2001-5 Delinquent Tax Revolving Funds Revisions to Accounting after Public Act 123 of 1999

February 8, 2001

To: County Treasurers, Controllers, Board of Auditors, Board of Commissioners

From: Richard L. Baldermann, CPA, CGFM Administrator, Local Audit and Finance Division Bureau of Local Government Services

RE: Accounting for Delinquent Tax Revolving Funds (100% Tax Payment Funds)

The county treasurer is required by the General Property Tax Law (Act 206 of 1893, as amended, Michigan Compiled Law (MCL) 211.1 to 211.157) to collect delinquent real property taxes levied by all local units of government within the county. Public Act 123 of 1999 amended the General Property Tax Law to subject tax delinquent property to forfeiture, foreclosure, and sale over a three-year period. Public Act 123 of 1999 applies to taxes levied after December 31, 1998. All property returned for delinquent taxes, and upon which taxes, interest, penalties, and fees remain unpaid after the property is returned as delinquent to the county treasurers, is subject to forfeiture, foreclosure, and sale for the enforcement and collection of the delinquent taxes. The act reformed the tax reversion process by decreasing the process to three years and amended the May Tax Sale process. It established the primary responsibility for administration with the foreclosing governmental units. Under the act, "foreclosing governmental unit" is defined to mean a county treasurer or the state, if the county has elected not to handle the process. The act added several new fees as a result of changes in the delinquent property tax process. How the fees are handled, in most cases, depends on whom the "foreclosing governmental unit" (FGU) is. However, the accounting for the delinquent tax revolving funds did not change significantly with the enactment of PA 123 of 1999 and in most situations Numbered Letter 7-88 issued August 17, 1988 by Treasury still apply.

This letter discusses the accounting procedures for recording transactions when the county board of commissioners authorizes the creation of a delinquent tax revolving fund taking into consideration the amendments associated with PA 123 of 1999. The General Property Tax Law authorizes the county treasurer to "buy" any or all delinquent real property taxes and special assessments owed to the county and local units of government in the county. Under MCL Section 211.87b-d, the county treasurer pays the local unit treasurer in full for delinquent real property taxes owed according to the delinquent tax roll "returned" to the treasurer. Taxes eligible for payment under this section are:

The county treasurer shall pay from the fund any or all delinquent taxes which are due and payable to the county and any school district, intermediate school district, community college district, city, township special assessment district, or any other political unit...(MCLA 211.87b(3)) Pursuant to Michigan Compiled Laws 211.87b, the board of commissioners may establish the Delinquent Tax Revolving Fund (DTRF). This fund must be segregated into separate funds or accounts for each year's delinquent taxes. The board must adopt a resolution establishing the separate fund or accounts for each tax year. Each year's separate fund or accounts continue in existence until the delinquent taxes for that tax year have been collected and the county board of commissioners have transferred any surplus to the county's general fund, in accordance with MCL section 211.87b. (7). The county retains all delinquent taxes, interest and penalties collected to offset its tax collection costs.

The surplus earned, after any borrowing is paid off, is under the control of the board of commissioners. The surplus may be accumulated to reduce or avoid future borrowings, or expended for other purposes as authorized by the board of commissioners.

This section allows local units and county funds to receive full payment for all delinquent real property taxes due them within 20 days (30 days if the county population exceeds 1,500,000) after sufficient money is deposited into the Delinquent Tax Revolving Fund.

The county treasurer (hereafter referred to as the treasurer) also avoids the complications of having to make monthly payments to local units for their share of collections of delinquent taxes and related interest (MCL 211.87).

As further described in the "Uniform Chart of Accounts for Counties and Local Units of Government in Michigan," a Delinquent Tax Revolving Fund (DTRF) "accounts for money advanced by a county to pay other local taxing units and various county funds for their delinquent taxes."

Delinquent property taxes are accounted for by the year that the delinquent taxes become delinquent in a fund segregated for the individual year's delinquent tax collections. The fund is called the Delinquent Tax Revolving Fund referred to as DTRF throughout this letter.

