Purpose

Explain when a state debt is considered uncollectible and how agencies must handle such debts in accounting, reporting, and oversight.

Main Provisions

• Uncollectible debt write-off: A state agency may write off a debt from its financial records and stop counting it as an account receivable for financial reporting once a debt is determined uncollectible.
• Criteria for uncollectibility: A debt is uncollectible when any of the following are true:
  • All reasonable collection efforts have been exhausted.
  • The cost of further collection would exceed the amount recoverable.
  • The debt is legally without merit or cannot be substantiated by evidence.
  • The debtor cannot be located.
  • Available assets or income are insufficient to pay the debt.
  • The debt has been discharged in bankruptcy.
  • The applicable statute of limitations for collection has expired.
  • It is not in the public interest to pursue collection.
• Reporting requirements: Uncollectible debts must be reported by the agency in its quarterly reports to the commissioner of management and budget. The agency must maintain the basis for the uncollectibility decision.
• Notification for large debts: If an uncollectible debt is $100,000 or more, the agency must notify the chairs and ranking minority members of the legislative committees with jurisdiction over the agency’s budget at the time the debt is deemed uncollectible. The notification must include the entity, amount, revenue type, reason for uncollectibility, and how long the debt has been outstanding.
• Annual summary: The commissioner of management and budget must report annually (to the chairs and ranking minority members of the relevant legislative committees) the number and total dollar amount of debts determined to be uncollectible during the previous fiscal year, by October 31 or November 30 of each year.
• Legal obligation remains: Determining a debt to be uncollectible does not cancel the debtor’s legal obligation to pay the debt.

What Changes This Bills Brings

• Adds formal write-off authority for uncollectible debts and ties it to clear criteria.
• Creates expanded reporting and transparency requirements, including quarterly reporting by agencies and an annual summary by the budget office.
• Establishes a threshold ($100,000) that triggers notification to the Legislature’s budget committees.
• Increases accountability around how uncollectible debts are identified, documented, and communicated to lawmakers.

Impact and Oversight

• Involves multiple actors: state agencies (who determine uncollectibility), the commissioner of management and budget (who receives quarterly reports and issues the annual summary), and legislative committees (chairs and ranking minority members who receive notification for large debts).
• Enhances transparency about debt recovery efforts and outcomes and makes large uncollectible debts more visible to the Legislature.

Notes on Terminology and Concepts

• Key terms appear in the bill and are used consistently with standard government accounting language, including uncollectible, write off, account receivable, financial reporting, quarterly reports, and annual summary.
• The bill also references common debt concepts such as bankruptcy, statute of limitations, public interest, debtor, and recovery costs.

Potential Implications

• Agencies may more proactively document reasons for uncollectibility and maintain a formal record for review.
• The Legislature gains more visibility into the scale and nature of uncollectible debts, especially for large amounts.

Effective Date (context)

• The text provided focuses on changes to reporting and write-off processes; the actual effective date would be specified elsewhere in the full bill.

Relevant Terms - uncollectible debt - write off - account receivable - financial reporting - quarterly reports - commissioner of management and budget - state agency - debt - debtor - statute of limitations - bankruptcy - public interest - notification - chairs - ranking minority members - legislative committees - annual summary - revenue type - amount - duration outstanding