Report On Internal Control and On Compliance and Other Matters City of Philadelphia Fiscal Year 15


Audit Date: July 12, 2016

Audit Categories

  • Financial
Controller: Alan Butkovitz

Audit Tags

  • Finance,
  • Grants,
  • Internal Controls,
  • Revenue,
  • Treasurer

Description


Audit of City’s Financial Statements


Executive Summary


Why The Controller’s Office Conducted the Examination
Pursuant to Section 6-400 (c) of the Philadelphia Home Rule Charter we conducted an examination of the City of Philadelphia’s (city) basic financial statements as of and for the fiscal year ended June 30, 2015 for the purpose of opining on their fair presentation. As part of this audit, we reviewed the city’s internal control over financial reporting to help us plan and perform the examination. We also examined compliance with certain provisions of laws, regulations, contracts, and grant agreements to identify any noncompliance which could have a direct and material effect on financial statement amounts.

What The Controller’s Office Found
The Controller’s Office found that the city’s financial statements were presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America and issued a separate report that accompanies the city’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2015. The audit procedures used to arrive at our conclusion regarding these financial statements led us to identify a number of weaknesses and deficiencies in the process that city management uses to prepare the statements. These weaknesses and deficiencies contributed to errors exceeding $1 billion. Some of the more important matters requiring management’s attention include:

  • Inadequate oversight and review procedures over the city’s financial reporting process, along with ongoing staffing shortages, continued to hinder the ability of city accountants to produce a timely, accurate, and complete CAFR without significant audit adjustments.
  • Unauthorized approvals for payroll and other types of disbursements increased the risk of improper expenditures.
  • Bank account reconciliations were not timely completed. Over 85 percent of accounts had not been reconciled until more than two months after fiscal year-end. In one instance, the last reconciliation on file for the city’s payroll disbursement account was September 2010. Late preparation of reconciliations can prevent the timely detection of errors, or worse, irregularities.
  • City agencies frequently failed to report new grant awards, correctly identify awards, and/or properly record expenditures in grant accounting records. These conditions have hindered the ability of the city’s grants accounting unit to accurately and timely report grant activity to the federal government.

What The Controller’s Office Recommends
The Controller’s Office has developed a number of recommendations to address the above findings. These recommendations can be found in the body of the report.