Unexpectedly Intriguing!
July 27, 2018

To say that the City of Philadelphia has a problem with managing the money that it collects from all the taxes it imposes on metropolitan residents and visitors, such as its highly controversial soda tax, may be an understatement. The city's new controller, Rebecca Rhynhart, has turned up some stunningly large discrepancies in the municipality's accounts.

Philadelphia has the worst accounting methods of the nation’s 10 largest cities, according to an audit released on Tuesday by Philadelphia city controller Rebecca Rhynhart.

The evidence, according to Rhynhart: The city has lost track of $33 million from its largest cash account, and it has made $924 million in accounting errors in the last fiscal year alone.

If it helps, the following video illustrates what $30 million looks like:

Now, just imagine those bills stacked 10% higher than what's shown in the video, and you've visualized how much money has gone completely missing from Philadelphia's city coffers without a trace!

Here's the kicker. In March 2018, Philadelphia Mayor Jim Kenney proposed increasing the city's property taxes and a number of others with the goal of collecting an additional $980 million over the next five years. Although Kenney has since slightly scaled back his proposed tax hikes, the city expects that it would collect an additional $900 million over the next five years from them.

If you lived in Philadelphia, would you vote to force yourself and your neighbors to give a city government with a history of such sloppy bookkeeping nearly a billion more dollars of revenue from higher taxes? Especially a city government that can't seem to find any trace of $33 million that it previously collected?

Thanks in large part to the lack of urgency that the city's government has approached its accounting problems, the mystery of Philadelphia's missing millions has become a fraud investigation:

City Controller Rebecca Rhynhart announced Tuesday a fraud investigation into the roughly $30 million in unaccounted-for-dollars the Kenney administration is trying to track down and criticized Finance Director Rob Dubow and her former boss Mayor Jim Kenney for a lack of urgency in correcting Philadelphia's accounting practices.

"The tone and the attitude regarding the urgency of fixing this needs to change and that needs to start with the mayor making it a significant priority," Rhynhart said during her first press conference since her inauguration in January.

"At best, this $33 million is several undocumented transactions, or money transferred into the wrong account. At worst, there’s the inducement for wrongdoing here," she said while discussing the Controller Office's annual internal control and compliance report, which was released Tuesday morning....

"We need to treat internal controls with the importance that taxpayers deserve," she said. "At a time when taxes are going up and assessed valuations are going up, we need to more than ever look at how the city itself is running its shop."

Indeed. If only more elected and appointed city officials had been doing that in all these years before.

Update 28 November 2019: The city has found most of the missing money!

Last week, accountants figured out that seven debt payments totaling $21 million had been paid from the wrong account, throwing off the city's books.

The $21 million is part of the $33.3 million in unaccounted-for funds reported earlier this year. It wasn't clear at the time whether the money was missing or misreported as the result of accounting mistakes. City Treasurer Rasheia Johnson said Tuesday that it was the latter....

Aside from the $21 million in seven misplaced debt payments, accountants also found that a $4 million payment was mistakenly recorded twice due to an initial bounced check. In other unaccounted-for transactions, amounts had been entered incorrectly in the books or deposited into the wrong account.

After these adjustments, along with a number of others, the total discrepancy in the city's books has been reduced from nearly $40 million down to $2.9 million. Jim Engler, Philadelphia Mayor Jim Kenney's Chief of Staff, has indicated that no city employees will be fired over the $40 million worth of accounting mistakes, which means that going forward, there will continue to be no penalty for city employees for mishandling the city's funds through sloppy bookkeeping.

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