FINDING OF THE COLLECTIONS BOARD OF REVIEWREPORT NO. 050416

Pursuant to the provisions of Sections 5.182 through 5.184 of the Los Angeles Administrative Code, the Collections Board of Review (Board) held a hearing to review, authorize and/or recommend delinquent accounts for write off. The meeting was held on May 04, 2016, in Office of Finance Conference Room 202 at City Hall, Los Angeles, California. The Board consists of the following members:

• Shane Min, Sr. Management Analyst II, representing the City Controller• Wai Yee Lau, Revenue Manager, representing the Office of Finance• Melissa Krance, Inspector General of Revenue and Collections, representing the

Office of the City Administrative Officer

The Board’s agenda included consideration for removal of various uncollectible accounts receivable from the active accounts of the Los Angeles Departments of Transportation, Fire and Public Works - Bureau of Sanitation. The Board may approve write offs of accounts less than $5,000 each as authorized by the City Council (CF 09-1735). The Board may recommend write off of accounts $5,000 or more for approval by the City Council. The results of the Board’s review are summarized below.

Los Angeles Department of Transportation (LADOT)

LADOT presented one write off request before the Board as follows:

I. April 18, 2016 report requesting write off of 325,921 uncollectible accounts totaling $42,485,553.66 representing invoice amounts less than $5,000.

Discussion. These accounts are parking citations issued by LADOT. These citations are from January 2011 to March 2014. These citations are processed by Xerox State and Local Solutions (Xerox) and Xerox also acts as the collection agency. Secondary collections are handled through sub contracted third party collection agencies - Harris & Harris, MRS and GC Services.

These accounts are not past the statute of limitations but the Department contends that accounts in excess of two years are highly unlikely to be collected. Therefore LADOT requests approval to remove these accounts from their active accounts receivables.

Board’s Decision. The Board has reviewed the list of uncollectible accounts and the Board unanimously approved the request from the LADOT to remove from its active accounts receivable the uncollectible amount of $42,485,553.66 representing 325,921 accounts less than $5,000 per account.

Los Angeles Fire Department (LAFD)

LAFD presented one write off request before the Board as follows:

Finding of the Collections Board of Review May 04, 2016 Page 2 of 2

I. February 22, 2016 report requesting write off of 24,189 uncollectible accounts totaling $25,433,673.70 representing accounts less than $5,000.

Discussion. LAFD provided a summary by month of 24,189 uncollectible emergency ambulance billing accounts totaling $25,433,673.70. The accounts are for the period November 2010 to September 2014. These accounts are covered by the Health Insurance Portability and Accountability Act (HIPAA) and are being considered by the Board of Review under special procedures instituted for HIPAA related accounts. These accounts have been adjusted for partial collections. LAFD bills these invoices through ADPI to the customer, to insurance providers and Medicare/Medical as required. ADPI also conducts the primary collection functions.If the invoices are unpaid, they are then sent to the collection agency Harris and Harris. All the accounts listed have been returned as uncollectible by Harris and Harris.

Board’s Decision. The Board has reviewed the accounts and has unanimously approved the write off request from LAFD to remove from its active accounts receivable, 24,189 invoices totaling $25,433,673.70.

Los Angeles Department of Public Works - Bureau of Sanitation (PW-BOS)

PW-BOS presented one write off request before the Board as follows:

I. April 22, 2016 report requesting write-off of 6 uncollectible accounts totaling $41,915.90 representing accounts more than or equal to $5,000.

Discussion. These invoices were generated by the PW-BOS (IWMD) for industrial wastewater fees. All 6 invoices belong to one debtor. These invoices are over three years old and the statute of limitation for collections has passed on all these invoices.

Board’s Decision. The Board agreed that additional efforts to collect could be disproportionately costly in relation to the probable outcome. The Board unanimously agreed to request the City Council to approve the request from PW-BOS to remove from its active accounts receivable 6 uncollectible accounts totaling $41,915.90 representing accounts more than or equal to $5,000.

