NORTH CAROLINA
STATEWIDE ACCOUNTS RECEIVABLE REPORT
For the Year Ended June 30, 2015
North Carolina Office of the State Controller
Linda Combs, State Controller
State of North Carolina
Office of the State Controller
LINDA COMBS
STATE CONTROLLER
MAILING ADDRESS: 1410 Mail Service Center, Raleigh, North Carolina 27699-1410
STREET ADDRESS: 3512 Bush Street, Raleigh, North Carolina 27609
Phone (919) 707-0500 ~ Fax (919) 981-5444
http://www.osc.nc.gov ~~ An EEO/AA/AWD Employer
January 15, 2016
The Honorable Pat McCrory, Governor
The Honorable Phil Berger, President Pro Tempore of the Senate
The Honorable Tim Moore, Speaker of the House of Representatives
Dear Sirs:
Attached please find the North Carolina Statewide Accounts Receivable Report for the fiscal year ended June 30, 2015. The Statewide Accounts Receivable Report includes all receivables at the fiscal year’s end reported to the Office of the State Controller (OSC) by state agencies. This legislatively mandated report is prepared in accordance with Article 6B of Chapter 147 of the North Carolina General Statutes.
The receivables disclosed in this report are based on Generally Accepted Accounting Principles (GAAP) and reflect a snapshot of amounts owed to the State at the conclusion of the fiscal year. This report also discloses additional information about the State’s receivables at fiscal year-end such as: an aging of receivables which indicates the degree to which receivables are past due and write-offs which are receivables that agencies will not, or most likely will not, collect and have, therefore, been deducted from their accounting records.
I trust you will find this report both informative and useful. If you have questions related to this report, my staff or I can be reached at (919) 707-0500.
Finally, additional statewide financial reports are located on the OSC website at: www.osc.nc.gov.
Respectfully submitted,
Linda Combs
cc: Members of the North Carolina Joint Legislative
Commission on Governmental Operations
Chief Fiscal Officers2015 Statewide Accounts Receivable Report
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Introduction
The Statewide Accounts Receivable Report includes all receivables at June 30, 2015, reported to the Office of the State Controller (OSC) by state agencies. As defined by the North Carolina General Statutes, a receivable is an asset of the State of North Carolina (State) reflecting a debt that is owed to the State that has not been received by the state agency servicing the debt. A state agency is defined by statute as any department, institution, board, commission, committee, division, bureau, officer, official or any other entity for which the State has oversight responsibility including any university. As prescribed by statute for the statewide accounts receivable program, the term state agency does not include a community college, an area mental health, developmental disabilities and substance abuse authority, or the General Court of Justice.
The receivables disclosed in this report are based on generally accepted accounting principles (GAAP) and reflect a snapshot of amounts owed to the State at June 30, the conclusion of the State’s fiscal year. This report also discloses additional information about the State’s receivables at fiscal year-end such as: an aging of receivables which indicates the degree to which receivables are past due and write-offs which are receivables that agencies will not, or most likely will not, collect and have, therefore, deducted from their accounting records.
How the State Collects Debt
State agencies invoice businesses and individuals for services rendered through many different billing and receivable systems.
State policy provides that receivable systems of state agencies should:
 Bill accounts on a timely basis, whether the receivables are due from private entities, the federal government, localities, or state agencies and institutions;
 Maintain an accurate record of receivables transactions;
 Effectively interface with other applicable agency-based accounting systems;
 Provide an aged trial balance of receivables;
 Provide information relative to specific collection efforts on each past-due account;
 Provide realistic estimates of, and properly account for, doubtful accounts;
 Properly account for receivables that are written off;
 Recognize and report receivables in accordance with generally accepted accounting principles (GAAP);
 Comply with federal and other contractual regulations;
 Maintain a record of year-end receivable balances; and
 Provide for the accrual of interest and penalties as allowed or as required by law.
2015 Statewide Accounts Receivable Report
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Types of Receivables
Taxes - Primarily consists of individual income tax, sales and use tax, and local sales tax collections.
Accounts - Primarily consists of student, patient and medical provider payments.