DTRF(s) must clearly indicate the tax delinquency year, either by fund number or, if only one DTRF is used, by separate activity numbers. The three fund/activity structure options follow. Option "a" is used in this letter. The yearly suffix number will correspond to the year of the general obligation limited tax notes, if notes are issued.

a) A series of DTRF's including a control DTRF, number 616, plus a separate DTRF for each year for which delinquent taxes are being collected by the treasurer. Each year's DTRF should be numbered to reflect the year of delinquency, i.e., fund 616.84 would account for taxes that become delinquent March 1, 1984. When notes reach final maturity and payment is made, and the tax sale for properties with unpaid delinquent taxes has been held, that year's DTRF may be closed to the General Fund. The board of commissioners could then transfer the surplus to the control DTRF for use in the purchase of future delinquent taxes.

b) A series of DTRF's as in option "a," including a control DTRF, number 615, and funds for each year numbered 616-625. The last digit would correspond to the last digit of the delinquent tax year (625 for taxes delinquent as of March 1, 1985).

c) A single DTRF, number 616, may be used. The accounts related to each tax levy are then designated by a unique activity number, such as "085" for taxes that become delinquent March 1, 1985.

Section 60 of the General Property Tax Law (which was added as results of PA 123 of 1999 amendments) authorizes the county treasurer to cancel the 2000 tax lien sale and the 2001 tax lien sale respectively, if there are no county delinquent tax revolving fund notes or bonds outstanding. If the county treasurer canceled the 2000 tax-lien sale or the 2001 tax-lien sale, then the 1997 delinquent taxes or 1998 delinquent taxes are subject to forfeiture and foreclosure. It provides in Section 60a (which was also added as results of PA 123 of 1999 amendments) that if a tax lien sale is canceled, delinquent taxes on the property will be subject to a 4 percent county property tax administration fee. Non-compounded interest at a rate of 1 percent per month can be added computed from the March 1 when the taxes were returned delinquent.

All activity, prior to the property tax foreclosure process under the regular delinquent property tax collection process, should be accounted for under activity number 253. For example, interest and penalties on taxes go to activity number 253 as in the past. All revenue and expenditures after the property tax foreclosure process goes into activity number 254 within the delinquent tax revolving fund.

On March 1, forfeiture date certain, MCL 211.78g requires that the following fees may be charged and collected by the county treasurer prior to redemption of the parcel from forfeiture and subsequent foreclosure.

• On March 1, in each tax year, certified abandoned property and property that is delinquent for taxes, interest, penalties and fees for the immediately preceding 12 months or more is forfeited to the county treasurer for the total amount of those unpaid delinquent taxes, interest, fees and penalties. If property is forfeited to a county treasurer under this subsection, the county treasurer does not have a right to possession of the property until 21 days after a judgment of foreclosure is entered under 78k. If property is forfeited to a county treasurer under this subsection, the county treasurer shall add $175 fee, as adjusted under section 78p, to each parcel of property for which those delinquent taxes, interest, penalties and fees remain unpaid.

• Property forfeited to the county treasurer under subsection (1) may be redeemed at any time before 21 days after the entry of judgment foreclosing the property under section 78k upon payment to the county treasurer of all of the following:
  (a) The total amount of unpaid delinquent taxes, interest, penalties and fees for which the property was forfeited.

  (b) In addition to the interest calculated under section 60a(1) or (2) and 78(3) additional interest computed at the non-compounded rate of ½% per month or fraction of a month on the taxes that were originally returned as delinquent computed from March 1 preceding the forfeiture.

  (c) All recording fees and all fees for service of process or notice.

PA 123 of 1999 allows the County Treasurer (or State if it's the FGU) to sell the forfeited property to recover the amount owed for delinquent property taxes if the property is not redeemed. The foreclosing governmental unit must deposit the proceeds from the sale of tax delinquent property into a "restricted account" created for each year a property sale is held. We recommend that the County establish the restricted accounts within the Delinquent Property Tax Revolving Fund based on the year of the sale. Activity # 254--Delinquent Tax Property Sales should be used to record the sale proceeds and the authorized expenditures from the proceeds. When the forfeited property is sold, the proceeds from the sale should be recorded in the Delinquent Property Tax Revolving Fund under revenue account number 642 "Charge for Services-Sales." The proceeds in the fund can only be used for the following expenditures.