City of Los AngelesBOARD OF PUBLIC WORKS

MEMBERS CALIFORNIA OFFICE OF THE BOARD OF PUBLIC WORKS

KEVIN JAMESPRESIDENT

MONICA RODRIGUEZVICE PRESIDENT

HEATHER MARIE REPENNINGPRESIDENT PRO-TEMPORE

MICHAEL R. DAVISCOMMISSIONER

JOEL F. JACINTOCOMMISSIONER

ERIC GARCETTIMAYOR

FERNANDO CAMPOSEXECUTIVE OFFICER

200 NORTH SPRING STREET ROOM 355, CITY HALL

LOS ANGELES, CA 90012

GENERAL INFORMATION Tel: 213-978-0261 Fax: 213-978-0278

TDD (213) 978-2310 http://bpw.lacity.org

April 22, 2016

City Controller Board of Review Room No. 300 City Hall East

#1 BOS/OOA

Attn: Shane Min, Chair

Subject: REMOVAL OF UNCOLLECTIBLE ACCOUNTS RECEIVABLE BALANCES OFEQUAL TO AND MORE THAN $5,000 OWED BY INDUSTRIAL USERS

As recommended in the accompanying report of the Directors of the Bureau of Sanitation and the Office of Accounting, which this Board has adopted, the Board of Public Works hereby requests that the Board of Review, subject to approval by the City Council, authorize the Bureau of Sanitation and the Office of Accounting to administratively remove, from their accounts receivables and other City records, the delinquent industrial wastewater fee balances that are equal to or more than $5,000, older than three years in age, and owed by Industrial Users with inactive wastewater permits, as listed in the Transmittal for a total of $41,915.90.

FISCAL IMPACT

The write-off of un-collectible delinquent accounts will not impact the City’s General Fund because these accounts receivables are associated with the Sewer Construction and Maintenance Fund.

Respectfully submitted,

FernandoJCahjpos, Executive Officer Board of Public Works

FC:mp

cc: Victoria A. Santiago, Director Office of Accounting

AN EQUAL EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER

DEPARTMENT OF PUBLIC WORKSADOPTED BY THE BOARD and referred to the

PUBLIC WORKS OF THE CITY board of review of Los Angeles California

BUREAU OF SANITATION OFFICE OF ACCOUNTING JOINT BOARD REPORT N0.1 April 22, 2016

APR 2 2 2016

Executive ba£o.i

Executive Officer Board of Public Works

CD: ALL

REMOVAL OF UNCOLLECTIBLE ACCOUNTS RECEIVABLE BALANCES OF EQUAL TO AND MORE THAN $5000 OWED BY INDUSTRIAL USERS

RECOMMENDATIONS

1. Forward this report to the Collections Board of Review and request that the Board of Review, subject to approval by the City Council, authorize the Director of the Bureau of Sanitation (LASAN) and the Director of the Office of Accounting to administratively remove from their accounts receivables and other City records, the delinquent industrial wastewater fee balances that are equal to or more than $5000, older than three years in age, and owed by industrial users with inactive industrial wastewater permits, as listed in the Transmittal for a total of $41,915.90.

2. Following action by the Collections Board of Review, forward this report to the City Council, for its approval of the Collections Board of Review’s action and recommendation to authorize the Director of the LASAN and the Director of the Office of Accounting to administratively remove, from their accounts receivable and other City records, those delinquent balances listed in Transmittal 1.

TRANSMITTAL

1. Inventory of inactive Industrial Wastewater Permits with delinquent industrial waste (IW) fee balances of equal to or more than $5,000 that are more than three years old.

2. Billing and Collection Process Flow Chart3. Delinquent Account Detailed Collection Process Flow Chart

FISCAL IMPACT STATEMENT

The write-off of un-collectible delinquent accounts will not impact the City’s General Fund because these account receivable are associated with the Sewer Construction and Maintenance Fund.

DISCUSSION

BackgroundThe Industrial Waste Management Division (IWMD) of (LASAN) regulates and monitors the discharge of industrial wastewater to the City's wastewater collection and treatment facilities. IWMD is also responsible for the determination and collection of industrial waste fees to recover the City's costs in providing the required level of wastewater treatment and control associated with the discharge of industrial wastewater.

