Report to: Executive Member for Regeneration Date: 31st March 2008 Report of: CHIEF EXECUTIVE OF Report No: BOLTON AT HOME Contact Officer: EDWARD MELLOR, FINANCIAL Tele No: 5660 SERVICES MANAGER Report Title: Former Tenants – Bad Debt Write Offs 2007-2008 Confidential / (Non-Confidential) This report does not contain information which Non Confidential: warrants its consideration in the absence of the press or members of the (delete as approp) public. Purpose: To provide the details of the Former Tenant Debt to be written of in 2006- 2007. Recommendations: The Executive Member for Development and Regeneration is asked to note the write off of £522,928.93 representing 1,010 cases under £5000 and approve the writing off of £16,657.36 representing 3 cases over £5,000. Decision: Background Doc(s): (for use on Exec Rep) Signed: Leader / Executive Member Monitoring Officer Date: Summary: (on its own page with background docs) EXECUTIVE SUMMARY The report gives details of the Former Tenant Debt to be written of in 2007-2008 and requests that the Executive Member for Development and Regeneration notes the write off of £522,928.93 representing 1,010 cases under £5000 and approve the writing off of £16,657.36 representing 3 cases over £5,000. 1. INTRODUCTION 1.1 The report gives details of the Former Tenant Debt to be written of in 2007-2008. 2. Background 2.1 The current procedure for writing off arrears requires the approval of the Executive Member for Development and Regeneration for cases of more than £5,000. Cases below £5,000 in value can be written off with the delegated authority of the Director of Finance (BMBC) and the Chief Executive (BH). 2.2 It should be pointed out that although the account is written off for accounting purposes, in line with audit recommendations, records of the debt are retained and if the tenant subsequently returns in future years the debt is written back to the account. The recovery action taken to date has involved both the Bolton at Home Income Management team and external firms which specialises in debt recovery. A separate report will be brought to a future meeting setting out proposals for amending the debt collection procedures. These will include a proposal to carry out tracing of former tenants on a regular basis where debt has been written off. 3 Debts recommended to be written off in 2007-2008 3.1 The Executive Member for Development and Regeneration is requested to note the write off of £522,928.93 representing 1,010 cases under £5000 and approve the writing off of £16,657.36 representing 3 cases over £5,000.. 3.2 A area / district split of the debt written off is given below: Annual Total 2007-2008 Area Under £5,000 Over £5,000 Total No Amount No Amount No Amount Benjamin Court / Clare Court 115 £21,337.47 1 £5,015.80 4 £26,353.27 Gypsy Site 11 £7,500.95 0 £0.00 1 £7,500.95 Council House/Flats 884 £494,090.51 2 £11,541.56 135 £505,632.07 TOTAL 1010 £522,928.93 3 £16,557.36 140 £539,486.29 3.3 The figures for write-off are in line with that anticipated and reflected in the HRA Quarterly monitoring reports. Although £539k will be written out of the accounts in 2007/2008 there will be at least £40k which will be written back into the accounts. This relates to debts previously written off, where tenants have subsequently been traced or have expressed an interest in having a council house again. The final figures for the re-instated debt will not be known until year end however for accountancy purposes they will be netted off the actual debt written off. 3.4 All of the above arrears relate to former tenants. In the calculation of the bad debt provision for housing, former tenants arrears are provided for at the rate of 90%. In effect this means that in accounting terms 90% of the debt has already been treated as uncollectable. Therefore the effect of writing these debts out of the accounts is that an additional 10% charge will be made to the Housing Revenue Account. This equates to about £54k which was all anticipated when the quarter 3 HRA monitoring report was written. 3.5 Further details about the movement in Former Tenant Arrears are provided in Appendix 1. Although the level of write-offs is still high, a substantial portion of the annual write-off figure in each of the last 3 years and gone towards reducing the year on year level of former tenant arrears. The underlying level of annual write-off has dropped significantly in 2007/2008 to around £300k from a level of around £430k in each of the last 2 years. 4. Recommendation 4.1 The Executive Member for Development and Regeneration notes the write off of £522,928.93 representing 1,010 cases under £5,000 and approve the writing off of £16,657.36 representing 3 cases over £5,000. Edward Mellor - Financial Services Manager (Bolton at Home) Appendix 1 Movement on Former Tenant Arrears over the last 3 years Former tenants arrears at 31/03/2005 1,908,057 Payments recovered -204,139 Transfers from current arrears 565,291 Write-offs -823,889 Other adjustments 64,070 Former tenants arrears at 31/03/2006 1,509,390 Payments recovered -200,626 Transfers from current arrears 567,663 Write-offs -667,476 Other adjustments 71,018 Former tenants arrears at 31/03/2007 1,279,969 Payments recovered -205,093 Transfers from current arrears 502,944 Write-offs -540,003 Other adjustments 3,425 Former tenants arrears at 06/03/2008 1,041,242 Former tenants arrears at year end 2,000,000 1,800,000 Former tenants arrears at year end 1,600,000 1,400,000 1,200,000 1,000,000 800,000 31/Mar 05 31/Mar 06 31/Mar 07 06/Mar 08 Write off of Former Tenant Arrears split between underlying level of annual write-off and write-off of historic debt 0 -100,000 2005/06 2006/07 2007/08 -301,276 -200,000 -425,222 -438,055 -300,000 -400,000 -238,727 -500,000 -229,421 -600,000 -398,667 -700,000 Write-off of old uncollectable debt -800,000 Underlying level of annual write-off -900,000 Conclusions The figures in the table show that a consistent level of payment is still being recovered annually from the remaining former tenant accounts. In 2007/2008 for the first time, the value of the transfer from current tenant arrears to former tenant arrears looks like it will fall. This indicates that of the tenancies which terminated in 2007/2008 there was a lower level of arrears outstanding on these tenancies, linking to the success in bringing current tenant arrears down. The success in reducing current tenant arrears should see further reductions in the transfers to former tenant arrears in future years. The underlying level of write off of former tenant arrears has fallen significantly in 2007/2008. The write-off of old uncollectable debts should start to reduce significantly each year as we reach a level of FTA debt which is traceable and collectable.
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