Performance Audit of the City of Philadelphia Cash Managment Program Jun

Audit Date: January 10, 2013
Audit Categories
  • Performance
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
January 10, 2013

Contact: Harvey Rice

Butkovitz Finds City Paid $1 Million in Bank Fees
Controller discovers City didn’t analyze bank fees to know
if it was being charged correctly by three major banks

Performance Audit of the City of Philadelphia
Cash Management Program – June 2012

PHILADELPHIA – City Controller Alan Butkovitz today released a Performance Audit of the City of Philadelphia’s Cash Management Program that found the City incurred $1 million in bank fees in one year but never analyzed the fee arrangements to know if it was being charged correctly.

Fourteen separate banking fees totaling just over $1 million were incurred to Wells Fargo, PNC and Bank of America during Fiscal Year 2011. Some of the fees included were for various depository services, Brinks armored car service, wire transfers and account maintenance.

“The nature and classification of fees were difficult to understand and there was no comfort knowing the City was being charged the proper amounts,” said Butkovitz. “The Treasurer’s Office needs to ensure the City isn’t being overcharged and that it’s receiving the best rates.”

According to Butkovitz, the Treasurer’s Office even asserted that the fees were complicating and confusing and indicated they were in the process of obtaining a consultant to ascertain if it is being charged the correct amounts.

Along with the incurred bank fees, credits earned by the City to offset the fees were not accounted for separately in the City’s General Ledger. Instead of earning interest, the City received credits that were then applied to offset the bank fees. The Treasurer’s Office asserted approximately $710,000 in fees was offset by the credits earned, but there was no supporting documentation provided to the Controller’s Office indicating that this was the case.

“Because the bank fees and credits earned were not accounted for separately, it was impracticable to verify the amount of fees offset by credits,” said Butkovitz. “These items need to be recorded in the general ledger as separate revenue and expense entries.”

The Controller’s audit also found tax and water payments received through the mail were not being processed by the Revenue Department in a timely manner. In some instances, there was a time lag of several days, or even weeks, in depositing collections.

Additional lag time was due to delays in payments deposited at the City’s drop boxes. During an inspection at the North Philadelphia satellite office, auditors found the contents were not sent to the Municipal Services Building to be deposited until the following morning, creating an automatic two day time lag.

“According to City procedures, drop boxes are expected to be emptied three times a day on a set schedule with the contents processed the same day as received,” said Butkovitz. “Allowing citizens’ payments to sit in a drop box for more than one day can increase the risk of theft or loss of payment.”

Other findings from the Controller’s audit include:
-There were no formal written procedures detailing the process for daily cash investment decisions, including how each day’s uninvested consolidated cash balance was calculated.
-There was no documentation or minutes to support the Treasurer’s Office’s quarterly investment manager meetings, as required the City’s Investment Policy.
-The Revenue Department does not have an advanced system that would for the enable electronic deposits, instead of having the cash and check collections bundled and sent by armored cars for daily deposits.