1. The delinquent tax revolving fund shall be reimbursed for all taxes, interest, and fees on all of the property whether or not it was sold.
Foreclosed property reimbursement

1. Reimbursement of all unpaid base tax, interest, administration fee paid to the local units of government at settlement, pre-forfeiture notices mailing fees, certified mailing fee, publication costs, pre-foreclosure personal property visits, certified mailing, publication costs, and recording fees that have not been reimbursed through redemption and were originally expended from the delinquent tax revolving fund to the last day prior to all redemption rights being extinguished.

2. All costs of the sale of property for the year shall be paid.
Foreclosed property auction sales cost examples

1. Contracting costs for hiring sales auctioneer, property sale publications, property sale signs, supplies and materials necessary for conducting the sales, etc.

3. Any costs of the foreclosure proceedings for the year, including costs of mailing, publication, personal service, and outside contractors, shall be paid.
Foreclosure proceeding cost examples

1. Foreclosure petition filing fees and any subsequent court motion filing fees; costs of outside title search contractors; process service contractors; other contractors; and any other costs that were originally expended from the county's general fund or another source of revenue other than the delinquent tax revolving fund and not reimbursed to the last day prior to all redemption rights being extinguished.

4. Any costs for the sale of property or foreclosure proceedings for any prior year that have been paid or reimbursed from that prior year's property sales proceeds shall be paid.

5. Any costs incurred by the foreclosing governmental unit in maintaining foreclosed property before the sale, including costs of any environmental remediation, shall be paid.
Property maintenance cost examples

1. Boarding up empty dwellings, disconnecting utilities, environmental clean-up costs, posting property as no trespassing, mowing grass, evicting tenants, etc.

6. If the foreclosing unit is the State, any remaining balance shall be transferred to the Land Reutilization Fund.

The county treasurer must direct the investment of surplus funds and credit the interest and earnings from the investments to the restricted activity. The revenue and expenditures in activity 254 must be closed to a separate restricted earnings account in the fund equity within the Delinquent Tax Revolving Fund.

JOURNAL ENTRIES FOR TRANSACTIONS INVOLVING DELINQUENT PROPERTY TAXES

I. PROPERTY TAXES ARE LEVIED AND COLLECTED PRIOR TO BECOMING DELINQUENT

The county treasurer records all property taxes from county millage(s). Collections are termed "current levy" from December 1 until March 1 and "delinquent taxes" beginning March 1.

II. FUNDS ARE PROVIDED TO PURCHASE DELINQUENT TAXES (3 ALTERNATIVES)

III. DELINQUENT PROPERTY TAXES PURCHASED FROM UNITS (March settlement)

IV. PROPERTY OWNERS PAY DELINQUENT TAXES

V. IF MAY TAX SALE IS HELD; OWNERS HAVE ONE YEAR TO REDEEM PROPERTY (Under Old Process Prior to PA 123 of 1999. Effective December 31, 2003, the May tax sale process by the county treasurer as defined in MCL 211.70 is repealed by PA 123 of 1999. Effective December 31, 2006, the process to purchase state bids after the tax sale as defined by MCL 211.84 is repealed.)

VI. MAY TAX SALE CANCELED UNDER PA 123 OF 1999 (per example on pg. 10 and 11)

Given these statutory provisions of PA 123 of 1999, the costs of redemption from forfeiture and subsequent foreclosure for the March 1, 2001 forfeiture year, is shown in the example noted based on the following assumption.

Assumption: one parcel with 1997 and 1999 tax years with unpaid balances for each year on March 1, 2001. Both tax years forfeited must be paid within 21 days after the foreclosure judgment is entered in order to redeem the parcel from forfeiture and succeeding foreclosure.

