WATCHDOGOffice of the City Controller | ALAN BUTKOVITZ Spring/Summer 2016

City Controller Joins Mayor to End Fire Brownout Policy

Controller’s audit leads to immediate action by Mayor Kenney; efforts to improve Fire Department’s response rate Page 3

Retirement Reality:Finding Answers to Improve Savings

Investigation of Charter Schools Continues

Proposal to Reduce Pension Liability Moves Forward

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Controller reviews education companies

Strategies that can reduce retirees living in poverty

STUDENTS SHINE IN CONTROLLER’SMENTOR PROGRAM

Controller LaunchesFinancial Education Initiative

12,000 12th graders provided with Money Smart cards

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Controller Examines the Use of Drones to Improve City ServicesIn an effort to combat Philadelphia’s dangerous buildings that have become neighborhood nuisances, Controller Butkovitz examined the use of drones as a method to improve public safety and enhance numerous government ser-vices.

As part of the review, the Controller’s Office launched its own drone to visu-ally inspect selected neighborhoods with unsafe buildings across several sections of the city. The drone’s footage captured several concerning conditions such as missing roofs, weak structures and signs of trespassing on large, unsafe structures.

According to Butkovitz, the immedi-ate advantage of utilizing a drone was realized with the ability to cover more ground in less time, making the process more efficient and effective. A visual inspection of one block consisting of 56 homes could be completed in 30 sec-onds.

Cities across the U.S. have implemented drones to improve services. In Somer-

ville, Massachusetts, they are utilizing a drone as a new tool to join the city’s fight against snow-covered roof collaps-es. In Minnesota, a drone is being used by engineers for bridge inspections, eliminating the need to close bridges and connecting roads. Additionally, in Ann Arbor, Michigan, they are evaluat-ing potholes and identifying severe rut-ting and draining uses with their infra-structure system.

Controller Butkovitz found the technol-ogy could enhance workers’ abilities to perform their jobs quicker, easier and in a safer manner. It would not eliminate inspectors or other agency staff needed to perform important, daily tasks.

Along with monitoring building condi-tions, Controller Butkovitz indicated that drones could be utilized across sev-eral city departments and agencies, in-cluding:

Fire Department – aid fire and EMS • vehicles to survey traffic and street conditions in route of an emergency to increase response times,

Streets Department – monitor streets • that haven’t been plowed and allow crews to dispatch trucks to clear the snow from these areas,

SEPTA – deploy drones along rail • lines and other transportation routes during inclement weather and other instances when there are issues with track conditions, and

Parks and Recreation – aerial imag-• ery to assess stream conditions, eco-logical patterns and wildlife popula-tions.

Due to positive feedback from several city agencies, the Controller’s Office hosted a drone workshop that was led by a regional expert in Unmanned Aircraft Systems. Several Commissioners and support staff attended the presentation and learned about the latest federal laws regulating drones and how city agencies can safely implement the technology.

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Photo Credit: Philadelphia Inquirer, Jan. 27, 2016

Fire Response Audit Leads to ActionsThat Can Improve Public Safety

Examining the Retirement Reality in Philadelphia

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Along with releasing the audit of the Philadelphia Fire Department’s response time, the City Controller joined Mayor Jim Kenney when the city’s top leader announced the end of his predecessor’s policies that forced staff rotations and the temporary closure of firehouses, known as “Brownouts”.

As depicted in the Controller’s audit, these policies jeopardized public safety and contributed to an increase of nearly $20 million in overtime costs.

The Brownout Policy, which included daily closures of several engine compa-nies during day and night shifts, went into effect in 2010. The Rotation Policy was implemented three years later in an effort to ensure that all firefighters have equal opportunity to work in various as-

signments. During this time, the Fire Department’s response rates dropped from 80 percent to 74 percent. The na-tional standard requires first engines to arrive in five minutes and 20 seconds for 90 percent of the time.

Response time to fire emergencies can take more time because of longer dis-tances traveled by fire engines covering for others in browned-out fire stations. In fact, certain high-hazard occupancies, including hospitals, schools and nursing homes, have become difficult to reach on time due to their distance.

