Student Accounts Receivable (C-59)

Original Implementation: July 15, 2008
Last Revision: April 17, 2012

PURPOSE

This document establishes guidelines for the prudent collection of student accounts receivable in the best interest of Stephen F. Austin State University and the state of Texas. Although this policy primarily applies to student accounts receivable, including certain university issued short term loans, procedures stated herein may be used to process other delinquent receivables from vendors and non-student accounts. This policy does not apply to the write-off of any federal loans.

POLICY STATEMENT

Stephen F. Austin State University is responsible for determining whether the extension of credit in specific cases to students is appropriate and in the best interest of the university to do so. It is the responsibility of the controller’s office to establish the following:

a process to ensure that the requested extension of credit is not a prohibited transaction.
a procedure to ensure that any extension of credit (installment plan contract, short term loan request, or repayment agreement) is done so in a prudent manner, including the use of standardized credit applications and legal authority required for approval of the requested credit.
a procedure whereby credit is not extended to students who are in default on other obligations or for whom previous obligations have been written off as uncollectible. If a student account is in default, a transcript and registration hold will be placed on the account.
procedures for managing and monitoring the billing and collection activities on student accounts.
procedures for recording and monitoring credit extended and subsequent payments received on student accounts.
procedures to ensure that amounts reported as receivables on the financial statement are recorded in accordance with generally accepted accounting principles

CRITERIA FOR RECOGNIZING AN ACCOUNT RECEIVABLE

A student account receivable will be recognized (recorded in the university’s financial records) when:

a student has enrolled for classes at the university or has been registered for classes by the university;
a student has incurred charges for costs associated with attendance (tuition, fees, housing and meal charges, post office charges, book purchases, etc.) from which a benefit to the student is derived;
payment is due to the university from the student or a third party;
the revenue from the transaction has been recognized in the university’s books and records;
payment has not been received (collected) by the university from the student or third party;
the accounts receivable does not represent an extension of credit that is prohibited by law; and,
the recording is deemed to be appropriate by the university's fiscal officers.

RECORDING AN ACCOUNT RECEIVABLE IN THE FINANCIAL RECORDS

An account receivable is recorded in the financial records automatically by the registration process. These entries credit the appropriate revenue accounts and debit the appropriate account receivable accounts in the university’s accounting system.

In the event that a student withdraws during the semester, the accounts receivable outstanding balance is reduced by the appropriate percentage refund rate relevant at the time of withdrawal.

RECONCILING ACCOUNTS RECEIVABLE

The controller’s office maintains adequate records of student accounts receivable and prepares a reconciliation of the student receivable records and the financial accounting records on a timely basis.

AGING ACCOUNTS RECEIVABLE

The controller’s office also maintains an aging schedule for all student accounts receivable with the total of the aging schedule balanced to the total recorded accounts receivable. The following aging brackets are to be used:

Greater than 90 days old
Greater than 180 days old
Greater than 1 year old
Greater than 5 years old

COLLECTING ACCOUNTS RECEIVABLE

The size of the account receivable may influence the collection efforts. The expenditure of time, effort, and money to collect large accounts receivable is appropriate; however, the same efforts expended on very small accounts receivable may not be economical. Guidelines as to the level of attention and the efforts expended on accounts receivable will be set by the university based on recommendations from collection agencies and management.

The following steps are conducted in collecting accounts receivable which are delinquent or in default.

An account will be considered delinquent or in default if the following apply:

the account balance is at least 181 days old (approximate time semester concludes);
the debtor has not exhibited concern regarding the delinquent account (i.e., requested a repayment agreement); and,
the debtor is not an active student.

Aging Bracket in Days with Approximate Billing and Collection Activity

Active Students:

0 - 30 Payment in full is due unless student is approved for installment plan, repayment agreement, institutional short term loans, or has other pending financial aid.
1 - 120 Business office emails students with balances due.
1 - 180 Transcript and registration holds are placed on student accounts that are past due.

Inactive Students:

0 - 30 Business office mails first demand letter to students with outstanding balances.
30 - 60 Business office mails second demand letter to students with balances of $100 or more, giving students 30 days to pay any outstanding balance prior to turning over account to collection agency.
60 - 90 Business office applies outstanding general deposit to delinquent student accounts and compiles list to send to collection agency.
60 - 90 Collection agency sends warning letter to students with account balances of $100 or more giving student 30 days to make payment or repayment agreement without incurring collection fees.
60 - 120 Student has 30 days to make payment without penalty.
90 - 150 Collection agency actively pursues collection. Collection agency fees added. Payments in this time period to either the university or the collection agency will be subject to the collection agency fees.
90 - 150 Business office notifies Texas Comptroller of Public Accounts to initiate warrant hold process, ensuring that no treasury warrant is issued to the indebted student (Texas Government Code, § 403.055).
576 - 1500 Accounts returned from collection agency. Business office may refer account to alternate collection agencies for second or third referral (at business office discretion).
576 - 1825 Accounts turned over to Texas attorney general’s office (at business office discretion).

