Time for Philly to get a better handle on financial controls | Editorial

A new audit has found fewer errors in Philadelphia’s municipal bookkeeping process. Hold your applause, please.

Given that auditors have been citing internal financial control mistakes since 2002 — and how expeditiously cities of similar size have resolved similar problems — this welcome progress, however hard won, remains too slow.

As The Inquirer’s Claudia Vargas recently reported, the latest annual audit by the City Controller’s Office found errors in financial statements totaling $236 million in fiscal year 2018, compared with $924 million in the prior year’s audit. These inconsistencies have since been resolved.

The fiscal 2018 audit also affirmed a consultant’s findings regarding the separate, “missing” $33 million that made headlines last year. All but $529,000 of the $33 million difference between what the city had on the books and what was in the bank has been reconciled. No wrongdoing has been detected.

Controller Rebecca Rhynhart says the overall improvements the audit cites are modest compared with the scale of the problems that remain, which include the city’s chronically late reporting to comply with federal grant requirements. An array of errors in the city’s Aviation Fund alone accounted for nearly half of the $236 million cited in the audit. And outmoded technology, including vintage and now-orphaned Lotus 1-2-3 software (remember that?), is still in use in a cumbersome, cobbled-together financial reporting system.

“Philadelphia has by far the most weaknesses in internal controls among the 10 largest cities in the country, and there needs to be a real urgency to tackle all of them and to solve them,” she says.

The Kenney administration insists it’s already doing so, pointing out that since the fiscal 2017 report, the Treasurer’s Office has reconciled all bank accounts, a director of internal control and compliance has been hired, a new deputy treasurer for cash management has begun work, and an assistant city treasurer position is being added with other employees to be hired later this year. The audit had cited a dwindling number of workers in the Finance Department between 2000 and 2018.

Obviously, making sure the numbers add up is one of the reasons to care about the seemingly dry topic of errors in required internal financial control reports. But protecting taxpayer dollars is at the heart of such scrutiny.

Last month, City Council approved a $5 billion city budget; that budget has grown by 25 percent since Mayor Kenney took office. That makes it more important than ever to make sure every dollar is accounted for. It also makes it an ideal time for to upgrade the entire fiscal management infrastructure. The incremental improvements cited in the audit are worthy, but the city needs to think bigger.

After all, errors in internal financial control reports — even errors that typically get corrected and inconsistencies that are resolved as a normal part of the process — are worth caring about. Because the goal is not just to make sure columns of figures add up, but that taxpayer dollars are not wasted. Philly has neither money nor time to waste in bringing its bookkeeping system into the 21st century.