Audit/fiscal Committee Abraham Hovsepian, Chair MaryAnne M. Avila Dolores Barrow Robert Burkhardt Virginia Eriksen*

Individual County Departments: a. To our knowledge, the County Board of Supervisors has not adopted any standardized collection policies and procedures that each department is required to follow. b. In practice, the individual County departments have a wide range of policies and procedures with respect to the collection of slow pay and delinquent accounts. Many departments have no written collection policies and procedures. c. Many County departments have slow pay and delinquent accounts receivable that are not being collected fully or on a timely basis. The total value of accounts written off in 2000, as reported by respondents to our survey, was $1,292,062.

Central Collections: a. The County Treasurer's Office has a "Central Collections" function, which has been in operation since 1996. Central Collections has adopted comprehensive written policies and procedures with respect to the collection of slow pay and delinquent accounts b. Central Collections uses computer software specifically designed for collection agency applications. In some instances, the software interfaces with databases from the state and other County departments. c. Central Collections has developed comprehensive procedures for handling both slow pay and delinquent accounts, with specified periods for issuing collection notices and other communications. Central Collections is equipped to handle accounts that are slow to pay or delinquent, cases where debtors' whereabouts are unknown (through "skiptracing"), and cases requiring legal action, including liens and garnishment of wages. ... 01-28 AS A RESULT OF OUR REVIEW, WE HAVE THE FOLLOWING

At a minimum, each department's collection policy should provide for: The mailing of a series of delinquency notices

If a department is too small to perform all of these functions, or cannot perform these functions in a cost effective manner, then the department should be required to utilize Central Collections.

For those County departments that utilize Central Collections, we recommend a "two-tier" cost structure for collection fees that are charged back against departmental operations, one for "slow pay" accounts, and another for accounts that a department decides should be assigned for collection. Details are provided in Chapter 4. Adoption of the policy described above should yield financial benefits, in the form of more timely collection of delinquent accounts. It will also yield enhanced internal control, because more information will be gathered on the status of any one account, and that information would be available centrally. If the above policy is adopted by the County Board of Supervisors and if a significant number of County departments begin to utilize Central Collections, this could result in Central Collections adding additional collection agents, and a corresponding reduction in collection costs at the department level. We have not attempted to quantify the dollar magnitude of such changes in operations. II. DEPARTMENTAL BILLINGS In this Chapter, we present a summary of findings and recommendations on selected County departments and opportunities for centralized billing. Current Department Practices We have observed that each of the various County departments provides a unique service, often to many different types of clients. In addition to the complexity presented by the nature of the services themselves, those services are often governed by varying federal and/or state laws and regulations. The business of each department is therefore typically complex, and not easily standardized. A sample profile of selected departments is given immediately below. ARROWHEAD REGIONAL MEDICAL CENTER (ARMC) ARMC bills and collects approximately $400,000,000 in annual revenues. Invoices must be prepared and transmitted to a wide variety of recipients, including:

Clients (Please describe the general types of clients that receive services from your Department, for which they are charged a fee that you must collect) Cash Management Survey continued... of

Points of service—where do these clients receive your services, and where do they pay for those services, if different.

Number of invoices & dollar value, per month, for July 1 through December 31, 2000. July _____/ $_____ August _____/ $_____ Sept _____/ $_____October ____/ $_____ Nov _____/ $

What proportion of annual transactions are "cash and carry?" (service received AFTER payment is made.) _____%

Current statement of accounts receivable (Number and dollar value--Please attach details)

Year-end statement of accounts receivable for 1999/2000 and 1998/99.

Number and dollar value of cases forwarded to central or other collections in FY1999/00.

Number and dollar value of any accounts "written off" in FY1999/00.

Policies and procedures regarding a. Invoicing b. Credit c. Bad debt (e.g. how is "delinquency" defined?) d. Documentation, management of accounts receivable (e.g. are accounts aged?)

Does your Department automate any part of its invoicing and collections processes? (e.g. automatic triggering of follow-up invoices after a certain number of days) THANK YOU AGAIN FOR YOUR COOPERATION! Arroyo Associates, Inc. A/F-32