Executive Summary
Why The Controller’s Office Conducted The Examination
Pursuant to the requirements of Section 6-400 (c) of the Philadelphia Home Rule Charter, we examined the financial affairs of Philadelphia’s city departments as part of our audit of the City of Philadelphia’s basic financial statements. The focus of our examination was to determine if management of each department had 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.
What the Controller’s Office Found
The Controller’s Office again noted widespread deficiencies involving internal controls over payroll and cash activities that the Office of the Finance Director needs to address with department heads (see Appendix I). Highlights of the deficiencies include:
- The city’s sick leave policy was still not enforced in 40 percent of all city departments. In many cases when employees met the criteria for placement on the Excessive Use of Sick Leave List, departments failed to place the employees on the list. Consequently, these employees were not penalized according to the city’s sick leave policy and continued to use and be paid for sick leave in violation of this policy. Most notably, the failure of the Fire Department and the Department of Streets to enforce the city’s sick leave policy resulted in their employees being improperly paid $170,211 and $84,356, respectively.
- Employee overtime was not properly authorized in 13 departments. Four departments – the Office of Innovation and Technology, the Department of Streets, the Department of Behavioral Health and Intellectual disAbility Services, and the Procurement Department – could not provide approved overtime authorization forms for any of the overtime dates selected for testing.
- Petty cash and imprest funds were not adequately accounted for in 14 departments. There were many instances where bank and/or fund reconciliations were not properly prepared, including several unresolved account shortages and overages. In particular, we noted the following:
- The Department of Human Services was unable to provide support for a $1,240 shortage reported on the fund reconciliation for its Budget Unit petty cash fund.
- The Office of Homeless Services had a long-standing combined net shortage of $1,138 in its Riverview and Adult Services petty cash accounts, caused primarily by unreimbursed disbursements from previous fiscal years.
- There was a $910 shortage in the Department of Parks and Recreation’s petty cash account for its Program fund, which related to five checks issued between July 2011 through December 2014 not yet submitted for reimbursement. The department was unable to provide support for these five checks.
- The Law Department reported a $2,424 net overage in its petty cash account, which resulted from voiding checks that had previously been reimbursed.
Also, for the fourth consecutive year, the Controller’s Office noted that the Department of Licenses and Inspections (L&I) did not reconcile its daily payment totals to the revenue amounts posted to the city’s financial accounting system (FAMIS). For 12 collection days tested, a total difference of $92,769 was noted between the revenue amounts posted to L&I’s eCLIPSE system and FAMIS. Failure to reconcile daily cash receipts to FAMIS increases the risk of revenue misstatement and creates an opportunity for the misappropriation of funds.
What the Controller’s Office Recommends
The Controller’s Office has developed a number of recommendations to address these findings. The recommendations can be found in the body of the report.