Page 2

IWMD also oversees operation and maintenance of the City's industrial Waste Billing (IWB) system. The Director of the Office of Accounting is responsible for posting all payments and adjustments that are received, tracking all accounts receivables and generating monthly reconciliation reports for the wastewater program. The reconciliation reports identify the collection rates for various accounts and funds in the program, including the industrial waste fees.

Collection ActivityLASAN invoices all Industrial Users (lUs) in arrears on a quarterly basis and generates invoices (Regular Invoice), which are due and payable on the first of January, April, July and October of each year. I Us are then required to pay these invoices within 30 days or before the "delinquent" dates of the first of February, May, August and November. Failure to pay the invoices before the delinquent date results to an addition of a two and a half percent (2.5%) delinquency charge. LASAN additionally generates a second invoice (Delinquent Invoice) and a third invoice (Demand for Payment) to notify the lUs of their outstanding industrial waste fees. LASAN further issues a Notice of Violation (NOV) for non-payment if an IU fails to pay the required fees.

IWMD bills on an average of 14,500 lUs each quarter. 85% generally pay in a timely fashion. The other 15% are sent additional invoices and eventually 10% are sent to col to a collection agency under contract with the City. All delinquent accounts, with a balance of equal to or greater than $5,000 are referred to the Office of Finance’s Citywide Collection Unit within 45 days of the delinquent date.

The Office of Finance makes every effort possible to contact the delinquent lUs and collect the amount referred by LASAN. The Office of Finance is authorized to negotiate settlements of the accounts referred to it and in many cases places the debtor on a payment schedule and executes an agreement with the debtor to secure payments. In certain cases and when the debtor fails to respond, the Office of Finance initiates litigation against the debtor. The Office of Finance has litigated several cases and has been successful in obtaining judgments that have resulted in payments of the delinquent debts. The Office of Finance declares accounts un­collectible when it is not successful in collecting the debt. Some reasons an account is determined to be uncollectible include expiration of the statute of limitations, being out of business or inability to locate the debtor. The write-off will not prejudice the position of the City and all reasonable collection efforts have been exhausted.

Current StatusThe transmittal lists the inactive (cancelled) industrial wastewater permits with an outstanding balance of more than $5000 that are more than three years old. For these accounts, LASAN has made every effort to collect the aforementioned debts; however, the three year statute of limitations for collection has expired.

Bureau of SanitationOffice of AccountingJoint Board Report No. 1April 22, 2016

Page 3

LASAN has also mailed to the inactive holder a “Closing Invoice Letter” stating the amount owed and demanding payment. Currently, there are 6 invoices with a total outstanding balance of$41,915.90.

Authority to Write Off Uncollectible DebtsThe Los Angeles Municipal Code (LAMC) Chapter I, Section 11.04 provides the authority for writing off and canceling uncollectible debts owed to the City when an account or debt is deemed uncollectible. The reasons why an account could be written off include expiration of the three-year statute of limitations or the fact that the debtor is no longer reachable as in the case of a cancelled / inactive permit. An account can also be deemed uncollectible where the Office of Finance has exhausted its means trying to collect the subject debt. In this case, the three-year statute of limitations has expired for this account and the Office of Finance efforts to collect have not been successful. Further, this account also belongs to cancelled / inactive permits where the debtor may no longer be reachable and out of business. The LAMC also provides for the submission of uncollectible debts (accounts) to the Board of Review consisting of the Office of Finance, the City Treasurer and the City Controller for its approval to remove such debts from the City's accounts receivable records. Writing off of such debts, with a balance of more than $5,000.00 does require approval of the City Council.

LASAN and the Office of Accounting recommend approval of this report to allow the Industrial Waste Billing system to reflect the correct “accounts receivable" balances, and to delete from the system those accounts that are found to be uncollectible. This is an important step to ensure that the financial statements for the Sewer Construction and Maintenance Fund are accurate and the accounts receivable amount is realistic.

