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Sheriff's Office books to be vetted

The city controller has called for a forensic audit to account for millions of undocumented dollars.

With auditors unable to account for millions of dollars in transactions at the Philadelphia Sheriff's Office over the last decade, City Controller Alan Butkovitz is looking for professional fraud specialists to delve deep into the sheriff's books.

Butkovitz issued a request Friday for proposals from "certified fraud examiners" to conduct a forensic audit of the office.

In October, he demanded a thorough probe of Sheriff John Green's office after finding in an audit that the office staff had failed to provide documentation for more than $53 million in bank accounts. Green, who was scheduled to retire Oct. 31, in turn decided to stay on indefinitely to ensure cooperation with the full-scale audit.

The request was sent out Friday over the city's website for no-bid contracts. It outlines the findings of the audit from 2007 to 2009, but also raises potentially alarming symptoms of financial chaos in the office's computer databases.

Those records, from December 1999 to November 2010, were retrieved over the last two months by information-technology consultants hired by Butkovitz with Green's cooperation.

Among the red flags in those records:

More than 5,300 deposits to Sheriff's Office accounts totaling $716 million cannot be reconciled with bank statements or other records.

More than half of the nearly 116,000 transactions entered were not checks or deposits, but "cash adjustments" to balance the ledger without documentation or explanation. The adjustments totaled $8.1 million reported as received by the city.

Three title companies - RCS Searchers Inc., Global Abstract, and City Line Title Co. - handled more than $322 million from the Sheriff's Office without contracts.

The Sheriff's Office paid more than $88 million to the Water Department, Philadelphia Gas Works, and various banks to settle liens that are typically paid by title companies, which collect the money from property buyers at closing.

Of $45 million moved into various unclaimed-funds accounts, only $4.7 million was recorded as transferred to the city, as required by law when money is not claimed from the Sheriff's Office for 15 months.

The Sheriff's Office, with 240 employees, provides courtroom security, transports prisoners, and conducts real estate sales of foreclosed properties.

Butkovitz said his auditors had never seen a public entity whose books appeared to be so full of holes. He said special auditors were required given the number of red flags.

His initial findings have not shown outright theft, and Butkovitz has not accused Green's office of corruption.

"We have a responsibility when there are so many unusual transactions, and so many gaps in standard financial information involving millions of dollars, to determine whether an opportunity for fraud has matured into an actual fraud," Butkovitz said.

Certified fraud examiners have expertise in fraud detection and fraud prevention, and can include accountants, auditors, lawyers, and anyone else involved in antifraud professions.

Generally, such experts are required to pass a 10-hour, 600-question exam and meet certain criteria related to experience and continuing education, according to Scott Patterson, spokesman for the Association of Certified Fraud Examiners, which administers the exams.

Green, through his chief deputy, Barbara Deeley, declined to comment.

"Until this audit is done and completed, I am not allowed to divulge or discuss anything," said Deeley, who was in line to take over as acting sheriff before Green postponed his retirement.

Butkovitz, in an interview, questioned how the title companies could do public work without contracts or a formal solicitation process.

He also noted that RCS Searchers, a title company that has received $242 million in city payments since 1999, is owned by James Davis, whose sister, Crystal Smith Stewart, is an information-management analyst in the Sheriff's Office. Her husband, Darrell Stewart, is director of the office's real estate and mortgage foreclosure-prevention program.

Green told the Philadelphia Daily News in 2005 that Davis was a friend and close adviser. Green bought his house from a company Davis owned. Davis, Darrell Stewart, and Crystal Stewart could not be reached for comment.

Responses to the request for proposals are due Jan. 7. The forensic audit is to cover 2007 to 2009.