HOUSE BILL REPORT

HB 1577

BYRepresentatives R. Fisher, McLean, Holland, Silver, H. Sommers, Anderson and Winsley; by request of Office of Financial Management

Establishing liability for state trust funds.

House Committe on State Government

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (10)

      Signed by Representatives R. Fisher, Chair; Anderson, Vice Chair; McLean, Ranking Republican Member; Hankins, R. King, Morris, O'Brien, Rector, Sayan and Silver.

House Staff:Barbara McLain (786-7135)

AS REPORTED BY COMMITTEE ON STATE GOVERNMENT FEBRUARY 28, 1989

BACKGROUND:

Accounting within state government is decentralized, and agencies use separate systems and procedures to manage their individual accounts receivable based on guidelines developed by the Office of Financial Management (OFM).

A November, 1987 report of the Legislative Budget Committee (LBC) found in an audit of the state's financial statements that the total accounts receivable owed by non-governmental entities were worth $1.5 billion.  Receivables delinquent over 90 days were worth $225 million.  The LBC report included a number of recommendations designed to improve the management of accounts receivable.

State Trust Fund Accountability:  State trust funds are monies collected by a corporation on behalf of the state such as retail sales taxes and federal withholding taxes.  If a corporation fails, state law makes the person in control of the retail sales tax trust funds liable for any unpaid trust funds.

SUMMARY:

SUBSTITUTE BILL:  State trust funds are defined as all moneys collected from another on behalf of the state including the state's share of vehicle emission testing fees and the employee's share of workers' compensation contributions.

When a corporation responsible for a state trust fund fails, the person in charge of the trust fund is personally liable for the unpaid trust funds, if that person wilfully fails to pay the amounts due to the state.  If any law requires interest or penalties for the non-payment of state trust funds, then the person who is liable for the trust funds is also liable for the interest or penalties.

A person is only liable for funds collected while he or she was responsible for such funds.  A person is not liable if non-payment is due to events beyond the person's control, and liability only applies if the agency trying to collect the trust fund determines there is no means of collecting directly from the corporation.

Sales tax trust funds are exempt from the liability provisions for general state trust funds.

The liability provisions only apply to trust funds that become due on or after the effective date of the bill.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The liability provisions do not apply to the state sales tax trust funds, and only apply to trust funds that become due on or after the effective date of the bill.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Bob Jacobs, Office of Financial Management.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    This bill provides state agencies with a tool to aid in collecting past due accounts receivable.

House Committee - Testimony Against:      None Presented.