Example: February and March Redemption Cost Calculation plus Accounting for Fees
Assume that the property owner paid the delinquent 1997 and 1999 taxes subject to forfeiture and the 2000 tax sale was cancelled. The following accounting entries would be made with the new fees as required by Act 123 of 1999 based on the following information.

Computation of the Amount Due on March 1, 2001

Add February delinquent due plus additional fees added on March 1, forfeiture date

Redemption Amount Due March 1, 2001 = $520.81

Section 78g(3)(c) states: All recording fees and all fees for service of process or notice. The costs of the June and September notices and optional pre-forfeiture certified mail publication notice may be added to the 1999 tax year redemption under 78g(3)(c).

Costs for the 1999 parcel for redemption could also include:

(6) FGU show cause hearing notice certified mailing costs and circuit court foreclosure hearing costs (Section 78i(2))

(7) Personal property visit process service costs for occupant/posting notice of FCU show cause hearing and circuit court hearing (Section 78i(3)(a-d) assuming both notices served on one visit.

(8) Publication costs for service of process for FGU show cause hearing for persons entitled to receive notice and whose address can not be ascertained or unable to serve those persons (78i(6)).

(9) $9 recording fee for FGU show cause hearing and circuit court hearing notice proof of service on persons entitled to receive notice (78 i (4)) assuming both notices were served at the same time and 1 page proof of notice recorded.

(10) $9 recording fee for service of notice of the FGU show cause hearing and circuit court foreclosure hearing on occupants of the properties subject to foreclosure (78 i (3)(4)) assuming both notices served at the same time and 1 page proof of notice recorded.

(11) $9 and $2 per each additional recording fee for publication of FCU show cause hearing and circuit court hearing notice publication (78 i (6)) assuming notices with an appended list of properties to equal more than a one page recording.

VII. AFTER THE MAY TAX SALE, UNPAID DELINQUENT TAXES ARE CHARGED BACK TO LOCAL UNITS. THE COUNTY POLICY WILL DETERMINE WHETHER THE CHARGE BACKS OCCUR IMMEDIATELY AFTER MAY TAX SALE OR AT A LATER DATE. TAX TRIBUNAL ADJUSTMENTS ARE LIKEWISE CHARGED BACK. (Under Old Process Prior to PA 123 of 1999)

VIII. DTRF 616.X1 IS CLOSED TO THE GENERAL FUND

IX. ENTRIES TO RECORD THE COLLECTION OF TAXES

X. ENTRIES TO RECORD THE SALE OF FORFEITED PROPERTY

The following account numbers are in accordance with the Uniform Chart of Accounts (UCA), Michigan Department of Treasury, 1984. Where the UCA does not specify an account, an appropriate open account number has been recommended. Further information on the purpose of these accounts is provided below and/or in the UCA, as referenced.

DELINQUENT TAX REVOLVING FUNDS (616.XX)

GENERAL FUND (101)

ACCOUNT DESCRIPTIONS FOR DELINQUENT TAX REVOLVING FUND(S)

a) ACCOUNT 007, CASH--NOTE PAYMENT RESERVE, provides a restricted cash account for a note reserve "fund," if the note payment reserve is established in the note resolution according to MCL 211.87d(6)(c). A portion of note proceeds is recorded in account 007 according to the resolution. The "purchase" of delinquent taxes is made from account 001. The balance in account 007 must equal any note payment reserve required in the note resolution or note covenants. This note payment reserve is pledged to repay principal and interest on the notes or the purchase of notes, and may be used to retire the notes and accrued interest. In any case, this account must be maintained until final payment of bonds and interest is made. At that time, the reserve fund cash will be used in making the final payment. (per Letter #99-June 14, 1982)

NOTE: Joint or combined investments with other DTRF cash accounts or other county funds can be made (unless restricted in the note resolution or by note covenants) where detailed accounting is maintained which shows the amount invested for each fund, and where the interest earned is prorated to the funds with money in the combined investment.