Intergovernmental - Primarily consists of funds due from federal and local governments.
Notes - Primarily consists of student loans, housing mortgage loans and EPA revolving loans that will be collected on a predetermined contractual basis.
Interfund - Primarily consists of funds moving between different state fund types.
Other - Primarily consists of participant contributions to the health and pension plans and State Treasurer investment earnings (distributions) owed to those funds (trust, special) that earn interest.
Aging of Receivables
An aging of receivables indicates the degree to which receivables are past-due. State agencies provide OSC an aged trial balance of receivables each fiscal year-end.
The chart below summarizes past due receivable activity at year-end 2015.
(in thousands)
Accounts past-due at year-end 2015 total $2.7 billion of total receivables. The North Carolina Department of Revenue (NCDOR), the North Carolina Department of Commerce (NCDOC), UNC Hospitals, the Department of Health and Human Services (DHHS), State Education Assistance Authority (SEAA), Housing Finance Agency (HFA), and the UNC System account for $2.6 billion, or 96 percent, of these past due receivables. Each of these entities employs specific collection techniques to aggressively collect past due accounts receivables. Appendix A details the aging amounts by agency for fiscal 2015.
TotalPast Due Receivables by Type1-30 Days31-60 Days61-90 Days91-120 DaysOver 120 DaysPast DueTaxes Receivable$69,531$42,460$58,481$30,337$936,307$1,137,116Accounts Receivable244,027110,29168,85868,224471,371962,771Intergovernmental Receivable4,0933,4932,05131731,60941,563Notes Receivable210,51596,71767,87747,841103,605526,555Interfund Receivable1,2691,8321,3673,4334308,331Other Receivable6,3972,7343,1692,12226,20240,624$535,832$257,527$201,803$152,274$1,569,524$2,716,960Past Due2015 Statewide Accounts Receivable Report
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The chart below summarizes aging amounts for fiscal years 2015, 2014, 2013:
Year-end Amounts
The State’s Comprehensive Annual Financial Report (CAFR) disclosure of receivables includes both
estimated receivables and invoiced receivables, net of allowance for doubtful accounts as of June 30. The
chart below summarizes CAFR total receivables by type for fiscal years 2015, 2014 2013:
As shown in the table above, receivables totaled $10.9 billion for fiscal 2015, $11.1 billion for fiscal 2014
and $11.6 billion for fiscal 2013. Total receivables for 2015 decreased by $260 million or 2.3%. Notes
Receivable decreased by $270 million due to more efficient collection efforts resulting in fewer delinquent
accounts. More collection fee assessments were issued in 2015 than in 2014 contributing to the $82
million increase in Taxes Receivable. In addition, the 15% increase in Interfund Receivables was related
to general business variance and timing. Contributions, Premiums, and Other Receivables decreased by
$79 million which was due to better collections for fiscal year 2015.
$ .000
$ .200
$ .400
$ .600
$ .800
$ 1.000
$ 1.200
$ 1.400
$ 1.600
$ 1.800
1-30 past due 31-60 past due 61-90 past due 91-120 past due over 120 past due
Aging of Receivables
2015 2014 2013
Billions
Total Receivables by Type - Fiscal Years 2015, 2014 and 2013 (in thousands)
2015 2014 2013 Amount Percent
Notes Receivable ........................................................... $ 4,693,674 $ 4,963,586 $ 5,289,036 $ (269,912) (5.4)%
Taxes Receivable .......................................................... 2,248,051 2,166,315 2,225,097 81,736 3.8%
Intergovernmental Receivables ........................................ 931,370 982,133 1,316,556 (50,763) (5.2)%
Accounts Receivable .................................................... 1,899,881 1,903,273 1,629,366 (3,392) (.2)%
Interfund Receivables ..................................................... 477,700 415,384 437,704 62,316 15.0%
Contributions, Premiums, Other Receivables .................... 613,706 692,763 659,513 (79,057) (11.4)%
Interest Receivable ........................................................ 9,639 10,075 10,905 (436) (4.3)%
Total Receivables ....................................................... $ 10,874,021 $ 11,133,529 $ 11,568,177 $ (259,508) (2.3)%
Change FY14 to FY15
2015 Statewide Accounts Receivable Report
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Write-offs
Write-offs are receivables that agencies will not, or most likely will not, collect and have been deducted from their accounting records. Write-offs are caused by bad debt adjustments (unsuccessful collection efforts), contractual adjustments or indigent care adjustments. Write-offs for year-end 2015 totaled $5.6 billion consisting of $469 million for bad debt, $4.6 billion for contractual adjustments and $589 million for indigent care. Total write-offs for 2014 were $5.3 billion.
