The Wolves at The Door
Published Monday 07 March 2005
Wolverhampton City Council is finding innovative ways of managing sundry debt
Partnership is an oft over-used word, spoken freely by corporations to describe their relationships with their suppliers, as if they are all genuinely working together to achieve the same objective. Whereas in some examples the word has perhaps lost its meaning, in the case of Wolverhampton City Council, however, there is no better way of describing its approach to debt recovery.
Councillor Ian Brookfield, cabinet member for resources and support said: "The collaborative approach to managing and collecting so-called 'sundry' or miscellaneous debt, using two externally appointed collection agencies, has proven results, and is fast becoming a benchmark to which other local authorities may aspire. We have a responsibility of protecting the public purse and that is why we make every effort to work with our partners in collecting every debt."
The responsibility for managing sundry debt - or as he sees it: 'protecting the public purse' - falls to Simon Lunn, Banking and Cashiering Services Manager. It was his decision to recommend the employment of external collectors to support the work of his own teams, and he has never looked back.
"Historically, a contact by the Council may have been ignored, but a letter, 'phone call or a visit from an external debt collector shows that we are serious and seems to have much more weight of enforcement behind it."
Wolverhampton City Council first trialled the use of external debt collection agencies in 1998, in line with its own objectives to continually improve service delivery, and demonstrate value for money to the public. Though the trial was not an immediate success (a factor down to the choice of agent rather than the concept itself) the Council persevered, and its perseverance has paid off. Last year the two appointed agencies recovered in excess of £700,000 in sundry debt arrears. And the success continues.
Within Simon's remit is the management of £50 million of sundry debt. More than half of this (£28 million) is comprised of the Council's Pension Fund; the balance includes such items as overpaid housing benefit, repair and maintenance contracts, shop letting, business unit rentals, bin/refuse collection charges, business service charges, hire of games pitches etc.
The Council raises approximately 28,000 sundry debtor invoices each year. They range in value from £14.50 to £10,000,000.
"The way it used to work was that an invoice was raised, the invoice came into a central system, and then it was either paid or it wasn't. If it wasn't, it was passed on to legal services with varying degrees of success. We needed to find a more effective way of doing things. What happens now is that we take ownership of the debt on behalf of the Council from the day an invoice is raised to the day it is paid.
"Our approach now is much more about debt 'management'," Simon continues. "We are fair, but firm."
Whilst there used to be a limit on the value of debt referred to the collection agency, no such limit applies today. Any amount of money (above £14.50), however large or small, is deemed to be worth collecting. For value of invoices above £200, the Council will instruct a trace to be made if the debtor cannot be found. It is more expensive, but it is nearly always successful.
One of the collection agencies with which The Council works in partnership is The Lewis Group. "Before we appointed The Lewis Group we went through a rigorous tender process," Simon says. "The first thing we look for is that they have to be a member of the Credit Services Association (CSA), and adhere to the Association's Code of Conduct. Put another way, we won't appoint anyone who isn't a member.
"Secondly, they have to work to our own strict Code of Conduct; they will be effectively working on our behalf, and so we have to be sure that our reputation is protected.
"Price of course also has a rating, but it was not the overriding decision. It is always possible to buy 'cheaper', and we continually monitor prices within the market. But in buying cheaper, the service levels could be worse and the number of complaints we receive might increase. Our approach is to work in partnership with our agencies. That means they learn from us and we learn from them, and it enhances the way we both work."
Such genuine partnership has resulted in a number of innovations. The Council is now much more in tune with the different types of debtors, for example those that can pay, those that cannot pay, and those that can but don't for whatever reason. "Our policies take all of this into account," he says, "and we now have processes and procedures which more accurately ascertain an individual's financial circumstances, and this gives us a much better idea about someone's ability to pay."
Enforcement letters have also been re-drafted, with new content agreed between the agent and The Council.
Within Simon's department, Julie Gibson has been brought in to head a team of six tasked with debt recovery, albeit that they have other responsibilities. They work closely with The Lewis Group at an operational level in collecting debt during 'traditional' working hours, but outside of such hours and at weekends, The Lewis Group particularly comes into its own.
"The Lewis Group is specifically set up to recover debt. They have the specialist technology. They have the experts, experts who are highly and continuously trained. Although our own teams are also well trained, they are not able to devote 100% of their time to collections as they have many other jobs to do. That is why we need external support," Julie adds.
One of the specialist functions an external agency such as The Lewis Group provides is Doorstep Collections. It is for this reason, in particular, that Simon needs to be able to trust the Council's partners. "Of course we get the occasional complaint, but they so far have proven to be largely unfounded," he says. "Doorstep collections have an unwarranted reputation. They are only used in the last resort, and still from an approach of encouraging a debtor to start making an honest payment."
Of the £50 million of miscellaneous debt for which Simon is responsible, 96% recovery of the in-year debt and a reduction in cumulative debt is the target, and 99.6% is the level achieved. What this means 'in the bigger picture', is that the level of Council Tax does not have to increase.
"We have a responsibility of protecting the public purse," Simon concludes. "And that is why we make every effort to work with our agencies in collecting every debt."