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City Controller Says L&I Has Failed to Collect Millions

City Controller Alan Butkovitz just put out a new press release, saying that the Department of Licenses and Inspections has failed to collect $20 to $30 million in revenue.

Check it out:

Butkovitz Uncovers Almost $30 Million Owed to the City

City Controller reveals millions of dollars not collected from the Department of Licenses and Inspections.

PHILADELPHIA – City Controller Alan Butkovitz reports the Department of Licenses and Inspections failed to collect $20 to $30 million in revenue because of inadequate procedures with invoices to property owners for demolition services.

In a Licenses and Inspections Auditor’s Report for the 06-05 fiscal year, it is determined that the money is owed from property owners who had dangerous, at-risk structures demolished. The City is facing at least a $108 million deficit for the ’09 fiscal year partially due to money not collected by City departments in previous years.

“Any money that is owed to the City from past years could have helped alleviate the budget deficit we are now facing,” said Butkovitz. “This is millions of dollars that should have been paid to the City. We’re already facing at least a $1 billion deficit over the next five years and every amount collected now helps us in the future.”

Butkovitz notes a number of deficiencies involving internal control over financial reporting and other matters that L&I management needs to address. Some of the other crucial deficiencies include:

-Inadequate and incompatible recordkeeping systems, coupled with poor procedures and untimely billings, including some that L&I never sent to property owners.

-L&I management could not explain the differences between internal records and the City’s accounting system for various licenses, which netted to nearly $885,000 for the tested revenue accounts.

-On at least one occasion to correct the non-performance of a contractor awarded a demolition project, the department awarded a second contractor a cost-plus basis contract for the same demolition work, which cost nearly $9,500 more to complete the project.

-A shortage of nearly 500 sheets ($8,000) of plywood used in L&I’s Clean and Seal Operations occurred without the Department’s knowledge.

“A main concern appears to be that L&I may not have even billed for some undeterminable portion of the amounts owed,” said Butkovitz. “If L&I fails to send an invoice to the property owner, it is almost certain that the owner isn’t going to pay.”

To correct the deficiencies, Butkovitz recommends that L&I should meet with the City’s Revenue Department to discuss options for a better system to account for demolition receivables. Internal meetings should be conducted with managers responsible for the demolition expenses as well as take a look at system vulnerabilities. The department also needs to identify reasons that billings are untimely and implement a corrective action plan.

“City Government needs to be held accountable for all of its actions, especially when it comes to financial responsibility. The City has already tightened its budget belt and now it is crucial we secure wasteful spending practices and unaccounted for dollars in every department.”

To view a copy of this and other audit reports please visit the Controller’s Office Website: