Accounts Receivable Write-Off

Introduction

In the course of conducting business, the University creates accounts receivable from various parties including students, suppliers, bands and the general public. Occasionally, the University has difficulty collecting these accounts receivable and, after exhausting all reasonable methods of obtaining payment including the use of collection agencies and legal proceedings, must write off these balances.

Definitions

Allowance for doubtful accounts – a provision made by the University to reflect outstanding accounts which the University believes may never be paid thus reducing the balance of accounts receivable reported in the University’s financial statements;

Bad debt – any accounts receivable balance outstanding for more than one year;

Policy

Any balance owing to the University and outstanding for more than one year will be treated as a bad debt and will be provided for in the allowance for doubtful accounts. If the account remains unpaid for a further year it will be written off entirely subject to the following authorization limits:

1. < $25,000 – on approval of the Director of Finance
2. < $50,000 – on approval of the President
3. $50,000 – on approval of the Board of Governors

Consequences for Noncompliance

Failure to write off uncollectible amounts would result in meaningless accounts receivable balances remaining in the financial records thereby overstating the University’s financial strength. This would ultimately lead to a citation or even disclaimer from the University’s auditors if the cumulative balance was material on the basis that the financial statements did not present fairly the financial position of the University.