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Agenda 02/14/2012 Item #16C22/14/2012 Item 16.C.2. EXECUTIVE SUMMARY Recommendation to approve removing uncollectible accounts receivable and their respective balances from the financial records of Collier County Public Utilities Division in the amount of $423,644.77. OBJECTIVE: Obtain approval to remove uncollectible balances from the Miscellaneous Accounts Receivable Ledger; the Collier County Water -Sewer District ( "District ") Subsidiary Ledger; and Solid Waste Landfill Accounts Receivable Ledger to represent the true financial picture of the Board of County Commissioners' General Ledger. CONSIDERATION: Accounts receivable management includes the periodic recognition of bad debt expense in the financial records for accounts that have been identified as uncollectible. Bad debt is recognized for a variety of reasons. • Exceeding the statute of limitations of collection (approximately 80% of the total write off request), primarily for miscellaneous invoices related to contractor damages to buried utility infrastructure. • Commercial accounts where the registered entity has gone out of business. • Staff errors and omissions. • Non - Sufficient Fund (NSF) checks that are returned as not collectible. An internal review of all accounts receivable balances within the Public Utilities Division (PUD) was completed by the project delivery team. Process improvements for quality assurance /quality control programs have been incorporated into our business practices for all accounts receivable balances within the PUD (Exhibit 1, Page 1). Utility accounting staff employs the following process when invoices become delinquent. 1. The first delinquent notice is sent approximately 30 days after the invoice date reminding the entity that the invoice is overdue (Exhibit 2). 2. The second delinquent notice is sent approximately 60 days after the invoice date demanding payment (Exhibit 2). 3. The third and final delinquent notice is sent (via certified letter) 90 days after the invoice date, and notifies the responsible party that the invoice will be sent to a collection agency if payment is not tendered (Exhibit 2). 4. Invoices are then sent to the collection agency under contract with Collier County ( Mintex). Those returned by Mintex as uncollectible are considered for removal from the financial records. 5. Staff has utilized legal means and methods to secure payment. Clerk of Courts Finance reviews checks returned by the bank for non - sufficient funds and identifies those eligible to be turned over to the State's Attorney for collection following written notification to the customer that returned checks must be paid in full within 30 days (Exhibit 3). Packet Page -1418- 2/14/2012 Item 16.C.2. Collection efforts for receivable balances included in this recommendation have been exhausted. Approval of this item will increase PUD bad debt expense by $137,696.90, and reduce the reserve for bad debt by $285,947.87. write uttsumma Details are included as Exhibit 4. A. Miscellaneous Billing The accounts receivable balance in the amount of $285,947.87 is comprised of invoices issued to contractors for repairs to damaged infrastructure (water and sewer lines, etc.), including internal costs for staff time, equipment, and materials used to make the necessary repairs. The lien rights afforded to the District arising from a failure by a property owner to pay water or sewer services is not available in cases where District infrastructure is buried in the right of way. Annually, the Clerk of Courts identifies miscellaneous billing accounts that are one year or older and recognizes those as bad debt, recording the bad debt expense in the general ledger. An Ernst and Young audit of the miscellaneous billing system recommended removal of those account balances (Exhibit 5). B. Collier County Water -Sewer District The impact to the District's bad debt expense is $100,974.04. On. average, the District bills over $100,000,000 in annual revenue. The recommended write -off represents .10% of annual water -sewer revenues. Staff benchmarked this with utilities in neighboring counties and municipalities for their recent uncollectible accounts receivable experience (Exhibit 1, Page 2). C. Sewer Impact Fees The amount recommended for removal is $1,575.00, representing two checks returned by the bank for non - sufficient funds. D. Solid Waste Disposal The accounts receivable balance of $17,354.83 represents amounts in the solid waste landfill accounts for five companies that have gone out of business. Delinquent balances related to NSF checks dated April 1, 1990, through August 