OFFICE OF THE CONTROLLER CITY OF PHILADELPHIA PENNSYLVANIA. Jonathan A. Saidel City Controller

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1 OFFICE OF THE CONTROLLER CITY OF PHILADELPHIA PENNSYLVANIA 911 EMERGENCY COMMUNICATION SYSTEM FINANCIAL AND COMPLIANCE AUDIT FISCAL 1997, 1998 and 1999 Jonathan A. Saidel City Controller

2 November 29, 2001 Andres Perez, Commissioner Department of Public Property 1030 Municipal Services Building 1401 John F. Kennedy Boulevard Philadelphia, PA As you requested, the City Controller's Office performed an audit of the City of Philadelphia's 911 funds for the triennial period July 1, 1996 to June 30, We performed the audit pursuant to the Commonwealth of Pennsylvania's Public Safety Emergency Telephone Act, as amended. Attached is our audit report on the use of 911 Contribution Rate Revenues by the City of Philadelphia. We discussed our findings and recommendations with your staff, including the 911 coordinator, during the course of our audit and have included your written response to our comments as part of our report. We believe that our recommendations, if implemented by management, would improve internal control and ensure continued compliance with the 911 Act. We would like to express our thanks to your department for the courtesy and cooperation displayed to us during the conduct of this audit. Respectfully submitted, JONATHAN A. SAIDEL City Controller cc: Honorable John F. Street, Mayor Honorable Anna C. Verna, President, and Honorable Members of City Council Ms. Janice D. Davis, Director of Finance

3 CONTENTS Page CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (ACT 78 OF 1990, P.L. 340, NO. 78 AS AMENDED) Independent Auditor s Report... 1 Statement of Revenues and Expenditures for the period July 1, 1996 through June 30, Notes to Financial Statement... 4 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF THE CITY OF PHILADELPHIA 911 FUNDS STATEMENT OF REVENUES AND EXPENDITURES PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS... 8 Findings And Recommendations Matters of Noncompliance Matters of Internal Control Status of Prior Audit Findings Other Matters Requiring Management s Attention AGENCY RESPONSE Andres Perez, Commissioner, Department of Public Property... 15

4 Commissioner Philadelphia Department of Public Property Philadelphia, PA INDEPENDENT AUDITOR S REPORT We have audited the special-purpose statement of 911 revenues and expenditures of the City of Philadelphia, Pennsylvania for the period July 1, 1996 through June 30, This financial statement is the responsibility of the City of Philadelphia management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying special-purpose financial statement was prepared for the purpose of complying with the financial provisions of the Commonwealth of Pennsylvania s Public Safety Emergency Telephone Act Act 78 of 1990, P.L. 340, No. 78 As Amended and, as explained in Note 1 to the financial statement, it is not intended to be a complete presentation of the revenues and expenditures of the City of Philadelphia s 911 Emergency Communication System for the period July 1, 1996 through June 30, In our opinion, the special-purpose financial statement referred to above presents fairly, in all material respects, the revenues and expenditures of the City of Philadelphia s 911 Emergency Communication System funded with contributions assessed against telephone subscribers for the period July 1, 1996 through June 30, 1999, on the basis of accounting described in Note

5 C I T Y O F P H I L A D E L P H I A O F F I C E O F T H E C O N T R O L L E R In accordance with Government Auditing Standards, we have also issued our report dated August 31, 2001 on our consideration of the City of Philadelphia s internal control over financial reporting for 911 funds and on our tests of its compliance with the financial provisions of the Commonwealth of Pennsylvania s Public Safety Emergency Telephone Act Act 78 of 1990, P.L. 340, No. 78 As Amended. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. This report is intended solely for the information and use of the Philadelphia Department of Public Property and the Pennsylvania Emergency Management Agency and is not intended to be and should not be used by anyone other than these specified parties. August 31, 2001 ALBERT F. SCAPEROTTO Deputy City Controller 2

