Description
City Controller releases audit of the Memorandum of Understanding Between Mayor & Sheriff
Executive Summary
Why the Controller’s Office Conducted the Review
Pursuant to Section 6-400 (d) of the Philadelphia Home Rule Charter, the Office of the Controller commissioned and oversaw an agreed-upon procedures review, conducted by the independent accounting firm of David A. Lopez and Company, LLC, to determine whether the Office of the Sheriff (Sheriff’s Office) had reformed controls over its financial operations in accordance with the Memorandum of Understanding (MOU) between the Mayor and Sheriff. The review examined Sheriff’s Office activity during the MOU term of March 2, 2012 through June 30, 2013.
What the Controller’s Office Found
The review found that the Sheriff’s Office apparently failed to enact many of the promised reforms of the MOU. This condition appeared to result from the city administration’s failure to adequately fund the requirements of the MOU and monitor whether the Sheriff’s Office complied with it. Consequently, the Sheriff’s custodial accounts, which reportedly totaled $38 million at June 30, 2013, remained highly susceptible to misuse. Examples of the Sheriff’s apparent non-compliance with the MOU included:
-In many instances, no evidence was provided to document that the Sheriff’s Office was following the city’s required procurement and contracting guidelines.
-The Sheriff’s Office was still circumventing the city’s standard payment authorization process by continuing to pay contractors directly out of its custodial accounts.
-The Sheriff’s Office had not yet established and implemented accounting procedures to ensure the accurate recording of fee revenue and activity from Sheriff’s sales. In fact, Sheriff’s Office personnel stated that the agency’s accounting system in place during the review was inadequate.
-The process for the City Treasurer to establish the Sheriff’s bank accounts had not yet been completed.
-Fees established by the Sheriff’s Office did not appear to cover all costs associated with Sheriff’s sales.
What the Controller’s Office Recommends
The Sheriff’s Office should (1) follow applicable city guidelines in procuring goods and services; (2) refrain from paying contractors out of custodial accounts and instead ensure contractor payments go through the city’s payment authorization process; (3) continue to work with the city’s Finance Office in all accounting matters, as well as with the City Treasurer in establishing new bank accounts; and (4) re-evaluate fees to determine how they can be revised to fully cover Sheriff’s sale costs and continue to seek City Council approval. Also, the city administration should provide sufficient funding to the Sheriff’s operations and appoint an independent oversight authority to design and implement controls to ensure the Sheriff’s complete compliance with the MOU.