Taking charge of accounts receivable: proper controls over accounts receivable are an indispensable component of any government's overall financial management program.(Best Practices)(Government Finance Officers Association)

In 2003, the GFOA Executive Board approved a recommended practice entitled "Revenue Policy: Accounts Receivable Controls." This recommended practice was initiated by the Committee on Cash Management to underscore the importance of written policies and procedures for managing accounts receivable. This article describes the guidance contained in the recommended practice and how one government is striving to put it into practice.

POLICIES AND PROCEDURES

Governments sometimes provide services on credit, creating the need for written policies and procedures governing the management of receivables. Governments must establish proper controls over receivables, controls that are consistent with authoritative standards such as generally accepted accounting practices and state laws. Some variability exists among the states in terms of charging penalties for delinquent accounts and writing off outstanding debts. However, all governments should establish certain baseline internal controls, including the following:

* The various activities associated with 2the accounts receivable process should be performed by different individuals (segregation of duties)

* Receivables balances should be reconciled to the general ledger and other supporting ledgers in a timely manner

* Where possible, automated systems should be used to facilitate the processing and reconciliation of accounts receivable

* Any suspicion of fraud or noncompliance with internal control directives should be immediately reported to management and properly investigated