6 CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (ACT 78 OF 1990, P.L. 340, NO. 78 AS AMENDED) STATEMENT OF REVENUES AND EXPENDITURES FOR THE PERIOD JULY 1, 1996 THROUGH JUNE 30, Total Revenue: Telephone fees (net of collection charges) $ 11,212,219 $ 11,279,639 $ 11,455,642 $ 33,947,500 Interest 929,983 1,254,421 1,387,767 3,572,171 Total revenues 12,142,202 12,534,060 12,843,409 37,519,671 Expenditures: Staff salaries 6,726,993 6,765,628 6,878,458 20,371,079 Capital outlay 899,397 1,505,847 2,245,160 4,650,404 Total expenditures 7,626,390 8,271,475 9,123,618 25,021,483 Excess revenues over expenditures $ 4,515,812 $ 4,262,585 $ 3,719,791 12,498,188 Unexpended balance, July 1, ,274,762 Unexpended balance, June 30, 1999 $ 27,772,950 The accompanying notes to the Statement of Revenues and Expenditures are an integral part of this report 3

7 CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (Act 78 of 1990, P.L. 340, No. 78 As Amended) NOTES TO FINANCIAL STATEMENT FOR THE PERIOD JULY 1, 1996 THROUGH JUNE 30, Summary of Significant Accounting Policies The statement of revenues and expenditures for the City of Philadelphia 911 funds has been prepared for the purpose of complying with Chapter 120b of the Commonwealth of Pennsylvania's "Public Safety Emergency Telephone Act" of 1990, as amended (the Act). This statement is not intended to be a complete presentation of the assets and liabilities associated with the city's 911 Emergency Communication System, or the total expenditures incurred by the city in operating the system. The accounting policies used by the city in preparing this statement are described below. A. Public Safety Emergency Telephone Act The Act provides for a statewide telephone number 911 system. Under the Act, the General Assembly of Pennsylvania declared it to be in the public interest for each county within the Commonwealth to provide a toll-free 911 number to permit or to enable any individual to gain rapid, direct access to emergency aid. The purpose of the system is to effect a more rapid response capability to emergency situations. B. Funding The Act establishes a method for funding a 911 Emergency Communication System by allowing counties (including those that had a 911 system in place prior to the Act) 1 to require a fee (contribution rate) assessed against telephone subscribers for recurring and nonrecurring costs of the system. To begin assessing contributions, counties must submit a Surcharge Plan to the Commonwealth for approval. The City of Philadelphia submitted its Surcharge Plan to the Commonwealth in August The Commonwealth subsequently approved this plan, which outlined the 911 system and established a monthly $1.00 customer contribution rate for telephone subscribers within Philadelphia. Effective December 1992, the city was required to comply with the provisions set forth in the Act. Provisions of the Act require triennial audits of the city s collection and disbursement of contribution-rate funds and expenditures for non-recurring and recurring costs incurred in the establishment, upgrade, expansion, and operation of the 911 emergency communication system. 1 The City of Philadelphia first implemented its 911 system in March of

8 CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (Act 78 of 1990, P.L. 340, No. 78 As Amended) NOTES TO FINANCIAL STATEMENT FOR THE PERIOD JULY 1, 1996 THROUGH JUNE 30, 1999 C. 911 System The city's primary Public Safety Answering Point (PSAP), located in Police Headquarters at 8 th and Race Streets, receives all 911 calls and provides radio dispatch services for all 22 Police Districts in the city. Fire and emergency medical service calls are initially received in the primary PSAP, but are immediately transferred for call handling and dispatch to the city's secondary PSAP in the Fire Administration Building, located at 3 rd and Spring Garden Streets. With the approval of the city's surcharge plan by the Commonwealth in 1992, the Department of Public Property's director of communications became the city's 911 coordinator. He and his staff work closely with individuals in the city's Police and Fire Departments who are responsible for management of the day-to-day on site operations. D. Basis of Accounting The accompanying statement of revenues and expenditures has been prepared using the modified accrual basis of accounting, under which revenues are recognized in the accounting period in which they become both measurable and available. "Measurable" means the amount of the transaction can be determined. "Available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded in the accounting period in which the liability is incurred, if measurable. E. Interest Earned To comply with the Act, on August 22, 1996, the City of Philadelphia established a separate mutual fund where 911 telephone fees are deposited to earn interest until expended. Interest rates vary daily and are applied to the closing position of money held in the fund each day. The city earned interest income of $1.3 million from the start of this separate fund through June 30, Prior to opening the separate fund, the city deposited 911 telephone fees into its consolidated cash bank account, which is under the custody of the City Treasurer. Interest was computed using the interest rate in effect for the consolidated bank account and compounded monthly on the balance of unexpended 911 funds. Interest of $4,100 was earned on 911 funds deposited into the city s consolidated bank account for the period July 5