UNC Hospitals, including Rex Healthcare, Chatham Hospital, High Point Hospital, Caldwell Hospital, and Triangle Physicians Network, reported write-offs of $4.3 billion of receivables based on Medicare and Medicaid adjustments, indigent care provider adjustments, and managed care contractual adjustments. NCDOR reported write-offs of $82 million. UNC Chapel Hill (UNC CH) and East Carolina University (ECU) reported write-offs of $515 million and $253 million, respectively.
Appendix A details total agency write-offs during fiscal 2015 by receivable type. The chart below summarizes agency write-offs by type for fiscal years 2015, 2014, 2013.
Contractual Adjustments - The differences between revenue at established rates and the amounts realizable from third-party payers under contractual agreements. These adjustments are made to customer, patient, or business accounts as the result of a contractual agreement to provide certain services or products at a previously negotiated price. The contractual adjustment is the difference between the value assigned by the state provider/supplier of the product or service and the predetermined price as negotiated with a third-party payer (example: insurance company).
Indigent Care Adjustments - The differences between revenue at established rates and the amounts realizable from the financially responsible party for those receiving the state product or service. In this instance, the write-off is the result of the financially responsible party being unable to meet the financial obligations due to poverty or a lack of subsistence.
Bad Debt Adjustments - All write-offs of bad debts other than those for contractual or indigent care reasons.
$.0
$.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
2015
2014
2013
Total Write-Offs
Bad Debt Write-offs
Contractual Adjustments
Indigent Care Write-offs
Billions
8.4%
81.2%
10.5%
12.5%
75.4%
12.1%
10.0%
76.1%
13.9%2015 Statewide Accounts Receivable Report
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Cost of Collection
State agencies, excluding NCDOR, reported collection activity costs totaling over $80 million during 2015. Agencies also reported a total of 758 full-time equivalent (FTE) state employees dedicated to receivable activities during 2015. A large percentage of total collection costs and FTE reported by state agencies is attributable to patient accounts and student accounts, including student loans.
UNC Hospitals, part of the UNC Health Care System, reported 2015 collection costs of $18 million and 159 FTE. The UNC-CH Physicians and Associates, also part of the UNC Health Care System, reported collection costs of $30 million, and FTE of 298. ECU reported collection costs of $3 million for its medical faculty practice and FTE of 84. Regarding student loans, SEAA reported that loan administration and collection are out-sourced for a cost of $13 million for 2015.
Appendix B details by agency the collection costs and the FTE of state employees dedicated to collection activities.
Collection Activity – Attorney General
State agencies are required by G.S. 147-86.11(e)(4) to forward unpaid billings to the Attorney General for collection. Statewide policy specifies the unpaid billings be turned over no more than 60 days after the due date of the billing. The North Carolina Department of Justice (NCDOJ) then sends a letter to debtors demanding payment. If payment is not made within 30 days, the department recommends to agencies that unpaid billings be submitted to a state contracted collection agency. As of July 1, 2015, NCDOJ has contracts with six collection agencies.
During fiscal year 2015, a total of $135.9 million was submitted to the Attorney General for collection on behalf of state agencies. During fiscal year 2015, $86.8 million was submitted by state agencies to collection agencies, and $6.6 million was collected at a cost of $1.2 million.
Setoff Debt Collection Program Activity
NCDOR continues to administer the State’s Setoff Debt Collection Program that requires NCDOR and state agencies to cooperate in identifying debtors who owe money to the State and who qualify for refunds from the NCDOR. The procedure for setting off against any refund the sum of any debt owed to the State resulted in $37.7 million of net refunds to claimant agencies during the 2015 calendar year for the 2014 tax year.
