Philadelphia’s bookkeeping has improved a bit but is still a mess, according to a new report from the City Controller’s Office.
The controller’s annual report on internal controls, released Wednesday, showed that the city’s Finance Department made $236 million in errors in its fiscal 2018 books. That was better than the prior year’s $924 million, however. And in both years, the bookkeeping mistakes were corrected before the Comprehensive Annual Financial Report was released. The Kenney administration has argued that part of the point of the controller’s review is to catch errors before the report is printed.
Still, City Controller Rebecca Rhynhart issued a “material weakness” finding for what she says is an ongoing issue with filing accurate books.
“Year after year, the city has multiple serious deficiencies in its internal controls over financial reporting, and year after year, they take minimal action to address them,” Rhynhart said in a statement.
Here are some takeaways.
Not enough staff
The report in part blamed the city’s fiscal errors on insufficient staff. Since 2000, the number of accountants in the Finance Department has declined from 64 full-time employees to 46 as of fiscal year 2018. That means more of the work of financial reporting has fallen on accounting managers "and compromised the ability of Finance Office management to perform adequate reviews of the financial statements and related financial disclosures," according to the controller’s report.
The Kenney administration said that since last year’s report, it has hired a director of internal control and compliance and plans to hire more people.
The city’s accountants use a combination of Excel spreadsheets, Word files and Lotus 1-2-3 (a program that has been discontinued and unsupported since 2014) to create the annual comprehensive report.
“Using multiple linked files creates a cumbersome process which can adversely affect the accuracy and completeness,” the controller’s report said. The office recommended investing in a new, unified reporting system.
The administration said it is first planning to replace FAMIS, its nearly four-decade-old accounting software.
The infamous missing $33 million has mostly been resolved, with a $529,000 variance left.
But the controller’s office said that in its review of the $33 million, some bank receipt transactions — seven deposits totaling $2.2 million and 15 wire transfers from other city bank accounts totaling $11.3 million — could not be matched to the city’s books. The controller said the city treasurer vouched for the validity of the deposits and transfers.
“As such, [the Treasurer’s Office] considers the aforementioned accounts to be reconciled,” wrote finance director Rob Dubow in his department’s response.
The controller’s office asked that the finance team finish investigating the unaccounted-for $529,000. “Any errors or improprieties ... should be addressed accordingly,” the controller’s report said.
It’s customary for there to be friction between the controller’s office and the administration, and tension between Kenney’s staff and Rhynhart has increased since she took office last year. Still, the relationship is not as fraught as that between former City Controller Alan Butkovitz and the Kenney administration.
In response to the controller’s comments on what she says is the administration’s not treating her findings with urgency, Kenney spokesperson Mike Dunn said: “We appreciate the controller’s acknowledgement of progress in these areas, though she seriously understates the degree of progress by describing it as ‘minimal.’ It is anything but minimal,” before listing several new or future hires. “These are all substantial, important changes," he said, and Rhynhart’s conclusion is "a disservice to the dedicated and hard-working women and men who have implemented these reforms.”