Agenda Item No__10___________
Debt Recovery 2011-12
Summary:
This is an annual report detailing the council’s collection
performance and debt management arrangements for 2011/12
The report includes a:
ƒ
ƒ
ƒ
ƒ
Recommendations:
Members are asked to:
ƒ
Cabinet member(s):
All
Contact
Officer,
number, and e-mail:
A summary of debts written off in each debt area showing
the reasons for write-off and values.
Collection performance for Council Tax and NonDomestic Rates.
Level of arrears outstanding
Level of provision for bad and doubtful debts
Approve the annual report giving details of the Council’s
write-offs in accordance with the Council’s Debt Write-Off
Policy and performance in relation to revenues collection.
All
All
telephone Louise Wolsey 01263 516081
louise.wolsey@north-norfolk.gov.uk
1.
Introduction
1.1.
The Corporate Debt Management and Recovery Policy at Appendix 1 was last
approved by Members in May 2011. One of the components of this policy is a
Debt Write-Off Policy attached at Appendix 2. This annual report is one of the
performance management measures to provide members with outturn figures for
2011/12 for the following:
• A summary of debts written off in each debt area showing the reasons for
write off and values.
• Collection performance for Council Tax and Non - Domestic Rates
(NNDR).
• Level of arrears outstanding
• Level of provision for bad and doubtful debts
2.
Background
2.1.
Writing off bad debts is a necessary function of any organisation collecting
money. The Council is committed to ensuring that debt write offs are kept to a
minimum by taking all reasonable steps to collect monies due. There will be
situations where the debt recovery process fails to recover some or all of the debt
and will need to be considered for write off. The Council views such cases very
much as exceptions and this report identifies those debts.
3.
Performance
3.1.
Below is a summary of the Council’s three main income streams and the level of
debt associated with each, for the last four financial years.
Table 1
Income
Area
Council
Tax
NNDR
Year/Date Total
Arrears at
31st March
All Years
(after
write
offs)*
Current
Years
Arrears
Included
(after
write –
offs)
% of
Current
Arrears
v Net
Debit
Provision for
Bad/Doubtful
Debt for all
years
2008/9
£1,365,630 £731,840
1.41%
£482,539
2009/10
£1,596,611 £829,249
1.56%
£579,895
2010/11
£1,596,946 £756,064
1.39%
£570,910
2011/12
£1,630,971 £762,241** 1.39%
£588,250
2008/9
£194,830
£131,029
0.67%
£117,882
2009/10
£203,102
£139,290
0.64%
£107,503
2010/11
£216,850
£151,995
0.73%
£130,880
2011/12
£221,280
£179,044
0.64%
£141,591
*This is the cumulative arrears for all years including 2011/12.
** This is the arrears figure as at 31/3/2012. Collection of the 2011/12 debt is
ongoing and £320,064 (over 19.6%) has been collected since that date against
previous years arrears.
Table 2
Table 2 shows the level of sundry debt outstanding at the year end and the
element of that debt which is attributable to Housing Benefit Overpayments being
collected by invoicing customers.
Income Area
Sundry Income
(includes
HB
Overpayments
Sundry Income
(includes
HB
Overpayments)
Sundry Income
(includes
HB
Overpayments)
Sundry Income
(includes
HB
Overpayments)
*
**
***
*****
3.2.
Year
Total Arrears
at 31st March
All Years
(after write
offs)
%
Net Debit
Provision for
outstanding
Raised
Bad/Debt for
against debit
End of Year
all years
at year end
2008/9
**£1,053,125
£4,496,712
23.42%
£385,612
2009/10
***£1,016,713
£5,213,910
19.50%
£353,654
2010/11
*****£816,705
£4,804,262
17.0%
£393,829(a)
2011/12
*****827,655
£5,283,458
15.67%
£451,857
2008/09 Housing Benefit Overpayments = £ 440,561
2009/10 Housing Benefit Overpayments = £ 427,827
2010/11 Housing Benefit Overpayments = £ 487,627
2011/12 Housing Benefit Overpayments = £ 509,403
The arrears figures reflect that 27 debtors with invoice values over £5,000
account for £379,094 (46% of the outstanding debt).
•
•
•
•
19 of these invoices are HB overpayments totalling £ 217,532.
2 HBOP are currently in dispute and are at Tribunal stage, totalling
£17,902
10 HBOP are paying by instalments, totalling £138,614 - By the nature of
the debt repayment of these will be over a considerable period of time
(arrangements varying from £10- £100 month dependant on individual
circumstances).
7 HBOP, totalling £61,015 are at varying stages of recovery
It is not anticipated that the remaining non HBOP accounts will result in arrears.
The bad debt provision now includes debts with balances greater than £2,000
which are not over a year old (i.e. raised in 2011/12)
Table 3
Income
Area
Council
Tax
NNDR
Sundry
Debtors
Year/Date
Net
Collectable
Debit
2008/9
2009/10
2010/11
2011/12
£51,880,516
£53,309,139
£54,588,328
£54,801,832
Average
Number of Amount per
Accounts Account (after
adjustments)
52,061
£997
52,281
£1020
52,540
£1038
52,708
£1040
2008/9
2009/10
2010/11
2011/12
£19,809,677
£20,128,852
£20,901,384
£21,7055,544
5,650
5,779
5,868
6,023
£3,506
£3,483
£3,562
£3,603
£194,830
£203,102 *
£216,850*
£221,280
2008/9
2009/10
£4,496,712
£5,213,910
22,770
21,451
£197
£243
£1,053,125
£1,016,713
2010/11
£4,804,262
24,157
£199
£816,705
2011/12
£5,283,458
6,801**
£777
£827,655
Total of all
Years Arrears
£1,365,630
£1,596,611
£1,596,946
£1,630,971
**Domestic Waste Service – Tendered out to Kier Services – No Garden Bin
invoices raised via e-financials
Table 4
Performance Indicators for in year collection.