9 CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (Act 78 of 1990, P.L. 340, No. 78 As Amended) NOTES TO FINANCIAL STATEMENT FOR THE PERIOD JULY 1, 1996 THROUGH JUNE 30, , 1996 to August 21, 1996 and was subsequently transferred to the separate 911 mutual fund account. Additionally, from December 1, 1992 through June 30, 1996 the city had set aside $14.9 million, representing 40% of the net amount received from the major telephone service provider. This set aside amount, designated for the design and implementation of a new 800 MHz trunked municipal radio system, had been transferred to the city s capital improvement fund, where it has been restricted to 911 system uses. Interest earned on the unexpended portion of this set aside amount is calculated again using the interest rate in effect for the city s consolidated bank account and compounded monthly on the accumulated sum. During the period July 1, 1996 through June 30, 1999, interest totaling $2.3 million was earned on the unexpended balance of the set aside amount remaining in the capital improvement fund. This interest has been transferred annually to the separate 911 mutual fund account. F. Capital Outlay for Nonrecurring Costs Capital outlay expenditures include nonrecurring costs, which under the Act the city is required to amortize over a minimum of three years. Costs incurred by the city along with related amortization amounts for fiscal years 1997, 1998, and 1999 are presented below. The amortized cost amounts shown have been computed using a straight-line method over asset lives that range from 3 to 40 years. (Amounts in thousands) Year of Expenditure Capital Outlay for Nonrecurring Costs Amortization Billing Network System Changes Equipment Other Total Total Prior years $ 511 $ 10 $ 137 $ - $ 658 $ 148 $ 90 $ 2 $ $ 152 1, ,778-2, Totals $ 511 $ 1,747 $ 2,898 $ 152 $ 5,308 $ 198 $ 286 $ 730 1,214 Accumulated amortization at July 1, Accumulated amortization at June 30, 1999 $ 1,627 6

10 CITY OF PHILADELPHIA 911 FUNDS PUBLIC SAFETY EMERGENCY TELEPHONE ACT (Act 78 of 1990, P.L. 340, No. 78 As Amended) NOTES TO FINANCIAL STATEMENT FOR THE PERIOD JULY 1, 1996 THROUGH JUNE 30, Limitation on Recovery of Certain Recurring Costs Section 120b.106. of 4 Pa. Code Chapter 120b provides for the 911 contribution rate to be used for specified recurring and non-recurring costs associated with implementing, expanding, upgrading and operating a 911 emergency communications system. The Code limits recovery of certain recurring costs as follows: Section 120b.106. (2)(ii) Telephone company administrative costs for billing and collection of the contribution rate are limited to a maximum of 2% of the contribution rate monies collected. During the triennial period July 1, 1996 through June 30, 1999, such costs were as follows: June 30 year ended Amount Percent of contribution rate monies collected 1997 $ 170, , , Total $ 520, Section 120b.106. (2)(iii) County costs for the administration of the contribution rate is limited to a maximum of 1% of the gross receipts collected. During the triennial period July 1, 1996 through June 30, 1999, the City of Philadelphia did not charge such costs to the program. Section 120b.106. (2)(vii) Personnel salary and benefit costs directly related to the provision of 911 services were subject to a maximum of 60% of the contribution rate revenue. In April 1998, the Commonwealth increased this maximum to 70%. During the period July 1, 1996 through June 30, 1999, such costs were as follows: June 30 year ended Amount Percent of contribution rate revenue 1997 $ 6,726, ,765, ,878, Total $ 20,371,

11 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF THE CITY OF PHILADELPHIA 911 FUNDS STATEMENT OF REVENUES AND EXPENDITURES PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Commissioner Philadelphia Department of Public Property Philadelphia, PA We have audited the special-purpose statement of 911 revenues and expenditures of the City of Philadelphia, Pennsylvania for the period July 1, 1996 through June 30, 1999, and have issued our report thereon dated August 31, As stated in our audit opinion, we conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the City of Philadelphia's specialpurpose financial statement is free of material misstatement, we performed tests of its compliance with the financial provisions of the Commonwealth of Pennsylvania s Public Safety Emergency Telephone Act Act 78 of 1990, P.L. 340, No. 78 As Amended, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. However, we did note an immaterial instance of noncompliance that is listed in the "Findings and Recommendations" section of this report. 8