Accounts placed with a collection agency are subject to the following: Fees are calculated and added after the 30-day warning letter has been sent. These fees will be negotiated in advance with the collection agencies and are subject to approval from the Texas attorney general’s office. Accounts will also be reported to the Texas Comptroller of Public Accounts as authorized by Texas Government Code § 403.055 to ensure that no treasury warrants are issued or payments are paid to the debtor until the debt is paid.

If a debtor with a delinquent account makes monthly payments towards the balance or begins making monthly payments within the 30-day window after the collection agency warning letter has been sent, the debtor will be treated as an “active’ student and will not be turned over to a collection agency unless monthly payments cease before the account balance is paid in full. If the account is turned over for collection, collection agency fees will apply. Regardless, there will be transcript and registration holds placed on the account until the balance has been paid in full.

If a debtor has received a 30-day warning letter and begins making monthly payments but then stops making monthly payments, the debtor will be sent to an outside collection agency without further notice to the debtor.

All demand letters should be mailed in compliance with applicable collection laws. If an address correction is provided by the United States Postal Service, the demand letter should be mailed to the corrected address prior to the referral procedures described above. Demand should be made upon every debtor prior to referral of the account to an outside collection agency and the attorney general.

WRITE-OFF OF AN UNCOLLECTIBLE ACCOUNT

The following accounts may be subject to write-off:

Accounts receivable up to $10 may be written off by the controller if all collection efforts have been completed and the account has been outstanding for 5 years.
Accounts receivable between $10 and $1,000 may be written off by the controller if returned as uncollectible by more than two outside collection agencies (first and second referrals) and the account has been outstanding for 5 years.
Accounts receivable over $1,000 returned as uncollectible by at least three outside collection agencies (first, second and third referrals) and has been outstanding for 5 years must be referred to the vice president for finance and administration for write-off approval. Requests for write-off should include name, amount, school term, and a statement as to why that accounts receivable has been determined to be uncollectible.

A list of all accounts written off will be filed in the controller’s office and all student accounts that have been written off will be flagged in the student system. Additionally, a transcript and registration hold will be placed on these student accounts to prevent these persons from receiving future university services until their balances have been paid in full. Warrant holds placed on the student’s account will not be removed until the balance is paid in full.

The following accounts will be forgiven and permanently written off, and the student’s account will be marked as paid in full:

Deceased debtors. If the debtor is deceased, the delinquent obligation should be classified as uncollectible and permanently written off after attempts to collect against the estate have been unsuccessful.
Residual amounts as deemed appropriate by the vice president for finance and administration after application of any property deposit, and within guidelines set by state and federal regulations.

FORGIVENESS OF DEBT VERSUS WRITE-OFF OF UNCOLLECTED ACCOUNTS

The write-off of an uncollected account is a bookkeeping entry only and does not relieve the debtor from his financial responsibility to the university. Although the uncollected account has been removed from the financial books and records (i.e., written-off as uncollectible), the university may still have a claim against the debtor and may still seek legal remedy (i.e., file suit for collection in a court of law). Therefore, it is the responsibility of the controller’s office to maintain adequate records regarding legal financial obligations (i.e., debts) owed to the university.

Student accounts receivable that are forgiven because of the student’s death or because the account balance is considered residual will be treated as paid in full, and records will be treated consistent with other student accounts that have been paid in full.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The university records an allowance for doubtful accounts on past due accounts for all accounts that have not been written off or forgiven. Prior to closing each fiscal year’s books, the controller’s office will analyze and adjust the allowance for doubtful accounts, with offsets to the appropriate revenue accounts or bad debt expense, in accordance with accounting guidelines. An allowance for doubtful accounts will be set up as a contra-receivable in each appropriate general ledger.

Cross Reference: Texas Comptroller of Public Accounts Fiscal Policies & Procedures, Accounting for Uncollectible Accounts (APS 027); Tex. Gov’t Code § 403.055; Ch. 2107

Responsible for Implementation: Vice President for Finance and Administration

Contact for Revision: Controller

Forms: None

Board Committee Assignment: Finance and Audit