Butkovitz: Improve handling of bounced checks

Posted: January 18, 2014

Philadelphia City Controller Alan Butkovitz says the city needs to move more quickly to improve its handling of bounced checks - a problem initially identified last year by the Nutter administration's own watchdog.

Between 2009 and 2012, Butkovitz said, about 13,000 checks totaling $14 million were returned to the city because of insufficient funds, closed accounts, or other problems, based on data provided by the Nutter administration.

Most of the bounced checks were for taxes owed to the city; others were fees for licenses, permits, or other services.

Gaps in the city's data left the Controller's Office unable to say how much of the $14 million was eventually collected after checks bounced, Butkovitz said.

While those overall figures were unavailable, Butkovitz gave a $32,000 contract to a private accounting firm, Schectman Marks Devor P.C., to take a closer look at what happened in 83 cases where checks worth $202,317 had bounced.

In that random sample, more than 90 percent of the money was eventually recovered by the city - more than $182,000 of the total, according to the firm's analysis.

"What we don't know is what was the process that got them there, whether they prioritized the bigger amounts or what," said Bill Rubin, Butkovitz's deputy director of special investigations.

A spokeswoman for the Revenue Department, Vicki Riley, said 12 of the bounced checks in the sample, accounting for most of the money involved, were duplicate payments - where the check writer stopped payment after realizing the city had already been paid what it was owed. The city had been paid in full before the checks bounced, she said.

None of those situations was spelled out in the controller's report.

Even so, Riley said, Revenue Commissioner Clarena I.W. Tolson agrees with many of Butkovitz's recommendations and is beginning to implement them.

Butkovitz criticized several aspects of the city's collection efforts.

Though a Revenue Department unit is devoted to bounced checks, he said, most of its work has been sending out collection letters, not flagging repeat offenders and protecting the city from them. He also faulted the city for accepting checks that lacked names and addresses or phone numbers, such as those from recently opened "starter accounts."

"It is clear that this is a broken system that needs immediate attention and correction," Butkovitz said.

The city inspector general, Amy Kurland, issued a detailed report last March on bounced checks for licenses, permits, and other services from 11 city departments that made many of the same points.

Over a one-year period, Kurland found, 11 city departments were informed of bounced checks totaling $573,777 - more than half of it from individuals and businesses which had each written at least a dozen bad checks - yet failed to use that information to go after the bad-check writers.

Kurland described the overall situation as "a staggering breakdown in interdepartmental communication and a lack of coordination and uniformity."



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