29, 2011, total $16,235.20. Total bad debt expense for the Solid Waste Disposal Fund is $33,590.03. Packet Page -1419- Exceeds Statute ofLrnitations Out of Business Errors and Omissions Non- Sufficimt Funds (NSF) Unreconciled Items Total A Jkliscellaneous Billing (408) $278,976.53 $3,207.55 $3,763.79 $285,947.87 B Water- Sewer(408) $57,247.75 $14,540.97 $8,876.78 $1,312.98 $18,995.56 $100,974.04 C Sewer Impact Fees (413) $1,575.00 $1,575.00 D Solid Waste Disposal (470) - $17,354.83 - $16,235.20 $33,590.03 E Mandatory Collections (473) $1,557.83 $1,557.83 Totals $336,224.28 $35,103.35 $12,640.57 $20,681.01 1 $18,995.56 $423,644.77 Details are included as Exhibit 4. A. Miscellaneous Billing The accounts receivable balance in the amount of $285,947.87 is comprised of invoices issued to contractors for repairs to damaged infrastructure (water and sewer lines, etc.), including internal costs for staff time, equipment, and materials used to make the necessary repairs. The lien rights afforded to the District arising from a failure by a property owner to pay water or sewer services is not available in cases where District infrastructure is buried in the right of way. Annually, the Clerk of Courts identifies miscellaneous billing accounts that are one year or older and recognizes those as bad debt, recording the bad debt expense in the general ledger. An Ernst and Young audit of the miscellaneous billing system recommended removal of those account balances (Exhibit 5). B. Collier County Water -Sewer District The impact to the District's bad debt expense is $100,974.04. On. average, the District bills over $100,000,000 in annual revenue. The recommended write -off represents .10% of annual water -sewer revenues. Staff benchmarked this with utilities in neighboring counties and municipalities for their recent uncollectible accounts receivable experience (Exhibit 1, Page 2). C. Sewer Impact Fees The amount recommended for removal is $1,575.00, representing two checks returned by the bank for non - sufficient funds. D. Solid Waste Disposal The accounts receivable balance of $17,354.83 represents amounts in the solid waste landfill accounts for five companies that have gone out of business. Delinquent balances related to NSF checks dated April 1, 1990, through August 29, 2011, total $16,235.20. Total bad debt expense for the Solid Waste Disposal Fund is $33,590.03. Packet Page -1419- 2/14/2012 Item 16.C.2. E. Mandatory Collections The balance recommended for removal is $1,557.83. This amount represents 13 NSF checks dated January 1994 through January 2008. GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with this action. LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is legally sufficient, and requires majority support for approval. -JAK FISCAL IMPACT: Removal of the accounts receivable balances from the District subsidiary ledger will increase bad debt expense in FY2012 in Operating Fund (408) by $100,974.04; Sewer Impact Fee Fund (413) by $1,575.00; Solid Waste Management Fund (470) by $33,590.03; and Mandatory Collections Fund (473) by $1,557.83. Removal of District miscellaneous accounts receivable balances will reduce the allowance for doubtful accounts in Operating Fund (408) by $285,947.87. RECOMMENDATION: That the Board of County Commissioners, as Ex- officio the Governing Board of the Collier County Water -Sewer District, approves removing uncollectible accounts receivable and their respective balances from the financial records of the Public Utilities Division in the amount of $423,644.77. PREPARED BY: Teresa Riesen, Revenue Manager, Utility Billing and Customer Service Packet Page -1420- 2/14/2012 Item 16.C.2. COLLIER COUNTY Board of County Commissioners Item Number: 16.C.2. Item Summary: Recommendation to approve removing uncollectible accounts receivable and their respective balances from the financial records of Collier County Public Utilities Division in the amount of $423,644.77. Meeting Date: 2/14/2012 Prepared By Name: debbie chirm Title: Administrative Assistant,Utilities Finance Operations 1/24/2012 1:33:18 PM Submitted by Title: Manager - Revenue,Utilities Finance Operations Name: RiesenTeresa 1/24/2012 1:33:20 PM Approved By Name: Pam Callis Title: Supervisor - Revenue,Utilities Finance Operations Date: 1/24/2012 1:55:29 PM Name: HapkeMargie Title: VALUE MISSING Date: 1/24/2012 2:02:35 PM Name: Joseph Bellone Title: Manager - Utility Billing & Cust Serv.,Utilities Finance Operations Date: 1/24/2012 2:15:40 PM Name: WidesTom Title: Director - Operations Support - PUD,Utilities Fina Date: 1/25/2012 1:02:40 PM Packet Page -1421- Name: YilmazGeorge Title: Director - Wastewater,Wastewater Date: 1/30/2012 7:14:21 AM Name: KlatzkowJeff Title: County Attorney, Date: 1 /30/2012 4:05:48 PM Name: KlatzkowJeff Title: County Attorney, Date: 1/30/2012 4:13:45 PM Name: PryorCheryl Title: Management/ Budget Analyst, Senior,Office of Management & Budget Date: 1/31/2012 3:20:57 PM Name: OchsLeo Title: County Manager Date: 1/31/2012 3:57:16 PM Packet Page -1422- 2/14/2012 Item 16.C.2. 