b) ACCOUNT 026.XX TAXES RECEIVABLE--DELINQUENT REAL, records delinquent taxes purchased by the county treasurer from local taxing units and county funds. Delinquent taxes equal the unpaid property taxes levied plus the local Property Tax Administration Fee of 1% if the unit elected to levy that fee (MCL 211.44(6)). THE ACCOUNT SHOULD BE POINTED OFF TO ALLOW A SEPARATE SUB-ACCOUNT FOR EACH TAXING UNIT OR FUND (i.e., account 026.14 records delinquent taxes for township 14). If tax anticipation notes have been issued, the delinquent taxes receivable, interest and PTAF are pledged for payment on the notes (MCL 211.87c(4)). Collection and receipting procedures are discussed in MCL 211.58. There must be detail sub-accounts for each taxing unit and they must be balanced to the controls monthly.

c) ACCOUNT 081.XX, DUE FROM OTHER UNITS OF GOVERNMENT, is used here for simplicity. We recommend that a separate account for each unit type (accounts 071-077, UCA) be used, and that the account number be pointed off where multiple units of the same type exist. In any case, detailed sub-ledgers listing the amount due from each taxing unit must be maintained and reconciled to the control account.

d) ACCOUNT 088.01, FORFEITURE CERTIFICATE RECORDING FEE RECEIVABLE, is used to record the forfeiture certificate recording fee paid to the register of deeds from the delinquent tax revolving fund prior to the collection of the actual fees. The amount must be recorded as a receivable (asset account) in the Delinquent Tax Revolving Fund for the year which it's added to the parcel under the receivable account number 088.1 as "Forfeiture Certificate Recording Fee Receivable" with the off-setting credit to cash. At the time of redemption of the property, debiting cash and crediting the 088.1 account will eliminate the asset account. The cost is $9.00 for the first page and $2.00 for each additional page assessed to each parcel forfeited. The MCL 211.78g (2) states that within 45 days after forfeiture, the county treasurer is required to file with the register of deeds a certificate placing parties on notice that property has been forfeited. It also must state that title to the property will be lost 21 days after entry of a foreclosure judgment. The county treasurer must forward a copy of each certificate to the State Treasurer if that county elects to have the State foreclose on tax-delinquent property within that county.

e) ACCOUNT 204, TREASURER'S AGENT FEE PAYABLE, records the portion of the interest on delinquent taxes (recorded in account 445) which, on approval of the board of commissioners, may be restricted for payment to the treasurer as an agent fee. The fee due to the treasurer should be computed at least annually and recorded by a debit to account 702 and a credit to account 204 or, if paid when earned a credit to account 001. The payment should be included in the payroll system so that the taxes withheld and the W-2 form are proper.

(f) ACCOUNT 222, DUE TO COUNTY REGISTER OF DEEDS--REDEMPTION CERTIFICATE FEE, the amount collected for the redemption certificate when the property is redeemed is due to the Register of Deed's Office. The amount should be recorded in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under the liability account 222 Due to the County-Register of Deed for the "Redemption Certificate Recording Fee." The statute provides that forfeited property may be redeemed at any time before 21 days after entry of a foreclosure judgment and is recorded as revenue to the FGU. The amount should be transferred to the general fund and recorded under the Register of Deed's Office revenue account 422 for redemption certificate recording. Note: The person with a legal interest in the property must pay all of the following to redeem the property:
(1) total of unpaid taxes, interest, penalties and fees for which the property was forfeited;
(2) additional interest at a non-compounded rate of 0.5 percent per month; and
(3) all recording, service of process, and notice fees.

g) ACCOUNT 228.13, DUE TO STATE OF MICHIGAN--STATE TAX, records the state portion of the County Expense of Sale fee. See account 449 for details.