12 C I T Y O F P H I L A D E L P H I A O F F I C E O F T H E C O N T R O L L E R Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Philadelphia's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statement and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in the amounts that would be material in relation to the financial statement being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that are listed in the "Findings and Recommendations" section of this report. Other Matters We noted other matters relating to the city s 911 financial report that were not considered to be an instance of noncompliance for the current period or a matter involving internal control over financial reporting. However, they warrant management s attention and have been included in this report. This report is intended solely for the information and use of the Philadelphia Department of Public Property and the Pennsylvania Emergency Management Agency and is not intended to be and should not be used by anyone other than these specified parties. August 31, 2001 ALBERT F. SCAPEROTTO Deputy City Controller 9

13 MATTERS OF NONCOMPLIANCE Ineligible Costs FINDINGS AND RECOMMENDATIONS The Public Safety Emergency Telephone Act (the Act) provides counties with guidance on eligible and ineligible uses of the telephone fees they receive to subsidize their 911 emergency communications system. In general, fees may be used for recurring and nonrecurring costs associated with implementing, expanding, upgrading, and operating a 911 system. This would include, for example, the costs associated with acquiring mobile communications equipment installed in vehicles responding to 911 emergencies. Our audit disclosed an instance of noncompliance with the Act s spending provisions during fiscal year The city used $1.2 million of 911 money to acquire 290 mobile data terminals that were to be installed in patrol vehicles. Each of these terminals cost approximately $4,100. From detailed documentation supporting the $1.2 million expenditure, which included the serial number for each terminal purchased, we randomly selected 16 of them for observation. Of these 16 terminals, we observed that 14 of them had been placed in marked patrol vehicles assigned to districts or special units actively involved in responding to 911 emergencies and therefore eligible under spending provisions of the Act. We found two of the terminals, however, installed in police vehicles not routinely responding to 911 calls and therefore, in our opinion, ineligible as 911 expenditures. Police officials had installed one terminal in a vehicle assigned to a detective unit. This unit does primarily investigative work that begins after the initial emergency response. Officials had placed the other terminal in a vehicle assigned to the Police Department s Warrant Unit, a unit generally performing stake-out assignments to apprehend fugitives with outstanding warrants. Recommendations: We urge 911 management to remedy its noncompliance with the Act immediately. It should: Reimburse 911 funds for the two mobile data terminals placed into vehicles not directly involved in responding to 911 emergencies. Conduct an inventory of all mobile data terminals purchased with 911 funds to ensure that they have been physically placed into 911-related emergency vehicles. MATTERS OF INTERNAL CONTROL Mistakes Occurred in Accounting for 911 Cash Accounts A widely held practice used by many business entities is to periodically reconcile general ledger cash account balances to bank statements. This procedure helps managers detect misstatements that may have resulted from errors or fraudulent activity. 10

14 FINDINGS AND RECOMMENDATIONS Our audit disclosed that the city maintained two general ledger cash accounts for its 911 funds. 2 One account, which was held at a financial institution and used to account for receipts and disbursements of 911 money since August 1996, was accounted for in the city s grants revenue fund. The other account, which represented the unexpended portion of cash that 911 management had accumulated prior to August 1996 and designated for future 911 improvements was accounted for in the city s capital improvement fund. 3 For purposes of financial reporting, both of these accounts were merged into one balance to account for the unexpended 911 funds. However, neither of the two cash general ledger accounts was formally reconciled against a bank statement (for the grants revenue fund portion), or the city s computation of 911 equity in the case of the capital improvement fund. Because the accounts were not being reconciled, mistakes in accounting for the 911 cash were not timely detected by city accountants in the normal course of their duties. Although the financial statement was properly adjusted to rectify these mistakes, we found: At June 30, 1997, the general ledger account in the capital improvement fund that depicted 911 equity in the city s consolidated bank account was being carried at $10.9 million under the correct amount. The city s Finance Office eventually corrected most of the error, but did not do so until the beginning of fiscal year Interest on 911 funds accounted for in the capital improvement fund had been incorrectly computed for fiscal years 1998 and The mistakes, which were immaterial for both years, occurred because the 911 cash equity was inappropriately determined. In fiscal year 1998, vouchers that had not yet been paid were inappropriately deducted from the equity balance. A similar error occurred in fiscal year 1999, but was offset by other receipt and disbursement amounts that Finance Office accountants failed to recognize in arriving at the 911 cash equity balance. One-month s worth of interest income ($54,000), earned during June 1999 on the 911 funds held in the separate interest-bearing account, was recorded on the books twice once as cash and also as accrued interest receivable. Recommendation: We recommend that the city s Finance Office require the 911 accountant to periodically reconcile the cash account balances carried on the books to bank statements (for the grants revenue fund portion) and computational worksheets depicting the 911 share of equity in consolidated cash (for the capital improvement fund part). These should be formally prepared and reviewed by a supervisor. This review should be evidenced by supervisor s initials and dated appropriately. 2 For a discussion of how the City of Philadelphia accounts for 911 funds, see the comments under the subheading City Had Not Complied With Certain Provisions of the 911 Act in the STATUS OF PRIOR AUDIT FINDINGS section of this report. 3 The money in this latter account balance had actually been deposited in the city s consolidated bank account in which the portion of the capital improvement fund dedicated to 911 maintained shares of equity and earned interest income. 11