2/14/2012 Item 16.C.2. PUBLIC UTILITIES DIVISION Accounts Receivable Report January 24, 2012 EXHIBIT 1 Packet Page -1423- 2/14/2012 Item 16.C.2. PROCESS IMPROVEMENTS Quality Assurance /Quality Control (QA/QC) Program Process improvements for protection and preservation of Public Utilities Division (PUD) accounts receivable assets include: a. For miscellaneous billing: i. All invoice requests are reviewed by accounting staff for complete and proper documentation to support the claim prior to approval of the invoice. ii. Staff is developing an offset procedure with the Clerk of Courts Finance Department to recover delinquent receivables from active Collier County vendors. iii. Utilization of legal means and methods to secure payment. b. For water -sewer billing, written procedures for balance transfers due to change in ownership have been implemented. c. For impact fee payments, all checks must include the driver's license number accompanied by a photo ID in accordance with county -wide procedures. d. For solid waste disposal: iv. Current landfill operating policy prohibits customers from disposal at the landfill until bad checks have been replaced. Customers with a bad check history must pay by cash or credit card within one year of the date of the returned check. v. Billing for services in arrears is limited to only government agencies (City of Naples, City of Marco Island) and franchise solid waste haulers (Waste Management Inc., and Choice Environmental). e. For mandatory solid waste trash collection, liens are recorded with the Clerk of Courts on properties for delinquent payments, ensuring collection when ownership is transferred. From time to time, staff may utilize outside legal and forensic expertise to preserve and protect PUD accounts receivable assets. EXHIBIT 1 Page 1 Packet Page -1424- 2/14/2012 Item 16.C.2. ACCOUNTS RECEIVABLE BENCHMARKS Lee County Utilities (similar in size to the District) recognized bad debts of approximately 1.00% of annual billed revenues. Sarasota County Utilities (slightly larger than the District) experienced a .33% uncollectible rate. The City of Naples experiences an annual uncollectible rate of .48 %. EXHIBIT 1 Page 2 Packet Page -1425- c 2/14/2012 Item 16.C.2. o per co�.Hty Public Utilities Division Utility Billing & Customer Service Date, 20XX Entity Name Street Address City, State, Zip Code RE: Invoice #XXXX Dear Manager: This notice is to inform you that you have a past due invoice from the Board of County Commissioners. Payment must be received within thirty (30) days from the date of this letter to avoid further action, which could adversely affect your credit. Please contact 239 - 252 -2380, option # 4 at your earliest convenience. Your prompt attention to this matter is appreciated. Sincerely, Utility Billing & Customer Service Enclosure EXHIBIT 2- First Notice U66ty Billing & Custorm Service Depaftent • 4420 Mercantile Ave. Packet Page - 1426_'.52 -2350 - Water /Sewer Billing & Trash Collection 239 -252 -2380 co ,er c014nty Public Utilities Division Utility Billing & Customer Service Date, 20XX Entity Name Street Address City, State, Zip Code RE: Invoice #X=a Dear Manager: i 2/14/2012 Item 16.C.2. low This notice is to inform you that you have a past due invoice from the Board of County Commissioners. A Aft first notice had been sent to you; however, we have received no response to date. Payment must be received within thirty (30) days- from the date of this letter to avoid further action, which could adversely affect your credit. Please contact 239 - 252 -2380, option # 4 at your earliest convenience. Your prompt attention to this matter is appreciated. Sincerely, Utility Billing & Customer Service Enclosure EXHIBIT 2 — Second Notice UbbtyBOV & Customer Savice Departrnent • 4420 Mercantile Ave. •Packet Page -1427 ?52 2350 • Water /Sewer Billing & Trash Collection 239 - 252.2380 C011187 2/14/2012 Item 16.C.2. o ,er co�.