The Office of the City Controller last Tuesday released an unflattering report on the government’s accounting practices.
The Report on Internal Control and On Compliance and Other Matters Fiscal Year 2017, found two material weaknesses which resulted in $33 million being unaccounted for in the City’s largest cash account and $924 million in undetected material misstatements that occurred in the preparation of the City’s financial reports. The latter attracted national media attention.
Philadelphia Mayor Jim Kenney in response to the findings wrote an opinion piece for the Philadelphia Inquirer – which was published today and accused City Controller Rebecca Rhynhart of recklessly inflating the nearly $1 billion worth of accounting errors that “have long since been resolved” – and formed a taskforce to oversee the reconciliation of City cash accounts.
Reconciling a cash account means to monitor and document all transactions. The consolidated cash account, which is where the $33 million variance occurred, is mandated to be reconciled daily. However, the controller’s report notes that from fiscal year 2015 through the first 11 months of fiscal year 2017, such activity didn’t occur.
Other accounts that are supposed to be reconciled by the Treasurer’s Office have also gone unreconciled, some dating back to September 2010, according to the Office of the City Controller.
The Mayor’s Office says the treasurer has made progress of 77 total bank accounts, 72 are fully reconciled and his team has produced concurrent monthly reconciliations for the consolidated cash account for the months ending June 2017 through April 2018.
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At Tuesday’s announcement of the taskforce, Mayor Kenney accused the former administration of “kicking the can down the road” on this issue. He pledged to do the opposite.
“I take these unreconciled accounts seriously,” the mayor stated. “I vow to fix these things and fix them soon.”
The Finance Office states that the $33 million variance has been reduced to $28.6 million. The Controller’s Office hasn’t verified that number, but they do acknowledge that Finance has a plan for the bank reconciliation issues.
Former Philadelphia City Controller Alan Butkovitz today said the mayor can’t be taken seriously because “the same financial management team is still in place.”
Indeed, Mr. Rob Dubow, the City Finance Director, also served former Philadelphia Mayor Michael Nutter in that role. A 2013 article called Mr. Dubow “Mayor Nutter’s right-hand man on all things fiscal.”
“The finance director and the mayor didn’t care,” Mr. Butkovitz said on Tuesday about reconciling bank accounts.
A source in the Controller’s Office today also pointed out Mr. Dubow’s long-occupied role and implied he can’t be both part of the problem and the solution.
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The taskforce, which will meet bi-weekly beginning next month, is a public relations stunt, Mr. Butkovitz, a Democrat who will likely run for mayor in 2019, declared. He also suggested that Ms. Rhynhart, who worked for the Kenney Administration before becoming the city’s independent fiscal watchdog, is taking credit for his work.
“She’s ratified the same finding we had last August,” he said.
Almost a week ago, City Council President Darrell Clarke offered a similar sentiment.
“Her predecessor actually outlined the report… seems like she’s taken Mr. Butkovitz’s playbook and edited it somewhat.”
Unreconciled bank accounts aren’t new to Philadelphia, said Mr. Butkovitz, who this afternoon spoke to me exclusively. In 2010, he said, the Controller’s Office called for a forensic audit of the Sheriff’s Office due to, among many things, “missing bank reconciliations.”
They just don’t take being a custodian of assets and money seriously, he said of city officials, both past and present.
Mayor Kenney today aimed to position his administration as good stewards and ahead of the curve on this matter.
“We discovered the fact that these accounts weren’t reconciled and we set out to fix the problem,” the mayor said.
Mr. Butkovitz calls bullshit.
“The mayor’s claim is nonsense. We certainly reported it before these other people.”
A source in City Hall said it’s inaccurate for the mayor to say his administration discovered the problem. The last three reports from the Controller’s Office show the mayor’s statement isn’t true, they said.
The Mayor’s task force will aim to ensure reconciliations are proceeding on a timely basis and report out progress to the public. Former City Controller Mr. Johnathan Saidel will serve as co-chair along with City Treasurer Rasheia Johnson.
Thanks for reading! Until next time, I’m Flood the Drummer® and I’m Drumming for Justice!™
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