15 FINDINGS AND RECOMMENDATIONS STATUS OF PRIOR AUDIT FINDINGS Checks Received Were Made Payable to the 911 Coordinator In our prior audit report, we commented that checks received from the city s telephone service provider for 911 revenues included as payee the name of the employee designated as the 911 coordinator for the city. No similarly written checks came to our attention as part of the current audit, and we therefore consider the matter resolved. Invoices Were Not Being Paid Timely We previously commented that the city s Department of Public Property incurred over $60,000 in late payment charges on telephone bills related to the 911 system. No instances of late payment charges came to our attention as part of the current audit. City Had Not Complied With Certain Provisions of the 911 Act Our prior audit revealed that the city was not in compliance with the 911 act because it failed to: Establish a separate fund for the sole purpose of accounting for 911 revenue and expenditure activity. Deposit 911 moneys received from the local telephone company into an interest-bearing restricted account. Make an annual appropriation on a line item basis for the nonrecurring and recurring charges associated with the operation of the 911 system. Amortize nonrecurring costs over a minimum of three years. Starting in fiscal year 1997, management established specific accounts within the city s fund accounting system for all 911-related revenues and expenditures. These accounts are used by the three city agencies Public Property, Police, and Fire involved in operating the 911 system. Telephone fees received are now deposited into a separate interest-bearing account, accounted for within the city s grants revenue fund. The fees remain in the account until transferred to either the general fund for reimbursement of 911 staff salaries or to the capital improvement fund for system upgrades and other improvements. Amounts to be expended for the 911system appeared adequately identified in the city s annual operating and capital budgets. As to the amortization of nonrecurring costs, under generally accepted accounting principles for state and local governments, the city was usually not required to calculate amortization or depreciation on any of its capital assets. Accordingly, there was no system in place to provide for this information. With the application of the Government Accounting Standards Board Statement 34 4, the city will be in a position to more readily accommodate this requirement of the Act. In the meantime, management 4 Statement 34 titled Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments will require the city to present capital assets in its annual financial report and calculate depreciation. 12

