Jim Kenney: Controller ‘recklessly’ inflated accounting errors | Opinion
Long before the controller highlighted this matter, the issue had been reported in the City's CAFR and Treasurer Rasheia Johnson began significant, concerted efforts to complete all outstanding reconciliations.
Imagine receiving an "F" from your teacher because of errors in the first draft of a term paper, even though your final paper had no errors.
That's essentially what occurred last week, when City Controller Rebecca Rhynhart embarked on a PR campaign accusing the City of $924 million worth of errors that, in fact, have long since been resolved.
Of course the controller knows they've been fixed, since the resolution of those errors occurred during the annual give-and-take process between the Finance Department and the Controller's Office. The resulting, error-free report is called the CAFR, for Comprehensive Annual Finance Report. You can see it for yourself on the webpage of the Office of the Finance Director.
While making misleading and contrary statements publicly, the controller notes in her report that "the city's publicly issued fiscal year 2017 CAFR can be relied upon for informative decision making." In fact, throughout her report the controller acknowledges repeatedly the Finance Department's ongoing efforts not just to resolve these errors but also to improve processes and internal controls.
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For example, look at the matter of reconciliation — discrepancies between our records and those of the bank.
Long before the controller highlighted this matter, the issue had been reported in the City's CAFR and Treasurer Rasheia Johnson began significant, concerted efforts to complete all outstanding reconciliations:
Since discovering the discrepancy, we've reduced it by about 30 percent. Of 77 bank accounts, 70 have been fully reconciled.
We have also put additional controls in place to prevent such issues in the future.
We've hired new staff and retained a nationally recognized auditing firm to assist us.
This week, I am convening a Reconciliation Task Force to coordinate the effort, including representatives from PICA, City Council, and the Office of the Inspector General. The controller, unfortunately, declined to take part.
This is a comprehensive approach to a complex issue — and the controller clearly acknowledges this on page 5 of her Report on Internal Controls, which outlines the plan we put in place.
In other words, she agrees with what we are doing on reconciliation, and said as much in a letter to me last week: "As my office has stated, we support the plan outlined in Finance's response to our Fiscal Year 2017 Report on Internal Control and on Compliance and Other Matters."
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As to the $924 million touted by the controller? It is derived from earlier drafts of the CAFR report, not the final version in which the errors were rectified. And because the bookkeeping errors affect positives and negatives, the controller chose to add them all together as positive numbers rather than taking the net total. This exaggerated the impact and allowed her to create a fictitious, sensationalized dollar figure that would be sure to excite the news media.
The actual impact of all the draft errors on the city's general fund FY17 balance? Zero dollars. That's right — our final CAFR has zero errors. It's a shame the controller failed to acknowledge that at her press conference.
I take these bookkeeping errors and unreconciled bank accounts seriously. Unlike past mayors, I am absolutely not greeting this with the "Philly Shrug." My administration, particularly the staff of the Finance Department and the Treasurer's Office, take this seriously and approach it with urgency. I vow to ensure that we will fix these things, and fix them soon. Taxpayers deserve no less.
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But in this era of rampant misleading statements from elected officials, taxpayers also deserve factual conclusions from their controller, not sensationalized statements and recklessly inflated dollar figures designed more to grab headlines than to solve problems.
Jim Kenney is mayor of Philadelphia. @PhillyMayor