�.ty Public Utilities Division Utility Billing & Customer Service Date, 20XX CERTIFIED MAIL Entity Name Street Address City, State, Zip Code RE: Invoice #XXXX Dear Manager: This notice is to inform you that you have a past due invoice from the Board of County Commissioners. You have already been sent two notices, and this is your third and final notice. Payment must be received within thirty (30) days from the date of this notice, or your account will be turned over to a collection agency. This action could adversely affect your credit. Should you have any questions, please contact our office at (239) 252 -2380 option # 4. Sincerely, Utility Billing & Customer Service Encl. Invoice EXHIBIT 2 — Final Notice tl* Berg & Customer Servioe Deparhent • 4420 Mercantile Ave. - "' ^ ^' ^^ M-AA^'"'^" - °''O °52 -2350 - Water/Sewer Billing & Trash Collection 239 - 252 -2380 Packet Page -1428- 2/14/2012 Item 16.C.2. `CAiariiy of CoAlier CLERK OF 'Aig ttRCtIT COURT Dwight E. Brock COLLIER COUNTY UR' �O,USE. Clerk of Courts 3301 TAMIAMI EAST Clerk of Courts P.O. BOX 4 1044 Accountant NAPLES, FLORIDMT01 -3* Auditor August 29, 2011 Custodian of County Funds Abash Enterprises P. O. Box 51246 Fort Myers, FL 33994 To Whom It May Concern: You are hereby notified that check number 19342 in the face amount of $1,600.00, issued by you on. 08/10/2011 drawn upon First Bank and payable to Collier County Board of County Commissioners, has been dishonored. Pursuant to Florida law, you have 15 days from the date of this notice to tender payment of the full amount Of such check plus a service charge of $80.00, or an amount of up to 5 percent of the face amount of the check, whichever is greater. The tot91 amount d •e is xt gon n� Unless this amount is paid in full within the time specified above, the holder of such check may turn over the dishonored check and all other available information relating to this incident to the state attorney for criminal prosecution. You may be additionally liable in a civil action for triple the amount of the check, but in no case less than $50, together with the amount of the check, a service charge, court costs, reasonable attorney fees, and incurred bank fees, as provided in s. 68.065. In order to avoid the above, you are requested to mail a money order or a cashier's check as a replacement, made payable to the BOARD OF COUNTY COMMISSIONERS, or redeem the above mentioned check for cash at the Collier County Finance Department, 3299 Tamiami Trail East, Suite 700, Naples, Florida 34112 -5356, Telephone Number (239)252 -7815. IF MAILING PAYMENT, send to Clerk of the Circuit Court, Finance Department, 3299 Tamiami Trail East, Suite 700, Naples, Florida 34112 -5356. Sincerely, Crystal K. Kinzel Director of Finance & Accounting Fund: 470 b/s- 115900 $ 1,600.00 001 -0- 206901 $ 80.00 EXHIBIT 3 Phone - (239) 732 -2646 Fax - (239) 775 -2755 Website: www elerk.co Ter fl ns Email_• cnllip %ltr -k .clerk.collier fl.us Packet Page -1429- 2/14/2012 Item 16.C.2. Packet Page -1430- M H f i "< d •• �tS • Wit€ • Nil - • R, �p • i • - 1 k , 1 �q 1 r� � • Ell 4 Ir - ` �; •. v N�- � V Packet Page -1430- M H 2/14/2012 Item 16.C.2. 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J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 0 0 0 0 -- 0 0 0 0 0 0 - -- 0 0 0 0 0 0 0 0 0 0 0 0 0 N •- •� O O O O O\ d1 O\ -P W W �- '- •� �O �O J a> O\ a1 th 00 01 P D1 O� �-' �-' O W �-' �-' O N - O N N O �-' O O O N ►- N�� -' O� �-- � N N� W W N � w '-- N �-- J O O O� O W ao 00 0o w •.-• oo J �O O� to •� � � vi .- vi cn .P N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N O O O O O O O O O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 O� O O� p p� p p p p w 0 w w 0 a a aa It P� w Eom < o Lo o , o C O a a ° ° °= ° t- 7� N N CD CD a 2 N d CL p" yo n ( C o ro- CD �7 r �n U0oa000a z o x' ° °'�� -' c Cr1 CD N W N N �-+ N r-+ W Vi N N Ch „� N --` r-i = (n M p W W W 0 0 41 01 O O '-' O> J Vl '� O �-` N W U N 0o O '-' 6 �o LA --j (-A oo r-• �-' x -n x 0�0 N tin to v.A J J�� w cn 00 O- N N J N M 2 Co n n C ~ ~ N N O N c n O a, N J N cn J 00 P J W 0o J 00 \G C1 O J W W O J 00 00 J OrJ v O\ c.n O J �` W O N O w J oo N O O 00 ON O C N O O O J O 0 0 0 Ch O O cn d 0 0 0 J N O N o C=7 " r.+ tJl � O a r n �O ? �D w N N N 0 N cn O al N J N M 00 N w W C> N- w O N 0 00 00 J 00 J a1 cn O J P 00 `1 O 00 00 �- O O 00 O C/i O O O O N O O 66 6 6 Oo Vi O d1 O w J oo N O O oo O\ O O N O O O J O 0 0 0 to O O to 0 0 0 0 J N O N O O• d a 0 Packet Page -1444- 2/14/2012 Item 16.C.2. 