16 13 FINDINGS AND RECOMMENDATIONS has included in the notes to the special-purpose financial statement a schedule that presents amortized amounts for all nonrecurring costs incurred since December 1992, the date when the city was first required to comply with the Act. Interest Not Computed on Unspent 911 Funds in City s Capital Improvement Fund We previously commented that interest on unspent 911 funds that management had transferred to the city s capital improvement fund was not being credited to the 911 program. We believed that this situation violated the intent of the 911 Act and had estimated that $682,000 in interest should have been credited to the program. Starting in fiscal year 1997, management did begin computing interest on the unspent 911 funds held in its capital improvement fund. For the three-year period ending June 30, 1999, interest income of $2.3 million was earned on the unspent funds and transferred to the special bank account set up to receive 911 money. We therefore consider this matter resolved. Accounting for Equipment Bought with 911 Funds Needed Improvement In our prior report we had indicated that the city needed to improve its accounting for equipment purchased with 911 monies. The Department of Public Property had difficulty determining the location of radio equipment and accessories that had been acquired using 911 funds, making it time consuming to ascertain compliance with the Act. Additionally, we had observed that two radio receivers, purchased using 911 monies, were being used by the Department of Public Property and the Philadelphia Water Department for activity unrelated to the 911 emergency function. During our current audit, we did not have any significant difficulty locating equipment selected for observation. However, we did note that various items of equipment that cost nearly $712,000 did not have city property tags affixed to them as required by city accounting procedures. The items included workstations and communication equipment found in the radio room of Police Headquarters, as well as two radio-network controllers located in the basement of the Fire Administration Building. Additionally, all these items, along with 13 mobile data terminals we tested were not recorded in the city s central inventory of equipment as required by city accounting procedures. The majority of this equipment had been purchased as part of a large-scale capital contract, and no one from the Police Department had forwarded a list of the items to the Procurement Department, the city agency responsible for updating centralized inventory records. Finally, we again observed instances of when equipment acquired with 911 money was being used for other than 911-related purposes. As we noted in the section of our report dealing with Ineligible Costs on page 10, we observed at least two instances of when mobile data terminals acquired with 911 money had been placed in vehicles not responsible for responding to 911 emergencies. We continue to recommend that city management reimburse 911 funds for any equipment purchased that is not directly related to the emergency system. In addition, we urge Police and Fire management to develop procedures that will ensure all equipment purchased under a capital contract will be adequately identified and a list forwarded to the city s Procurement Department for inclusion into the centralized inventory records.

17 OTHER MATTERS REQUIRING MANAGEMENT S ATTENTION FINDINGS AND RECOMMENDATIONS Planned Non-emergency Use of New Radio System May Require Sharing Costs Among Users During the triennial period under audit, the city began incurring costs in connection with the acquisition of a new 800 MHz Trunked Municipal Radio System. The city s 911 coordinator has asserted that the new radio system will provide public safety personnel of the Police and Fire Departments with 95 percent in-building coverage. He has also indicated that this level of coverage is required by the city s police, fire, and emergency medical services personnel as opposed to personnel in other municipal departments that could adequately function with a radio system that provided solely on-street coverage. Through June 30, 1999, the city used $135,000 of 911 funds to pay for engineering services in connection with the planned acquisition of the new radio system. These services included, for example, assistance with the evaluation of vendor proposals, contract negotiations, and a review of the contractor s implementation, test and acceptance plan in order to develop a strategy for project management once the actual construction of the radio system commenced. Beginning in fiscal year 2000 and continuing into fiscal 2002 the city has been making payments using 911 money to acquire the new system that will cost $51.2 million. Our review of documentation dealing with the structure of the new system indicates that numerous other city agencies, such as the Philadelphia Water Department, the Streets Department and the city s Office of Fleet Management, will be using the system. Additionally, even non-emergency personnel within the Police Department will be using it. Both written and oral correspondence we have had with PEMA, suggests that it will be necessary for the city to allocate the cost of acquiring the new system to all non-emergency personnel using the system, especially, if their planned use has added any significant cost to acquiring the system. We recommend that the commissioner of Public Property require the city s 911 coordinator to formally develop a plan for equitably sharing the cost of the new radio system among non-emergency users. The plan should include the basis for each city agency s share in the cost. After the plan has been completed, it should be forwarded to PEMA for its formal approval. Not preparing a formal allocation plan approved by PEMA could give rise to questioned costs during the next audit. Attendance Records of Police Department 911 Employees Destroyed Prior to Audit Prior to our completion of this audit, the Police Department had destroyed payroll attendance records substantiating costs for its 911 communications room during fiscal years 1997 and To meet the objectives of the audit, we were able to perform alternate tests. However, so that future 911 audits can be timely completed, we urge the 911 coordinator to remind all units involved in the system to keep all documentation until after the City Controller s Office has completed the required audit. 14