G.S. 105A, the Setoff Debt Collection Act, requires all claimant agencies and the NCDOR to cooperate in identifying debtors who owe money to the State through its various agencies and who qualify for refunds from the NCDOR. It further requires that procedures be established for setting off against any refund the sum of any debt owed to the State. G.S. 105A, also requires a State agency to register with the NCDOR and OSC. Each State agency must report annually to OSC the amount of debts owed to the agency for which the agency did not submit a claim for setoff and the reason for not submitting the claim. OSC reviews this information annually to confirm program participation compliance.
2015 Statewide Accounts Receivable Report
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Summary data from NCDOR for the prior five tax years is reflected below (whole dollars).
 The cost of collecting child support debts is not charged against the taxpayer’s refund. Instead, the gross amount of the refund is applied to the debt and the NCDOR receives a collection assistance fee for these debts from individual income tax collections. For the calendar year 2015, collection assistance fees for child support debts collected through setoff were $101,695 bringing the total collection assistance fees received by the NCDOR to $954,590.
 A flat collection assistance fee of $5.00 is imposed for each debt collected through setoff.
Agency Compliance with Statewide Accounts Receivable Program
Since the 2007 fiscal year, OSC has required each state agency to complete an attestation document signed by the agency’s chief executive officer and chief financial officer. All state agencies must and have returned a signed letter stating that:
 Management is responsible for complying, and has complied, with requirements of Article 6B of Chapter 147 and Chapter 105A of the North Carolina General Statutes.
 Management is responsible for establishing and maintaining, and has established and maintained, effective internal control over compliance with the requirements of Article 6B of Chapter 147 and Chapter 105A of the North Carolina General Statutes.
 Information submitted to OSC for preparation of the Statewide Accounts Receivable Report is materially correct and verifiable to agency records.
The ability to charge interest and penalty on past due accounts receivable is a manual process that is not supported by some billing and accounts receivable systems currently operating within state government. Future business infrastructure projects should incorporate the ability to calculate interest on past due accounts.
Debt Setoff Activity for Tax Years 2010-2014 Tax Year 2014 2013 2012 2011 2010 Debt Setoff Occurs in Calendar Year 2015 2014 2013 2012 2011 Gross amount of Refunds Setoff $38,526,590 $68,252,280 $79,178,212 $73,640,930 $67,889,978 Collection Assistance Fees applied Based on Actual Expenses ($852,895) ($1,326,395) ($1,492,065) ($1,380,525) ($1,294,975) Net Amount of Refunds Paid to Claimant Agencies $37,673,695 $66,925,885 $77,686,147 $72,260,405 $66,595,003 DOR Administrative Expenses - Current Year $532,229 $563,096 $567,448 $556,175 $537,355 Total Setoffs 299,166 330,945 311,122 291,300 (includes completed, denied, and cancelled setoffs) 194,269 Number of Completed Setoffs 190,935 294,044 326,832 305,108 287,092 Average Gross Setoff Amount $201.78 $232.12 $242.26 $241.36 $236.48 Average Cost per Setoff $2.74 $1.89 $1.72 $1.79 $1.85 Average Net Amount of Refunds Setoff $197.32 $227.61 $237.70 $236.84 $231.97 2015 Statewide Accounts Receivable Report
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Vendor Attachment
OSC and NCDOR in September 2010 implemented a vendor attachment program. The program is authorized by G.S. 105-242(b) and G.S. 147-86.25. Phase I involves state agencies using the North Carolina Accounting System (NCAS). The program identifies vendor payments for attachment due to uncollected taxes.
In Vendor Attachment, OSC provides NCDOR a file each night of vendors who are to be paid through the North Carolina Accounting System. NCDOR compares the file against outstanding collections cases. As matches are discovered, the process generates an attachment and garnishment notice and the funds are redirected to NCDOR before the vendor receives the payment. The funds are applied to the vendor’s tax debt.
As of December 31, 2015, the program has collected approximately $10.3 million in unpaid taxes due to the state.