In addition, former Mayor Nutter as-serted that the Brownout Policy would lead to a reduction in overtime costs by $3.8 million. However, overtime for firefighters climbed from $15.7 million

in fiscal year 2010 to $34.2 million in fiscal year 2014. The overtime costs increased every year during this time period.

The Controller’s audit also found that data reflecting on-scene arrival times in the Fire Department’s database was, at times, incomplete and inaccurate, often when the fire incident involved a death or injury. This included three separate incidents between 2010 and 2014 in-volving either children, the elderly or firefighters who died or were injured.

Controller Butkovitz commended May-or Kenney for taking swift action to re-scind these policies and looks forward to working with the Administration to improve public safety for all Philadel-phians.

The inadequate state of retirement secu-rity in Philadelphia poses a risk to the fiscal and economic health of the City of Philadelphia, according to a review by the City Controller’s Policy Unit.

The staggering figures that indicate Americans struggle to save enough for retirement are especially prevalent in Philadelphia. The Controller’s review identified the following:

Philadelphians - as Americans • elsewhere - do not save enough for retirement. The average work-ing household in the United States has virtually no retirement savings. Women, minorities and low-income workers face the largest barriers to building financial security for old age.

Accumulating sufficient retirement • savings depends strongly on having a retirement plan at work. About 54 percent of employees in Philadel-phia (334,000) do not have access to a retirement plan at work. Small businesses are least likely to offer retirement plans to their employees.

The federal government has done • little to address this crisis, but more than 20 states around the coun-try - not including Pennsylvania - have introduced policies to foster retirement readiness among their residents. These states are pursuing state-run Auto-IRAs (aka “Secure Choice”), Open Multiple Employer Plans (Open MEP), Prototype Plans and Retirement Marketplaces.

According to Controller Butkovitz, the next steps will include engaging both local and state elected officials and con-ducting community outreach sessions throughout the city. It will require a commitment from all elected leaders – in City Hall and in Harrisburg.

Investigation Uncovers Mayhem in City’s Mailroom

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City Controller Alan Butkovitz immedi-ately launched an investigation into the Department of Revenue’s Mail Center, which processes mail for city agencies, after receiving a tip through his Fraud Unit.

Not only did Controller Butkovitz find that the mail facility was inefficient and failed to provide appropriate services to city users, but he also found it wasted resources on unnecessary postage costs and excessive overtime.

The initial findings included the follow-ing:

Tens of thousands of pieces of mail • were not processed in a timely fash-ion, including court notices, fines, tax bills, water bills and parking violations.

4,000 water bill notices were still • stored in the Mail Center one day before the payment due date.Management allowed virtually un-•

limited overtime for Mail Center employees without preapproval or justification, resulting in $465,500 in overtime costs over the last three years by a handful of employees.

The improper mail sorting proce-• dures were costing the city in ex-cess of approximately $1.5 million annually.

When the new Revenue Commissioner took the post, the Department made immediate changes to the operations

and management within the Mail Cen-ter. The Commissioner indicated that Revenue was working closely with the in-house technician to optimize the use of the sorter and to ensure that all mail eligible for discounts are processed. Ad-ditionally, the technician was training to properly operate the sorter and to ensure that it is running efficiently.

The Controller’s Office’s latest review of charter school operations included an examination of two education services providers’ compliance with the state Charter School Law and the School District of Philadelphia’s Charter School Office’s (CSO) oversight capabilities.

The education providers selected for review were ASPIRA Inc. of Pennsylvania (ASPIRA) and The Universal Companies (Universal), which operate five and seven schools, respectively.

After reviewing City of Philadelphia and SDP records, as well as inquiries with the education providers and SDP

staff, the Controller’s Office found the following conditions:

The state’s Charter School Law is in • need of reform to include oversight of education service providers and associated nonprofits.

SDP does not adequately staff • the CSO, which is tasked with providing appropriate oversight and accountability of charter school operations. The CSO employs eight staffers, including the Executive Director, to monitor 83 charter schools with 63,500 students. In contrast, the Washington, D.C. Public Charter School Board Office

has a 39-member staff overseeing 39,000 students.

Controller Butkovitz continued to recommend that state legislators need to reform the Charter School Law to empower local school districts with greater oversight and compliance authority over education service providers.

