City controller audit finds $14 million in revenue lost to bounced checks

bank check
Credit: Wikimedia Commons

Between 2009 and 2012, the city missed out on $14 million in payments where they received bad checks from individuals and entities who owed money, City Controller Alan Butkovitz announced in a report released today.

While a report from city Inspector General Amy Kurland in April 2013 stated that the city had been paid back about $212,383 in money owed due to bounced checks.

Ten parties had paid their debt in full, and 14 others entered into settlement agreements with the city to pay off their debts.

But Butkovitz’s report states that based on a random sampling of 83 checks from the 2009-12 period, 50 percent were never paid.

“It’s unfathomable that the city is leaving millions of dollars uncollected due to individuals writing bad checks,” Butkovitz said at a press conference this morning.

The random sampling Butkovitz’s office performed included 40 unpaid, bounced checks that totaled $19,680 owed to the city.

The total $14 million reported unpaid due to bad checks between 2009 and 2012 consisted of 13,000 bounced checks. In fact, Butkovitz said, the bounced checks cost the city $78,000 in bank fees.

Butkovitz singled out the Bank Return Item (BRI) Unit for causing the problem by failing to collect on these bad checks. He said they just send collection letters without enforcing them.

“They need to change the procedures and catch the 13,000 people who are paying bad checks,” Butkovitz said. “The BRI forwards things and just says, ‘We’re done with this.’ Basiclly, they need to function as if it’s 2014 and they’re a business.”

The city defended its enforcement of bounced checks and revenue collections.

“The OIG [Office of the Inspector General] – in partnership with the Law, Revenue and other departments – has been working to aggressively recover money owed to the city as the result of bounced checks,” responded Mayor Michael Nutter’s press secretary Mark McDonald, in an email. “The OIG released a Policy Recommendation Report April 4 aimed at streamlining the collections process and is working closely with other City agencies to implement those changes. The report identified breakdowns in communication among different City department about how to process bounced checks.”

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