After an item has been marked as Long Overdue and the patron account has been charged, that issue is no longer connected to the patron (the book is not longer checked out to them). When the item is returned, the charge for the item is removed from the patron's record. However, even if the Forgive Fines checkbox is checked, any overdues accrued on this item before it was marked as Long Overdue are NOT forgiven. This is because the subroutine that handles clearing the Lost bill can tolerate not having an associated borrowernumber (since there should, in theory, only be the one Lost charge for the item), but the subroutine for clearing overdues cannot (since multiple people could have unpaid overdues on that item).
Still valid?
The problem described by Ian Walls was impossible to fix prior to bug 15675 'Add issue_id column to accountlines and use it for updating fines'. I don't know off hand if that bug fixed this issue. If not, at least it's a tractable problem now.
Any updates? Carnegie team
This probably needs retesting, we have since added quite a lot of options for lost item workflows.