2015 Statewide Accounts Receivable Report
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Appendix A
Past Due Receivables byTotalTotalDepartment/Institution1-30 Days31-60 Days61-90 Days91-120 DaysOver 120 DaysPast DueWrite-offsGeneral Assembly$ — $1$ — $ — $ — $1$ — Secretary of State64104335728Office of the State Auditor— 212— — 40252— State Treasurer1,1072,0642,08339628,22933,879138Public Instruction— 3— 1711— Justice250701,16291601,6511,853Agriculture2011082024278631116Labor— 16072583,3093,5991,245Insurance6826822321,371— Administration1169111,1443,4481525,7715Office of State Controller— — — — 11— Transportation2,6121,5132,5812,12330,72039,5494,319ENR148322127149621,573265Wildlife— 69— 312846Public Safety923220161423,5174,863174DHHS 98,65733,1407,53612,759126,281278,373400,297ITS2,254— 8892093853,737— Commerce6,7996,3106,6083,836174,407197,9608,944Revenue66,37738,58854,81229,403866,3631,055,54381,695Cultural Resources— — — — 22— UNC Hospitals 98,31144,49336,14135,612100,864315,4214,336,945Community Colleges— — — — — — — Board of Elections492520472170— Education Lottery8429303771389336Office of Administrative Hearings— — — — — — — Housing Finance Agency45,86011,9495,70710,50115,94789,964976North Carolina Board of Nursing— — — 37105North Carolina Board of Cosmetic Arts— — — — 3636— North Carolina Board of CPA Examiners— — — — — — 1Global TransPark22— — — 123— NC Ports Authority3,7067114972302785,42219State Education Assistance Authority165,82185,79962,69137,44372,961424,71561Golden Leaf Foundation— — — — — — — Gateway University Research Park45— — 312— UNC General Administration— — — — — — — UNC - Chapel Hill20,57015,14810,79511,72679,416137,655514,649North Carolina State Univ6,8525,8652,7157937,46423,6891,826UNC - Greensboro— 5172641104,1285,019800UNC - Charlotte2,24678217612,7205,9252,085UNC - Asheville48531664502691,301108UNC - Wilmington402567(23) 51,2552,206209East Carolina Univ7,9655,5923,4521,80027,27646,085253,314NC A & T State Univ330202413691,7812,723541Western Carolina Univ4894091,1362657813,0802Appalachian State Univ5081281411321,5192,428604UNC - Pembroke73371991131,4602,476406Winston-Salem State Univ6201533091542,8004,036663Elizabeth City State Univ12414478— 1,0091,355342Fayetteville State Univ1363537411,0931,630758North Carolina Central Univ38316925411610,28111,203— North Carolina School of the Arts— 8— 3748152616North Carolina School of Science and Math— — — — 4949— $535,832$257,527$201,803$152,274$1,569,524$2,716,960$5,613,451Past DuePast Due Receivable Summary Aging ReportFiscal Year Ended June 30, 2015(in thousands)2015 Statewide Accounts Receivable Report
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Appendix B
CollectionAgencyCollection UnitCost# FTESecretary of StateAccounts Receivable Department$13,357— Office of the State AuditorAgency/Division Budget/Fiscal Office31— Public InstructionOther8,734— AgricultureCollection Agency/Outsourced203— LaborAccounts Receivable Department442,4596LaborCollection Agency/Outsourced299— LaborOther2,6501InsuranceAgency/Division Budget/Fiscal Office32,5081TransportationAccounts Receivable Department616,548— TransportationCollection Agency/Outsourced6,353,830— ENRAccounts Receivable Department229,3501WildlifeAccounts Receivable Department2,150— Public SafetyAccounts Receivable Department101,7213Public SafetyCollection Agency/Outsourced658— Public SafetyPayroll Section31,4881DHHS Accounts Receivable Department2,563,47787DHHS Collection Agency/Outsourced34,191— DHHS Tax Department6,065— ITSAccounts Receivable Department108,5352CommerceTax Department1,154,89116CommerceOther367,8396Revenue * (see note below)Agency/Division Budget/Fiscal OfficeUNC Hospitals Collection Agency/Outsourced8,275,278— UNC Hospitals Patient Accounts9,989,902159Board of ElectionsOther1,827— Education