Outdated State Law Leads to Questionable Activityby Charter School Managers

Recognizing Financial Literacy Month

Pension Proposal Could Save Taxpayers Millions

City Controller Alan Butkovitz launched an initiative as part of April is Financial Literacy Month to provide 12,000 se-niors in Philadelphia’s public and charter schools with Money Smart Cards, a re-source that provides access to free finan-cial education services.

The Money Smart Cards include contact information for non-profits and govern-ment agencies that focus on providing financial guidance and resources. The information includes assistance with opening a first checking or savings ac-count, establishing good credit, help with student loans or car loans, starting a small business and planning for a specific career path.

Students can keep these cards in their wallets, handbags or phone cases and utilize them when they need answers to their financial questions.

With thousands of young adults soon em-barking on their next journey, they will need answers to tough financial ques-tions.

In Philadelphia, almost 14 percent of residents are unbanked, meaning they have no access to mainstream financial education. Another 22 percent are under-banked, which means they might utilize a bank or credit union but still rely on al-ternative entities such as check cashers to maintain their money.

Controller Butkovitz joined with the School District of Philadelphia and sev-eral City Councilmembers to recognize the importance of providing Philadel-phians with a safe place to access their money and to let young adults know there are resources to help guide them toward a healthy financial future.

City Controller Alan Butkovitz proposed an Employee Pension Income Conver-sion (EPIC) Plan to the Philadelphia Pen-sion Board that could reduce its unfunded liability by as much as $1 billion, elimi-nating millions annually in obligated city payments.

The EPIC Plan would allow city employ-ees in the Legacy Plan, also known as Plan 67, to convert to Plan 87 in return for a one-time cash payment. That sum would be calculated by the difference in expected payments between the two plans and employees would continue to receive a monthly pension payment but at the less costly plan.

If all eligible employees and pensioners in the Legacy Plan convert, it would re-duce the unfunded liability by $1 billion and save the city $136 million annually for the City’s Minimum Municipal Obli-gation.

A 50 percent participation rate would re-duce the unfunded liability by $204 mil-lion and reduce the annual obligated pay-ment by $27 million.

The primary objective of the EPIC Plan is to restore pension stability and reduce taxpayer burden. The Plan would be op-tional and an opportunity for those who would like to choose a one-time cash payment.

The Pension Board also approved the City Controller’s motion to create a sub-committee that will create a survey of eligible employees and pensioners. This will help gauge the interest of employ-ees and pensioners who would opt for the EPIC Plan.

Controller Butkovitz recognizes that fi-nancial literacy is an important life skill and he wants employees and pensioners to make smart decisions with their hard-earned money.

Controller Butkovitz will require a finan-cial education component for anyone that opts into any pension conversion plan.

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TO REPORT FRAUD & INVESTIGATION TIPS:

COMMUNITY AFFAIRS

www.philadelphiacontroller.org

Download the FREE Philly WatchDog app for your mobile device or email FraudTips@PhiladelphiaController.org

or call215-686-3804

Email: CommunityAffairs@PhiladelphiaController.org Phone: 215-686-8888

Students Gain Professional ExperienceStudents in the Controller’s Mentor Program conducted a mock audit under the guidance of City Controller’s Of-fice staff to determine if costs associ-ated with large events held in the City of Philadelphia are reimbursed by the sponsoring organizations.

The students decided to limit their scope of review to the April 2016 receivables report for Reimbursement of Police Ser-vices to ascertain if the entities reim-bursed the city in a timely manner for contracting Police Services.

The receivables indicate when public safety was requested by private organi-zations and governmental agencies.

The student’s audit found:

The City is owed $5.3 million from • 607 entities for police services, an increase of $280,000 since the City Controller’s 2012 report of police receivables.

Sixty percent of overdue balances • older than 90 days is owed by five entities for events dating back to 2008.

Twenty-eight entities carry both • credits due back to the entity and outstanding amounts owed for ser-vices rendered during separate time periods. This indicates insufficiency

in the Philadelphia Police Depart-ments accounting information sys-tem.

The students recommended the City of Philadelphia should discontinue ongo-ing relationships with entities that con-sistently do not pay outstanding amounts due and aggressively pursue all debts over 30 days in order to increase the rate of collections. In addition, entities with both credits and outstanding receivables for services rendered on different dates should have the credits applied to the oldest outstanding receivable.

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