(h) ACCOUNT 228.51, DUE TO STATE OF MICHIGAN--TITLE SEARCH FEE (Opt out Counties Only)--If the county has opted out and allows the State to foreclose property under the tax reversion process, the county treasurer must collect $175 statutory fee for the title search to be transmitted to the State of Michigan. In this case, the amount should be recorded as a liability Due to the State of Michigan when collected under accounts number 228. 51. The liability may be set up either within the Delinquent Tax Revolving Fund or as a liability in the Trust and Agency Fund.

i) ACTIVITY ACCOUNT 253, TREASURER--DELINQUENT TAX (Prior to Act 123 process) All activity prior to the property tax foreclosure process which occur under the regular delinquent property tax process should be accounted for under activity 253.

j) ACTIVITY ACCOUNT 254, OTHER TREASURER'S ACTIVITIES--DELINQUENT TAX PROPERTY SALES (After Act 123 process) All revenue and expenditures after the property tax foreclosure process goes into activity 254 within the delinquent tax revolving fund. The act states the foreclosing governmental unit must deposit the proceeds from the sale of tax delinquent property into a "restricted account" created for each year a property sale is held. The restricted accounts should be established within the Delinquent Property Tax Revolving Fund based on the year of the sale. This activity (Activity # 254--Delinquent Tax Property Sales) is used to record the sale proceeds and the authorized expenditures of the proceeds. When the forfeited property is sold, the proceeds from the sale should be recorded in the Delinquent Property Tax Revolving Fund under revenue account number 642 "Charge for Services-Sales."

k) ACCOUNT 445, INTEREST ON TAXES, records interest collected on delinquent property tax payments. The interest is calculated by month or any fraction thereof as follows, subject to exceptions in MCL 211.59(3) and higher rates provided for taxes levied December 1 of 1980-82 (see MCL 211.89).

Interest is 1% per month or fraction of a month on delinquent taxes paid during the period from March 1 following the tax levy until May 1, proceeding the May tax sale applying to that tax year (MCL 211.44(3) and 211.59(1)). The interest rate may be changed by act of the legislature.

Interest is 1.25% per month or fraction of a month beginning on May 1 of the year the lands are listed to be sold for delinquent taxes at the May tax sale. This rate applies whether the original property owner redeems the property, or another party buys the tax lien at the May tax sale or thereafter. (MCL 211.60, 211.74, and 211.84).

l) ACCOUNT 447, PROPERTY TAX ADMINISTRATIVE FEE (formerly known as the collection fee), records the county Property Tax Administration Fee (PTAF) which is included in all delinquent property tax collections. The PTAF is the greater of 4% of the delinquent taxes paid or $1.00 (MCL 211.59(1), (6) and 211.87b(6)). Where the issuance of notes has been authorized, the PTAF is credited to the DTRF. Expenses of borrowing must be repaid from the PTAF. The balance of the PTAF may be pledged by resolution to the note repayment (MCL 211.87d(6)(a) or transferred to the General Fund (MCL 211.59(2)). WHERE NOTES HAVE NOT BEEN AUTHORIZED, THE PTAF IS GENERAL FUND REVENUE. Alternatively, the PTAF may be recorded upon collection as a DTRF payable in Account 214.01, then transferred to the General Fund at the end of the year.

m) ACCOUNT 449, COUNTY EXPENSE OF SALE, records the county portion of the Expense of Sale Fee (account 228.13 records the state portion). The county portion reimburses the county for the expenses incurred in preparing the list of delinquent lands for sale. The fee is to go to the General Fund as revenue (MCLA 211.59(1)).

The fee is $10.00 from October 1, preceding the May tax sale at which the property would be sold for delinquent taxes ($5.00 for the county and $5.00 for the state).

n) ACCOUNT 639, TITLE SEARCH FEE--If the property is forfeited to the county treasurer under MCL 211.78g, the county treasurer must add a $175 statutory fee, as adjusted under 78p, to each parcel of property for which the delinquent taxes, interest, penalties and fees remain unpaid.

The amount should be recorded as revenue (if the County is the FGU) in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under revenue account number 639 as "Title Search Fee." Note: The actual amount recorded for the expense of the title search may be more than the title search fee.

o) ACCOUNT 641,PRE-FORFEITURE MAILING NOTICE FEE (or OCTOBER 1^st FEE). For certified abandoned property, on the October 1 immediately succeeding the date that unpaid taxes are returned to county treasurer for forfeiture, foreclosure, and sale under section 60a(1) or (2) or returned to the county treasurer as delinquent under section 78a, the county treasurer must add a $15.00 fee, as adjusted under section 78p, on each parcel of property for which the delinquent taxes, interest, penalties, and fees remain unpaid.