18 RESPONSE TO AUDITOR S REPORT C I T Y O F P H I L A D E L P H I A DEPARTMENT OF PUBLIC PROPERTY ANDRES PEREZ, JR 1030 Municipal Services Building Commissioner 1401 John F. Kennedy Boulevard Philadelphia, PA (215) FAX (215) November 27, 2001 The Honorable Jonathan A. Saidel City Controller City of Philadelphia 12th Floor, Municipal Services Building Philadelphia, PA Re: 911 Emergency Communication System Audit Dear Mr. Saidel: We have reviewed the Controller s Office 911 report issued for the period July June 1999 and appreciate the opportunity to comment on the findings contained therein. The Department of Public Property will respond to findings included under the report heading Matters of Noncompliance while response to findings under the heading Internal Control Matters is provided to us by Finance Department representatives. Matters of Noncompliance Recommendation: Conduct an inventory of its mobile data terminals (MDTs) and reimburse 911 funds for those that have been physically placed into vehicles not directly involved in responding to 911 emergencies. Response: Our reading of Act 78 does not preclude the installation of mobile communications equipment in a non-patrol Police vehicle such as those specified by the Controller s report. In this act, the eligible costs for 911 funds are listed as Mobile Communications Equipment - the act does not specify that the equipment must be solely placed in cars that are primarily 911 responders. Once again, we don t believe that the Act is structured so tightly as to inhibit the ability of the municipality to make informed, reasoned decisions regarding 911 expenditures. Instead, we believe that the Act, as modified, is designed with certain safeguards to prevent municipalities from assigning 911 revenues to non-public safety areas and/or stretching the boundaries of 911 funding eligibility. 15

19 RESPONSE TO AUDITOR S REPORT The Honorable Jonathan A. Saidel City Controller Re: 911 Emergency Communication System Audit November 27, 2001 Page 2 We would also like to point out that 283 of the approximately 800 MDTs purchased by the City were funded through the federal COPS MORE program, which did not put any limitation on the use of these devices. Many of the MDTs purchased with these funds were placed in vehicles that routinely respond to 911 calls. As a result, even if we were to agree that the purchases of the devices listed in the Controller s Office report were ineligible, the City could merely substitute that purchase with a device purchased through COPS MORE funding. Internal Control Matters Recommendation: Require the 911 accountant to periodically reconcile the cash account balances carried on the books to bank statements (for the grants revenue fund portion) and computational worksheets depicting the 911 share of equity in consolidated cash (for the capital improvement fund part). These should be formally prepared and reviewed by a supervisor. This review should be evidenced by supervisor s initials and dated appropriately. Response: The Finance Department acknowledges that some minor errors were made in the original posting to subsidiary records accounting for the 911 funds. However, as noted in the audit report, the errors were detected and corrected by our staff The methodology utilized by the Finance Department to calculate interest has been consistently applied to all interest calculations performed by this office. As noted, the differences determined by the Controller s methodology are immaterial. The City Treasurer s Office (CTO) performs bank reconciliations on all of the accounts maintained by the City. The CTO reconciles bank statement to the Treasurer s group of accounts in the City s general ledger system. The Finance Department reconciles individual general ledger accounts to the Treasurer s group of accounts. It was during this process that the posting errors mentioned above were detected and corrected. We agree with the Controller s recommendation that these recommendation should continue to be performed. Other Matters Requiring Management s Attention Recommendation: The Commissioner of Public Property should require the city s 911 coordinator to formally develop a plan for equitably sharing the cost of the new radio system among nonemergency users. The plan should include the basis for each city agency s share in the cost. After the plan has been completed, it should be forwarded to PEMA for its formal approval. 16

20 RESPONSE TO AUDITOR S REPORT The Honorable Jonathan A. Saidel City Controller Re: 911 Emergency Communication System Audit November 27, 2001 Page 3 Response: The 800 MHz radio system infrastructure was built to fully support the public safety personnel of the Police and Fire Departments. The Police and Fire Department will be utilizing one hundred percent of the system including all ten towers constructed in response to the City s coverage requirements. Had the City not built the system s infrastructure for a public safety system, we believe that a two to three site system could have provided on-street coverage for non-public safety personnel. While other departments will be utilizing the system to varying degrees for radio transmissions, there was no additional build-out to accommodate their needs. That is, even if no other users were to use the system, the public safety requirements of the City would require the exact same infrastructure to be built. Further, the City has always planned to allocate radio system costs by the number of radios utilized by public safety versus non-public safety personnel. While the infrastructure was intended solely for public safety, other departments will be able to use the system at a lower priority than public safety. Water and Aviation funds together with funds from the sale of microwave frequencies will contribute in excess of $15 million to the project cost. While we respectfully take exception to some of the audit findings, we are most appreciative of the professionalism and diligence displayed by your staff in completing this complex undertaking. 17