Philly Controller: City has worst accounting controls of 10 largest U.S. cities

This article appeared on PlanPhilly.

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Sloppy accounting practices inside Philadelphia’s City Hall made headlines last year after officials lost track of $33 million dollars in taxpayer funds. The money was (mostly) recovered, but a new audit from City Controller Rebecca Rhynhart finds that many problems with the city’s accounting practices remain.

Although the new report praises some reforms, it asserts that Philadelphia still has the worst internal accounting controls of the 10 largest U.S. cities. The audit noted some $236 million-worth of fiscal errors made by the city last year.

Rhynhart said these holes could enable corruption. She didn’t point to any specific instances.

These are “red flags that there could be serious issues with the city’s finances. And they’re warning signs that taxpayer money could be put at risk,” she said. “That’s why this is serious. When you don’t have adequate internal controls, bad things can happen, like missing funds.”

Major parts of the city’s $5 billion municipal budget are still pieced together using Microsoft Word documents and Lotus spreadsheets, a now-discontinued 1980s accounting program. The Controller cited other holes in the city’s process, citing a finding that showed the city certain finance employees could wipe away millions in tax obligations with little oversight.

Rhynhart attributed some of the issues to short-staffing at the Finance Department and a lack of investment in new technology.

In a statement to the Inquirer, Mike Dunn, a spokesperson for Mayor Jim Kenney, criticized the report for understating recent improvements to the finance process. He cited a decrease from $924 million in accounting errors uncovered in 2017. He called Rhynhart’s findings “a disservice to the dedicated and hard-working women and men who have implemented these reforms.”

But Rhynhart told PlanPhilly that the city has not acted with appropriate “urgency” to fix certain outstanding issues, some of which have persisted for years.

Her office recommended the city retain an outside accounting firm to oversee short-term improvements, immediately hire additional accountants and implement a new financial reporting system.