Report On Internal Control and On Compliance and Other Matters City of Philadelphia Fiscal Year 13

Audit Date: August 18, 2014
Audit Categories
  • Financial
Controller: Alan Butkovitz
Audit Tags
  • Finance,
  • Grants,
  • Internal Controls,
  • Revenue,
  • Treasurer

Executive Summary

For Immediate Release
Aug. 18, 2014

Contact: Brian Dries

Butkovitz Says Revenue Department Failed to Monitor City’s Billing & Collections
City Controller’s report finds lack of communication with departments,
some with employees whom were not trained as accountants

FY2013 Internal Control and Compliance Report

PHILADELPHIA – City Controller Alan Butkovitz today released the FY13 Internal Control and Compliance Report that found the Revenue Department neglected to provide adequate oversight of the billing and collection functions of other City departments.

Revenue did not routinely provide guidance to the departments or regularly communicate with department personnel performing the billing and receivable duties, some of whom were not trained as accountants. In one instance, Revenue did not review a $389 million write-off by the Fire Department to ascertain whether or not it should be removed from the City’s financial statements.

“Revenue simply accepted the figures the Fire Department’s accountant provided and never scrutinized the numbers for anomalies and errors,” said Butkovitz. “The Fire Department performed an unauthorized write-off that Revenue should have questioned.”

For an appropriate write-off to occur, the City Charter requires that departments must submit the delinquent accounts to the Accounts Review Panel, which determines if the owed balances are uncollectible and then approves the removal of funds from the City’s financial statements.

“It’s critical that all policies and procedures are followed, no matter if its four dollars or four hundred million dollars,” said Butkovitz. “Revenue failed to monitor city departments’ responsibilities of billing and collecting.”

In addition to inadequate oversight of receivable balances, the Controller’s audit revealed more than $89 million in payroll costs that were approved by unauthorized employees. The names of employees who were approving payroll for individual departments did not match the names on the official signature files maintained by the Finance Office.

Standard Accounting Procedures for Signature Authorization Cards require a signature verification process and establishes the appropriate employee rank that can be designated to approve an agency’s bi-weekly payroll. Of the total 55 city agencies reviewed, 25, or 45 percent, had unauthorized employees performing executive-level approval of the bi-weekly payroll.

“Finance needs to review the executive-level approvers in the payroll system to ensure that all individuals are properly authorized and have appropriate access to the system,” said Butkovitz.