In accordance with the Home Rule Charter, the City Controller’s Office examines the financial affairs of city departments as part of the audit of the city’s basic financial statements. The focus of the examination is to determine if management of each department has suitably designed and placed in operation internal controls to ensure accurate financial information and compliance with any laws and regulations related to revenue and expenditure activities. This review, called the Departmental Audit, includes findings about operational and financial deficiencies that need to be addressed with department heads by the Finance Director, as well as recommendations from the Controller’s Office and responses from departments regarding the findings. Departments are tested on a tiered system based on whether their revenue, expenditure amounts, or processes may significantly impact the city’s financial statements.
Key Findings – Fiscal Year 2020
The City of Philadelphia’s sick leave policy, which addresses civil service employees, aims to reduce unnecessary use of sick leave. Under the policy, employees who miss 8 days of work due to illness in a given year without documentation should not be paid for additional sick days taken (specific conditions apply). The previous legacy payroll system had the capability to track the number of uncertified sick days used by an employee, identified the dates in which an employee reached the fifth and eighth uncertified sick days, and had fields for departments to notate whether a fifth-day warning letter was sent or an employee was placed on the sick abuse list. OnePhilly, the city’s new online payroll system – a modernization initiative led by the Finance Office, did not allow for the tracking and monitoring of sick abuse. OnePhilly’s lack of functionality adversely affected departments’ compliance with the city’s Sick Leave Rules and Regulations. As a result, the Controller’s Office found that 26 of the 27 departments tested failed to properly enforce the sick leave policy for calendar year 2019, resulting in the city paying employees more than $1.1 million of sick time for which they were not eligible to be paid. In addition to the cost, the use of sick time may increase overtime in departments or functions with mandatory staffing levels.
At the request of the Treasurer’s Office, the Finance Office approved the issuance of procurement cards (p-cards) for the Department of Public Health (DPH) and the Office of Emergency Management (OEM) to make emergency purchases during the COVID-19 pandemic. While standard accounting procedures (SAPs) existed already for the OEM’s imprest fund and were prepared for DPH’s fund, the SAPs were designed for debit cards, not p-cards. Once the transition to p-cards occurred, Finance failed to implement proper controls to ensure that the p-cards were processed through the city’s standard disbursement approval process, including card spending limits, utilization of the city’s accounting system to record expenditures, monthly reconciliation of accounts, and restriction of card usage to the employees to whom the cards were issued.
For example, spending limits were not established when the p-cards were issued. Instead, the p-cards were set up with a revolving balance rather than a declining balance. The lack of spending controls, combined with DPH’s untimely fund and bank reconciliations and its failure to submit reimbursement vouchers, resulted in DPH spending beyond its approved limit. In total, DPH spent $195,925 from March 19 through September 30, 2020, nearly $96,000 more than the approved $100,000 imprest fund total.
In addition to overspending, DPH’s p-card expenditures appeared questionable when compared to the stated reasons for the card. While the cards were intended to be used for urgent COVID-19 purchasing needs, DPH spent more than half, $102,388, on commuting costs for 114 city employees and contractors, including $83,188 on Uber rides and $19,200 on parking costs. Management cited limited public transit service due to the pandemic, extended working hours, and safety concerns as necessitating these expenses. However, the Philadelphia Parking Authority did not enforce meters, kiosks, or residential parking time limits through mid-June 2020. Therefore, other, no-cost to taxpayer parking options were available for employees and contractors for at least half of the time period the p-cards were used for parking.
Per DPH, the p-card expenditures were not reimbursed by federal grants/funds as of July 29, 2021. The department stated that it was working with the city’s Office of Recovery and Grants to evaluate eligibility for reimbursement.
For the third year in a row, the Controller’s Office found that the Department of Licenses and Inspections did not reconcile housing inspection license renewal revenue to the city’s account system on a daily basis, as required. Failure to reconcile cash receipts to the city’s accounting system daily increases the risk of misstatement of revenues and creates an opportunity for misappropriation of funds. The total housing inspection license renewal revenue was $15 million for fiscal year 2020. Of the 24 sample days tested, the Controller’s Office noted differences between revenue posted by the department and the city’s accounting system totaling $313,818.
The Controller’s Office has developed a number of recommendations to address individual department findings. Recommendations can be found in the body of the report.
 The City Controller’s Office also approved the issuance of p-cards for DPH, however the approval was contingent upon Finance’s approval and that p-card activity would be handled through the city’s accounting system (FAMIS). While the p-cards were approved by Finance, the p-cards’ activity was not handled through FAMIS. The p-card request for OEM was not sent to the Controller’s Office for approval. Additionally, the OEM p-card was not approved by Finance in writing.