LotteryAccounts Receivable Department114,2183Education LotteryCollection Agency/Outsourced1,689— Office of Administrative HearingsAgency/Division Budget/Fiscal Office31Housing Finance AgencyAgency/Division Budget/Fiscal Office45,000— North Carolina Board of Cosmetic ArtsAccounts Receivable Department7,440— NC Ports AuthorityAccounts Receivable Department13,334— State Education Assistance AuthorityOther13,019,478— State Education Assistance AuthorityStuden Loans284,3515Gateway University Research ParkAccounts Receivable Department3,863— UNC - Chapel HillCollection Agency/Outsourced40,410— UNC - Chapel HillPatient Accounts29,870,973298UNC - Chapel HillStudent Accounts49,7221UNC - Chapel HillStudent Loans1,6211North Carolina State UnivAgency/Division Budget/Fiscal Office200,0043North Carolina State UnivAccounts Receivable Department65,4081North Carolina State UnivCollection Agency/Outsourced112,695— North Carolina State UnivGrants Office55,6111North Carolina State UnivStudent Accounts92,2722North Carolina State UnivStudent Loans92,2722Cost of Collecting Receivables by AgencyFiscal Year Ended June 30, 2015(Whole Dollars)2015 Statewide Accounts Receivable Report
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UNC - GreensboroCollection Agency/Outsourced65,563— UNC - GreensboroGrants Office66,5981UNC - GreensboroStudent Accounts30,0091UNC - GreensboroStudent Loans63,4731UNC - CharlotteCollection Agency/Outsourced103,078— UNC - CharlotteStudent Accounts25,1002UNC - CharlotteStudent Loans24,2152UNC - AshevilleStudent Accounts1,576— UNC - AshevilleStudent Loans3,306— UNC - WilmingtonAccounts Receivable Department5,015— UNC - WilmingtonCollection Agency/Outsourced110,879— UNC - WilmingtonOther1,175— UNC - WilmingtonStudent Accounts80,7222UNC - WilmingtonStudent Loans36,2501East Carolina UnivAccounts Receivable Department2,9831East Carolina UnivCollection Agency/Outsourced429,977— East Carolina UnivGrants Office7861East Carolina UnivOther253,5969East Carolina UnivPatient Accounts2,961,36084East Carolina UnivStudent Accounts674,42621East Carolina UnivStudent Loans27,8495NC A & T State UnivAccounts Receivable Department— 1NC A & T State UnivCollection Agency/Outsourced66,780— NC A & T State UnivStudent Loans67,137— NC A & T State UnivStudent Accounts72,3241Western Carolina UnivStudent Accounts7,986— Western Carolina UnivStudent Loans94,7942Appalachian State UnivCollection Agency/Outsourced131,707— Appalachian State UnivGrants Office42,9191Appalachian State UnivStudent Accounts163,4403Appalachian State UnivStudent Loans25,0341UNC - PembrokeAccounts Receivable Department16,112— UNC - PembrokeStudent Accounts3,134— UNC - PembrokeOther1,193— Winston-Salem State UnivStudent Accounts27,5281Elizabeth City State UnivAccounts Receivable Department61,924— Elizabeth City State UnivCollection Agency/Outsourced4,912— Fayetteville State UnivAccounts Receivable Department36,0691Fayetteville State UnivStudent Loans28,5251North Carolina Central UnivCollection Agency/Outsourced75,25712North Carolina Central UnivStudent Accounts7091North Carolina School of the ArtsStudent Accounts9,258— North Carolina School of the ArtsStudent Loans37,0311Total$80,350,064758.00#FTE -Full Time Equivalent positions utilized by an entity for collectionsOne of the core functions of the NCDOR is the collection of state taxes owed to theState of North Carolina. Collection activities in the Department are so varied and widespread that it is not reasonably possible to determine the portion of theDepartment’s budget that is directly and indirectly attributable to the cost of collectingpast due taxes (accounts receivables), nor is it reasonably possible to determine the cost of collecting taxes that have not yet been assigned the status of an account receivable.