
To finance renovations to some Federal properties Public Works and
Government Services Canada (PWGSC) has started to sell and leaseback federally
owned properties. These “sale and
leaseback” transactions involve a 25-year leaseback by the Federal Government
and the completion of renovations by the lessor. When these properties are sold and leased
back, they become taxable and the education portion of the property taxes must
be remitted to the Province. Sale and
leaseback transactions to date have reduced City of Ottawa revenues by $4
million annually. From the end of 2007
to the end of 2009 the losses total $9 million.
City of Ottawa
staff has met the Minister of Finance to explain the issue. Subsequent meetings with his staff has
explored the issue in depth and possible solutions were discussed. Staff was asking that the Minister of Finance
bring about the legislative changes required to meet the City request and
recognize that the change that has occurred is only one of “form” and not one
of “substance”. These revenues should be
restored to the municipalities. In 2008,
while expecting that the Province would restore the revenues to the affected
municipalities, the revenue of $4 million was accrued. In spite of many meetings and conversations
between City and ministerial staff and personal meetings between staff, the
Mayor and some Councillors with the Minister of Finance and his Parliamentary
Assistant, we are unable to get a definitive answer as to whether these amounts
will be returned to the municipalities.
At this time staff is recommending that the 2008 accrual of $4 million
be written off.
The public consultation process is not applicable.
There are no legal or risk management impediments to implementing the recommendation in this report.
The amounts to be written off total $4,663,283. With respect to the PILT account, $500,000 was written off against the AFDA and $3.5 million forms part of the deficit for 2009. The remaining balance was either charged back to the applicable department or written off against the AFDA.
There are no rural implications to implementing the recommendation in this report.
Specific details relating to general accounts receivable deemed uncollectible in 2009 are on file with the Deputy City Treasurer, Revenue.
Following consideration by Corporate Services and Economic Development Committee, this report will be forwarded to Council for its information.