How did Philly lose track of $33 million?

City officials are trying to figure out if $33.3 million is missing from the city's main bank account.

The discrepancy is the amount the city reports having in its records vs. what bank statements show and was first flagged in the city's 2017 Comprehensive Annual Financial Report (CAFR), released in February. But the problem wasn't widely known to the public until the current series of budget hearings — in which Councilman Allan Domb has peppered every city financial official about the unaccounted-for funds.

"I'm flabbergasted," Domb said as he questioned the city's treasurer earlier this month. "There could be a theft. I don't really know what's going on."

The city has hired the accounting firm Horsey, Buckner & Heffler LLP to look at the issue.

Both current City Controller Rebecca Rhynhart and former Controller Alan Butkovitz say it shouldn't have reached this point.

The Controller's Office under Butkovitz had for several years warned about the city's sloppy bookkeeping, suggesting it could be at risk for fraud.

"We were always met with the response, 'Oh, we're working on this,' " Butkovitz said in an interview Thursday. "The city always shrugged their shoulders and acted like it was no big deal."

Then the big number of what was actually missing was listed in this year's CAFR.

"We didn't fully understand how big it was," said city finance director Rob Dubow, adding that the initial discrepancy was $40 million and so far $13 million has been reconciled.

Dubow said the problem started in 2014 when several staffers responsible for daily reconciliations left the treasurer's office. When asked who is to blame, Dubow, who was finance director during all eight years of the Nutter administration and has continued in the Kenney administration, simply said that accounting falls under the finance office.

"I should've known about it," he said.

In addition, payroll records were not reconciled between late 2010 and last July, when, city Treasurer Rasheia Johnson said, she discovered the problem and asked her staff to start reconciling them and also the main cash account. Dubow said there don't seem to be any discrepancies in payroll records.

Still, Domb said the city needs to operate like a business and not slip on essential accounting practices. He said if $33 million was not accounted for in his business, he would stay up all night trying to figure out what happened.

"It's really important now because we are asking taxpayers to pay more in taxes when we aren't managing effectively and efficiently the current money that they have been paying us," Domb said during Wednesday's budget hearing for the controller's office.

Rhynhart, who previously served as city treasurer and budget director, agreed.

"Not reconciling accounts is an inducement for wrongdoing," she said during the hearing, adding that she hopes city officials address the matter with an urgency they previously lacked.

"I think there is a culture change that needs to happen on the financial management of the city," Rhynhart said.

Johnson, the city treasurer, said she was making sure her staff was reconciling accounts daily and that the outside firm that was hired will clear up prior year discrepancies.

"This is taxpayer money," Rhynhart said in an interview Thursday. "There is $33.3 million that the city doesn't know where it is. That's an issue."