Controller Butkovitz Says City Needs to Eliminate Ongoing Financial Errors

For Immediate Release
Aug. 1, 2017

Contact:  Brian Dries

Controller Butkovitz Says City Needs to Eliminate Ongoing Financial Errors 
City Controller’s audits have resulted in $10.5 billion in financial adjustments

PHILADELPHIA – In addition to releasing the latest city-wide audit of financial statements, City Controller Alan Butkovitz today urged the Director of Finance to immediately address issues that have resulted in $10.5 billion in errors over the last five years.

Since the Fiscal Year 2013 audit, the City Controller has found financial errors that were not detected by the Finance Office during its preparation of the city’s Comprehensive Annual Financial Report (CAFR), which is a report on the financial statements for all governmental activities for all major funds.

“We found $5.8 billion in financial errors in just this last year,” said Controller Butkovitz. “The city’s financial statements should be free of all errors that might affect a reader’s ability to make confident and informed decisions.”

Some of the errors over the years have included mistakes by improperly recording grant monies, unrecorded debt refunding and inaccurate receivables for unpaid balances. The errors are a result of a number of issues, including:

  • Financial statements reported by quasi-government agencies that included incorrectly recorded information,
  • Outdated software being utilized to manage financial reporting, and
  • Inadequate staff size, combined with several employees performing new duties, made the task of completing the CAFR more difficult.

“I strongly urge the Finance Office to take immediate action to address these issues,” said Controller Butkovitz.  “The constant need to fix errors results in lost productivity between accountants and auditors.”

While the errors have always been corrected after the City Controller’s auditors presented them to Finance’s management, it has been an ongoing issue for the Finance Office.  The Finance Office indicated that it plans to hire an accounting firm to assist with the Fiscal Year 2017 CAFR.

“The risk for errors will continue to increase if the Finance Office does not have sufficient and experienced accounting staff along with an updated, inclusive financial reporting system,” said Controller Butkovitz.

In addition to uncovering the financial errors, the City Controller’s city-wide audit also identified the following:

  • The Treasurer did not timely reconcile about a quarter of its bank accounts by comparing the city’s accounting records against the bank’s records to ensure their accuracy, until two months after the end of the fiscal year. This puts the city at an increased risk for undetected errors in reported cash balances.
  • The City still lacks a comprehensive capital asset management system to better manage and account for real property assets.
  • Revenue Department accounts did not review adjustments made to taxpayer accounts, which on any given day can involve millions of dollars, until seven months after the fiscal year. This can increase the risk for lost revenue and misstatement of the taxes receivable report.