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O� O N `o w 0 0 0 0 J w P O O ON o 0 0— -Q W\C w 0 C 0 \.O 0 0 J �7 O w 0 0 O\ oo O O — O O O .P W oo to O O O -P O�C W .P by a � r CNii GIN O o vNi -- O �1 N w � Q y by a � r Q1 N W N O Packet Page -1446- Ot O G G. W O Cn O N O N N N W J O O O O N w � w O N A ON O N "O w 0 0 0 0 J w N P O O 0 0 w �'p 0 0 �l �l O W O O O\ 00 O — 0 0 O O 00 (-n O O-11. o "D w P Q1 N W N O Packet Page -1446- Ot O G G. W O 2/14/2012 Item 16.C.2. o w w d m 0 0 00 0 0 N N ob O a � n � a. o w CD C �• o CD CD N 5 td Y N z o o x CO -n y CN 7C M �—� 00 o �oo o Cn d � W to 00 C/1 00 Packet Page -1447- Fes+ C!! d � � O H ° td Y N r o y CN 00 �oo o W to 00 a H+ 0000 O 00 �--• W 2/14/2012 Item 16.C.2. EXHIBIT 5 Management Response Public Utilities — Miscellaneous Revenue & Billing 1) Segregation ofDuties Observation: During the course of our Miscellaneous Billing — Water & Wastewater walkthrough at UBCS, we noted that the same individual who reviews the draft invoices prior to issuance to customers (control activity) has access in the SAP module to edit the invoices, and is also the same individual who mails the invoices. Recommendation: Management should consider that a different individual perform an additional review and be responsible for the mailing of the final invoices, or that the Fiscal Technician's SAP access be restricted to prevent her ability to edit the invoices prior to her approval of them, in order to achieve adequate segregation of duties._A fundamental element of internal control is the segregation of certain key duties. Segregation of incompatible duties, such as the recording activity and the control activity, ensures that no employee or group should be in a position both to perpetrate and to conceal errors or fraud in the normal course of their duties. Management Response: Management agrees and requested Clerk's MIS to restrict the fiscal technician's access to prevent editing invoices prior to approval. This system permissions change has been implemented. 2) Accounts Receivable Write -off &Agin Observation: During our walkthrough of the Miscellaneous Revenue & Billing - Water & Wastewater process at UBCS, we noted that the aging of receivables includes accounts which are greater than 1 year old. We note that the Finance office fully allows for any receivables older than 1 year; however, this process does not include writing off uncollectible accounts. Recommendation: Management should consider that those accounts which are greater than 1 year old, and have therefore already been provided to the collections agency, should be written off, as collectability is unlikely. This will reduce the gross -up of the accounts receivable balance as well as the offsetting allowance for doubtful accounts, resulting in accounts receivable balances which are more likely to be realized. Management Response: Management agrees that account balances that are uncollectible should be written off in a timely manner. Those balances due from vendors who are also service providers to the county will not be sent to the collection agency. Every attempt will be made to offset receivables balances against payables to that vendor. All other aged receivable balances that have been returned by the collection agency as uncollectible will be written off, regardless of the age of the receivable. Staff is preparing an Executive Summary- to recommend existing balance write -offs for invoices that are considered uncollectible. Observation: Per policy, accounts which are greater than 90 days overdue are turned over to the collections agency, based on the review of the aging by the Fiscal Technician. We noted during our discussions with the Fiscal Technician that, although a procedure is in place for reviewing the receivables aging on a weekly basis in order to determine the accounts to be sent to the Packet Page -1448- 2/14/2012 Item 16.C.2. EXHIBIT 5 collections agency, the procedure is being performed more on an ad hoc basis, as there is no formalized review process of the procedure. Therefore, the receivables aging may be reviewed y several times within the month or not at all, depending on the availability of the Fiscal Technician. Recommendation: Management should consider that the review of the aging be incorporated more formally into a weekly or monthly receivables closing and a formal list of accounts to be sent to a collection agency be formally approved by the Department Director. Therefore, the process will be more formalized and result in standardized opportunities for review, which will in turn assist with the implementation of the new offset policy, as the review of vendors may be performed simultaneously. Management may also wish to consider that the vendor numbers in the UBCS Miscellaneous Billing Module of SAP be adjusted to match those vendor numbers used universally by the County, allowing employees to run a matching using the SAP program to identify vendors who fall under the offset policy. Alternatively, a vendor table could be developed in SAP to allow reconciliation between the UBCS vendors and the County vendors. Management Response: Management agrees to a formal monthly review of the acing to be implemented with the November, 2010 A/R balance. ,Observation: Per discussions with UBCS management, we noted that a new policy has been approved by the Board on September 28, 2010 (Agenda Item 160), but is not yet in place. This policy allows management to offset the amounts owed to vendors by the County with the vendor's overdue balance owed to the UBCS division (hereafter referred to as the "offset policy "). We note that this policy will require that UBCS management /staff to review the listing of vendors on a frequent basis and to crosscheck the vendors against the County's master vendor listing. Recommendation: Management should consider that, upon the implementation of the offset policy, accounts sent to the collections agency should be restricted to those accounts which are not actionable in any other way. In other words, those accounts which can be collected through the offset policy should not be provided to collections, in order to reduce the administrative burden on the employees to follow up with the collections agency, and to ensure more timely settlement of the account. Management Response: Discussions are underway with Clerk's Finance and MIS to determine how best to automate offset of receivables against payables. Once this process has been implemented, receivable balances sent to the collections agency will be restricted to only those that cannot be resolved via the offset process. 3) Wastewater Invoice Detail Preparation Observation: In our testing performed over the process of Miscellaneous Billing & Revenue - Wastewater, we noted that the County subcontracts out certain work orders. When work is subcontracted, the County receives an invoice from the subcontractor for the work performed, and the County uses that invoice received as the basis for the invoice amount to be charged to the subject of the work order. We noted that when an invoice was received from the subcontractor, F1 Packet Page -1449- 2/14/2012 Item 16.C.2. EXHIBIT 5 the County noted that the "Service Date" was the date of the subcontractor invoice, not the date that the work was performed. Recommendation: Management should consider implementing a policy in which all work orders are processed, listing the "Service Date" as the date the work was actually performed, regardless of which date the County receives subcontractor invoices or processes the work order. This will more accurately reflect the details of the work performed and may decrease the volume of related complaints /disputes regarding the services performed from customers. It also helps to ensure that revenues are stated correctly, as currently, some revenues may not be properly accounted for as of the month or year -end based on the actual date of service performed and additional time is incurred to accrue such revenues prior to the closing of the books. Management Response: Management agrees to list the "Service Date" as the date the work was. actually performed. The invoice received from the subcontractor will show the actual date the work was performed. Observation: In our testing performed over the process of Miscellaneous Billing & Revenue - Wastewater, we noted that the Work Order does not specify the customer /contractor to whom the work performed should be invoiced. This information is provided verbally to the Wastewater Supervisor by the preparer of the work order by the Field Supervisor, but is not formally documented on the work order. Therefore, there is no record of the customer to which the invoice is to be billed to until the invoice is created by the Wastewater Supervisor. Recommendation: Management should consider implementing a policy in which all work orders provide the name of the customer. This will reduce the possibility of mistaken or incorrect billings and ensures that each work order document stands alone and provides sufficient detail for the preparation of an invoice, without requiring further information from the field supervisor. This also prevents any delays in processing work orders, as if the Field Supervisor is unavailable, the Wastewater Supervisor may still prepare the invoice. Management Response: Water /Wastewater will create work order in wo system and reference responsible party (property owner, contractor, etc.) at the time of creation. Work will then be performed either in -house or by hired contractor (hired contractor will need to reference work order number on invoice for payment to receive payment). Work order will then be reviewed by supervisor /manager to confirm that the work is clearly billable. Invoice for payment is created to bill property owner or responsible contractor. 