Income
Area
2008/9
2009/10
Council
Tax
98.53%
99.1%
2010/11
2011/12
98.4%
98.6%
98.6%
98.6%
98.3%
99.2%
99.1%
98.8%
99.2%
98.9%
Target
2011/12
Target
2012/13
NNDR
3.3.
The collection of Council Tax and Non-Domestic rates has been particularly
challenging this financial year. Given the backdrop of the economic recession,
and the introduction of 100% rates on empty Non-Domestic properties.
Unfortunately a number of businesses have closed and unemployment has
increased greatly causing more of our Non-Domestic and Council Tax customers’
difficulties in paying.
The collection targets have been adjusted to reflect the potential impact of the
introduction of the replacement revenues system and ongoing economic
difficulties.
3.4
There are no longer national indicators for the collection of Council Tax and Non
Domestic Rates. The performance indicator (PI) is retained as a local PI, and
continues to be monitored monthly. An important part of debt management is to
ensure that bills are sent out accurately and timely and that council tax payers
are aware of any appropriate discounts, exemptions and benefit entitlement they
may be entitled to. The Council Tax booklet, web site, service information and
benefit take up by personal contact provides information on discounts etc.
Ongoing promotion of DD also forms an important part of debt management
76.4% of council tax payers are paying by direct debit and 55% of NNDR
customers pay by direct debit.
3.5
The empty property relief threshold for business properties was reduced for
2011/12 from £18,000 down to £2,599. Any property with a Rateable Value
above £2,599 is liable to pay the full ‘empty rate charge’. Currently there are 283
empty properties of which 170 have a RV over £2,599. 49.
3.6
The Government introduced the Small Business Rate Relief (SBRR) scheme in
April 2005 to give more support to small businesses. Businesses with a Rateable
Value below £6,001 receive a 50% reduction to their charge. Changes to Rating
Legislation on the 1st October 2010 increased the amount of relief granted to
100%, this will continue until 1 April 2013 when the relief will then reduce back to
50%. We grant SBRR to 2,769 accounts out of 6,023 business rated properties
we hold.
Accounts receiving SBRR with a Rateable Value up to £6,000 = 2,320
Accounts receiving SBRR with a Rateable Value £6,001 to £12000 = 449
4.
Write-Offs
4.1.
The table below details the actual amounts of debts that have been written off
over the last five years.
Table 5
Income Area
2007/8(£)
2008/9(£)
2009/10(£)
2010/11(£)
2011/12(£)
Council Tax
NNDR
Sundry Debtors
includes
Housing Benefit
write-offs
Housing Benefit
86,369
75,355
30,391
118,310
78,100
63,468
65,557
76,111
62,783
159,759*
71,320
47,423
144,803
120,994
33,241
12,060
29,682
32,440
30,654
16,841
Table 6
The table below details the category of debts that have been written off over the
year 2011/12.
Category
Unable to collect
Uneconomic/
bailiff unable to
collect
Debtor deceased
Debtor
absconded
Debtor in
bankruptcy
Or liquidation or
other
Insolvency
proceedings
Detained/Prison
Debt cannot be
proved (conflict
of evidence)
Ill health & no
means
Undue hardship
Debt remitted by
the Court
Irrecoverable
VAT
Debts Reinstated
Other
Costs
Totals
Council Tax(£)
NNDR(£)
Sundry Debtors(£)
0
23,654
12,879
532
0
1,987
92,324
5,290
10,211
25,412
96,354
10,855
0
0
57
(53)
0
288
1,337
0
0
0
0
0
0
0
180
7,882
0
0
0
17,369
144,803
0
0
(5,647)
0
1,343
120,994
0
0
(4,034)
0
0
32,423
4.2
Council Tax write offs have decreased in value from last year. Only £7,882 of our
write offs arose due to the debt being impossible to collect, £25,412 was due to
insolvency - something which we cannot control and £92,324 due to
absconders.
4.3
National Non-Domestic Rates (NNDR) write offs have increased in value from
last year. £23,654 arose due to the debt being impossible to collect. The Bailiff
firms return debts when they are unable to distrain on goods and effects or when
they are unable to gain access to premises.
4.4
£96,534 (£46,743 increase from last year) was due to insolvency, this is
something we cannot control. Under Rating Law we are required to write debts
off where the debtor has been made personally bankrupt or a company has gone
into liquidation. Due to the current economic climate, more people have been
made personally bankrupt during 2011-12 and during 2011 some of the larger
“chains” have gone into liquidation. Usually the latter occupy larger premises, so
the amounts being written off are greater.
4.5
There was additional write offs of £20,605 (£12,723 increase from last year)
which was irrecoverable. This is where the debtor has moved out of jurisdiction.
5.
Financial Implications
5.1.
The Council is already required to make provision for bad and doubtful debts.
The additional information gained from this report will help improve monitoring
and our ability to consider the appropriateness of the provisions in a more
accurate way.
6.
Equality & Diversity
6.1.
The Debt Management & Recovery Policy takes account of the impact that
getting into debt can have on people and their families, so it also encourages
people to pay, and aims to provide reasonable facilities and assistance for them
to do so.
6.2.
Before writing off debt, the Council will satisfy itself that all reasonable steps have
been taken to collect it and that no further recovery action is possible or
practicable. It will take into account the age, size and types of debt, together with
any other factors that it feels are relevant to the individual case. All write-offs are
dealt with in the same fair and consistent way in line with equality and diversity
issues.