Bad debt written off by council rises by 170%

by EWAN LAMB

Leading members of Scottish Borders Council will be told next week the value of write-offs of irrecoverable debt on outstanding council tax,business rates and other unpaid bills rocketed  from £259,000 to £702,000 in the space of twelve months.

The loss of revenue to the local authority represents a dramatic 171% rise in write-offs during the 2018/19 financial year compared to the figure for 2017/18.

Statistics relating to the lost cash are contained in a report prepared by a team of finance officers at SBC, now available on the council's website. The document will be considered by the Executive Committee when it meets next Tuesday.

The report explains: "As required by the Financial Regulations, this report details the aggregate amounts of debt written off during 2018/19 under delegated authority. The report covers the areas of Council Tax, Non-Domestic Rates, Sundry Debtors, Housing Benefit Over-payments and aged debt from the balance sheet.

"The total value of write-offs increased from £0.259 million in 2017/18 to £0.702 million in 2018/19.There are ongoing risks associated with the management of the Council’s debts and these may lead to an increase in the level of debts that may require to be written off as irrecoverable in future years.

"Financial Regulations give the Chief Financial Officer authority to write-off individual irrecoverable debts up to £100,000. Any debt in excess of £100,000 may only be written off as irrecoverable following approval by the Executive Committee. No write-offs have fallen into this category in 2018/19."

The amount of council tax written off in each of the last three financial years was £164,000 in 2016/17, £39,000 the following year, and £433,000 in 2018/19.

Meanwhile sundry debt write-offs which totalled £49,000 and £133,000 in the two previous fiscal years, amounted to £218,000 last year.

Finance officials say in the report: "In all cases, a debt will only be written off when at least one of the following occurs:  Legislation prevents its recovery;  It is uneconomic to pursue;  The Debtor becomes insolvent;  All options of recovery have been exhausted, which includes the use of the Council’s Legal team and the Sheriff Officers, (Walker Love);  After a professional assessment of the debt concludes that recovery is unlikely. For example, if Sheriff Officers advise that there are no assets, or the debtor has left the area and cannot be traced."

An explanation is also offered for the huge rise in lost council tax revenues in 2018/19: "The value of Council Tax write offs processed within 2018/19 has increased significantly in comparison to last year. In 2017/18 the amount written off was unusually low as a result of a reduced number of cases being processed but also a reduction in the individual case value.

"It was also affected by the prioritisation of newer, rather than aged. It was expected that the level of write offs would increase significantly in 2018/19 as a result of addressing the backlog of cases to be cleared and ensuring ongoing works were maintained. The highest value of write-offs for Council Tax in 2018/19 continues to be within the category where the liable party has become insolvent. The number of cases increased from 191 in 2017/18 to 533 in 2018/19 although some of these cases would have become insolvent in 2017/18."

The number of council tax transactions written off increased from 871 to 7298.

Reason for write off – deceased cases increased from 68 to 631. No forwarding address  67 to 340; insolvency 191 to 533.

"Write-offs for Sundry Debt continued at a higher rate in 2018/19 as the Council continues to encounter difficulties in recovering social care debt and liquidations/sequestrations. The amount of Sundry Debt currently owed to the Council, and deemed to be at risk, presently stands at £1.7 million. The Bad Debt Provision currently stands at £1.1 million. To mitigate against this possible shortfall in provision, a further £150,000 has been added to the provision from the 2018/19 out-turn. This is consistent with the level of debt considered to be at high risk of non-recovery."