4) General Work Order Review & Timely Invoice Preparation Observation: In conjunction with our walkthrough, and as confirmed through our testing performed over the receivables aging and discussions with management, we note that there is no formal policy in place relating to the timing of work order processing and billing. As such, a work order may not be invoiced for several months, depending on the availability of the Fiscal Technician preparing the related invoice. Therefore, resulting difficulties are untimely revenue collections, possible incorrect pricing due to pricing changes between the date work was performed and the date it was invoiced, both of which may also result in disgruntled customers. Furthermore, County is assuming additional credit risk as the customer may be in strong 3 Packet Page -1450- 2/14/2012 Item 16.C.2. EXHIBIT 5 financial condition at the time the initial work is completed and may become insolvent during the many months it takes to bill in some cases. This may result in additional uncollectible amounts. Recommendation: Management should consider implementing a policy in which all work orders are processed on a timely basis, such as weekly. This will reduce collection delays, and may decrease the volume of related complaints. It also helps to ensure that revenues are stated correctly, as currently, some revenues may not be properly accounted for as of the month or year end, and additional time is incurred to accrue such revenues prior to the closing of the books. Management Response: A new procedure has been put into place that requires all invoices be entered for processing within 10 days of close out of the work order or receipt of a contractor's invoice, whichever comes last. This requirement has been added into the key results areas for the data entry clerk: The Administrative Assistant who manages the team member responsible for performing the data entry will develop a tracking report to allow this to be monitored for compliance. Observation: In conjunction with our walkthrough, and as confinned during our testing performed over the process of Miscellaneous Billing & _Revenue, we note that there is no formal policy in place relating to the reconciliation of work order numbers. Work orders are pre - numbered and sequential, but there is no check to detennine that all work orders are submitted for processing. As such, work orders may be lost or not turned in for processing, resulting in the County being unaware of a billing opportunity. Recommendation: Management should consider implementing a policy in which work orders are reconciled on a regular basis, such as weekly or monthly. This will help to ensure that all work orders are processed, and that the County appropriately bills for all water distribution and wastewater repairs. It also helps to ensure that revenues and accounts receivable are stated correctly, as otherwise, some revenues and accounts receivable may not be properly included in the financial statements. Management Response: Currently, work orders are prepared for all daily work assignments, either prior to the start of the day through inHance or in the field on a manual work order by the field team members. Work orders issued to repair damage to utility assets are included within the batch and cannot be singled out identifying it as necessary to bill to a third party. If a particular work order must be billed to a third party to recover costs, a Request for Invoice form is prepared and submitted along with the work order to the department manager for review and approval. Since management reviews all work orders on a daily basis, this process is sufficient in our current manual work order system to ensure all work orders that should be billed to a third part are billed.. However, a field based electronic work order system is anticipated in the near future. Management will request functionality in that automated system that tags a billable work order with a specific identifier. A weekly report can then be produced for management review that will enable a thorough reconciliation of all billable work orders with invoices produced each week. 4 Packet Page -1451- EXHIBIT 5 Conclusion 2/14/2012 Item 16.C.2. We were not engaged to, and did not conduct, an examination, the objective of which would be the expression of an opinion on management's assertions. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Collier County Government Center and management of Utility Billing & Customer Service, and is not intended to be and should not be used by anyone other than these specified parties. 5 Packet Page -1452-