CONCLUSION

Bureau of SanitationOffice of AccountingJoint Board Report No. 1April 22, 2016

Considering that LASAN has made every effort to collect the aforementioned debts, LASAN is unable to locate the debtor, the write-off will not prejudice the position of the City, the three-year statute of limitations for collection has expired; and provided with the authority to remove such debts from the City records, it is recommended that the Board approve this report to set in motion the required process to administratively remove all such debts from the City's accounts receivable records.

STATUS OF FINANCINGThere will be no impact on the General Fund.

Page 4

Bureau of SanitationOffice of AccountingJoint Board Report No. 1April 22, 2016

(SA.MS, Bl)

Prepared By:Sonny Berberabe, IWMD (323) 342-6087

LA FRESH CUT CORP - PERMIT # 519143 Out-of-Statute Invoices

INVOICE#

INVOICEDUEDATE PRINCIPAL Delq. Fee TOTAL

AGINGIN

YEARS201041749 10/1/2010 $ 5,940.49 $ 347.14 $ 6,287.63 5.5201056705 1/1/2011 5,940.49 495.66 6,436.15 5.25201112173 4/1/2011 5,940.49 644.17 6,584.66 5.00201126833 7/1/2011 5,940.49 792.68 6,733.17 4.75201141349 10/1/2011 5,940.49 941.19 6,881.68 4.51201156515 1/1/2012 7,855.04 1,137.57 8,992.61 4.25

TOTAL $ 37,557.49 $ 4,358.41 $ 41,915.90

transmittal 1

DATERETURNED

02/07/1304/22/1304/22/1312/31/1305/08/1505/13/14

REASONCancelled- Effort Exhausted/ Out of Statute Cancelled- Effort Exhausted/ Out of Statute Cancelled- Effort Exhausted/ Out of Statute Cancelled- Effort Exhausted/ Out of Statute Cancelled- Effort Exhausted/ Out of Statute Cancelled- Effort Exhausted/ Out of Statute

Delinquent Industrial Wastewater Fees Collection Process

NOTICE OF ' VIOLATION 1 TRANSMITTAL 2DELINQUENT

INVOICE

DEMANDFOR

PAYMENTNOTICE

REFER TOOFFICE OF

FINANCE (OOF)

IU’AY:

> THAN \ $5000^./

REFER FOR COLLECTIONS

OOFCOLLECTS

No NoOFFICE OF

ACCOUNTING (OOA)

DRAFTREFER TO

COLLECTION AGENCY (NCO)

SUSPENSIONORDER

MEETINGLETTER RETURN TO

IWMD

IU'AY AGENCY

COLLECTS REFER TO SECONDARY COLLECTION

AGENCY (ALLIANCE ONE)

No IW Billing System UpdatedREVOCATION

HEARING WITH BPW

COMMISSIONER

Yes

AGENCYCOLLECTS

RETURN TO IWMD

FORWARD TO OOA

IU'AY:

<|Ye:

REFER TO BOARD OF

REVIEW FOR WRITE-OFF APPROVAL

REFER TO BOARD OF

PUBLIC WORKS FOR WRITE-OFF

RETURN TO IWMDREFER TO BPW

FOR PERMIT REVOCATION

YY

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Yrr

A/O

O SSQ

I &IE-

BUREAU OF SANITATION transmittals

INDUSTRIAL WASTE MANAGEMENT DIVISION INDUSTRIAL WASTEWATER FEES BILLING AND COLLECTION PROCESS

Due Date Delinquent Date On or Before4/1 5/1 6/157/1 8/1 9/1510/1 11/1 12/151/1 2/1 3/15

Regular Invoice f Delinquent Invoice Notice of Violation

'Demand for Refer to Collection

Generation Generation payment notice Agency or Office ofInvoice Ai

1 IInvoice B Invoice C Finance

Regular Invoice DelinquentInvoice

Generation5 days after

delinquent date

Generate within 3 DFP Generation Greater than $5000Generation days after 20 days after to Office of Finance

15 days before the delinquent invoice delinquent invoice Less than $5000 todue date generation generation Collection Agency