Record as revenue in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under revenue account number 641 as "Pre-forfeiture mailing notice cost."

p) ACCOUNT 665, INTEREST ON INVESTMENTS--REGULAR; AND ACCOUNT 670, INTEREST ON NOTE RESERVE INVESTMENTS, record interest on investments. Where a note reserve exists (account 007), the interest on investment of the note reserve is recorded separately.

q) ACCOUNT 676, REIMBURSEMENT--Upon the request of a holder of a tax lien purchased under the Michigan tax lien sale and collateralized securities act (MCL 211.921 to MCL 211.941), and payment to the county treasurer of the actual costs incurred in complying with that request, the county treasurer shall provide a list identifying the parcels of property for which a notice is required under sections 78 to 78l.

Record the revenue as account number 676 for "reimbursement" of costs incurred in complying with the request within activity 254 in the Delinquent Tax Revolving Fund.

r) ACCOUNT 702, TREASURER'S AGENT FEE; ACCOUNT 715, EMPLOYER'S SOCIAL SECURITY; ACCOUNT 726, OFFICE SUPPLIES; AND ACCOUNT 980, CAPITAL OUTLAY, (plus others as needed) record the expenses of administering a DTRF if the board of commissioners has authorized payment of the expenses from that DTRF. Expenses incurred in the administration and collection of delinquent taxes may be expensed to the DTRF. Expenses may be up to the limit of 5% of the treasurer's office budget for the year or the applicable 1/27 or 3/64 of the interest collected each month in all delinquent tax revolving funds, whichever is smaller. Of the amount specified, the treasurer is entitled to an agent fee limited to the lesser of 20% of the total allocation for the delinquent tax administration expenses, or 20% of the treasurer's authorized salary (MCL 211.87c(3)). The balance, after deducting the agent's fee, may be spent for any other cost attributed to collecting delinquent taxes. Unexpended administration expenses, excluding the agent's fee, will remain in the delinquent tax funds. Capital assets may be purchased but are titled in the name of the county.

Note: Public Act 123 of 1999 amended this section (MCL 211.87c). Section 16 was added and states that a county treasurer elected or appointed to office after the effective date (October 1, 1999) of the amendatory act is not eligible for payment for services as agent for the county. To be eligible for payment of agent fees, the county treasurer must have held office on the effective date of amendatory act and had not vacated the office, after the effective date of the amendatory act that added this subsection.

s) ACCOUNT 807, OTHER CONTRACTUAL SERVICES--TITLE SEARCH COMPANY--The expense of the title search may be more than the title search fee. The expense to the vendor or title search company should be recorded as "Other Contractual Services" under activity 254 within the Delinquent Property Tax Revolving Fund

t) ACCOUNT 997, NOTE BORROWING COSTS AND FISCAL AGENT FEES, records the expenses of borrowing from the DTRF which are to be repaid from the PTAF (see Item g, above).

u) FUND EQUITY ACCOUNT 397, RETAINED EARNINGS--RESERVED FOR DELINQUENT PROPERTY--The foreclosing unit must direct the investment of surplus funds and credit the interest and earnings from the investments to an restricted activity. The revenue and expenditures in activity 254 must be closed to a separate restricted earnings account in the fund equity.

RECONCILEMENT OF DELINQUENT TAXES RECEIVABLE

Tax Rolls to General Ledger

The delinquent taxes receivable control account 026 for every tax year and every DTRF should be reconciled periodically, but at least annually. The reconciling procedures include the preparation of an adding machine tape of the unpaid real property taxes for the specific month ending date of a delinquent tax roll or rolls for the applicable tax year. The total amount of the unpaid delinquent real taxes indicated by the adding machine tape should equal the balance recorded in the Taxes Receivable--Delinquent Real sub-ledger account for the applicable tax collecting unit.