So last week, an exasperated Councilman Allan Domb recalled city Finance Director Rob Dubow and Treasurer Rasheia Johnson for a hearing to try and break through the fog of the city’s embarrassing accounting practices. The background: The city still can’t find $27 million of your tax dollars, and, over the course of multiple hearings, as the terse, defensive testimony of Dubow and Johnson has, shall we say, “evolved,” it now appears that five city accounts, home to some $40 billion over the years, haven’t been reconciled, in some cases since 2010.
Reconciliation, of course, is a basic accounting practice. Not doing it for years would likely result in termination for any mid-level bookkeeper in the private sector. Yet Dubow and Johnson continue to dissemble and obfuscate, even now that Domb, during last week’s testimony, revealed something shocking about the outside accounting firm the city hired—for up to $500,000!—to help fix this mess. It’s at the 27:15 mark:
Let’s highlight that exchange about Horsey, Buckner & Heffler, the outside firm:
DOMB: The firm that we hired for this consolidated cash account. Have we checked the backgrounds of that firm carefully?
JOHNSON: We went through the RFP process, checked their references and their standing, yes.
DOMB: Because I just looked on the Internet, which you can do today, and I noticed that one of the principles had their accounting license suspended from ’02 to ’11. From what I’m told, it’s pretty tough to get your accounting license suspended.
I did the same Google search as Domb. Turns out that, in a Securities and Exchange Commission case alleging fraud and insider trading against a firm called MERL Holdings, accountant Michael Horsey consented to an SEC order finding that he had engaged in improper professional conduct. The order prohibited Horsey from appearing or practicing before the SEC for two years. This is who is going to help reform our shoddy accounting practices?
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In their latest testimony, Dubow and Johnson have moved the goalposts for figuring all this out, now claiming that some of the unreconciled accounts won’t be reconciled for months. (They’d previously said they would be reconciled by June 30). Yesterday, Domb introduced a “Monthly Reconciliation Reporting” bill that would mandate Dubow to file with Council a monthly accounting report, as well as a resolution authorizing Council’s Committee on Finance to conduct an investigatory public hearing to review Horsey, Buckner & Heffler’s work.
Yesterday on the floor of Council, Councilwoman Blondell Reynolds Brown warned against scapegoating Johnson. She’s right. This ought to be about accountability, not scapegoating.
Both the bill and the resolution would seem to be necessary steps, but the Keystone Cop-like succession of testimonies during the last three weeks of hearings reveals a pattern of defensiveness and deflection by Dubow and Johnson that no amount of Council oversight can truly correct. Instead of owning the problem and reforming the system, Dubow and Johnson are quibbling and dissembling, fighting transparency.
As I suggested last week, Dubow and Johnson have grossly violated the city’s fiduciary responsibility to its taxpayers, which could affect the city’s bond rating. Both should do the right thing and step down, or the mayor should break his silence and do as the mayor of Spokane, Washington did when consecutive audits of his city’s accounting practices found material weaknesses. “I wish you the very best in your future professional endeavors,” wrote Mayor David Condon to his director of accounting.
In a Securities and Exchange Commission case alleging fraud and insider trading, accountant Michael Horsey consented to an SEC order finding that he had engaged in improper professional conduct. This is who is going to help reform our shoddy accounting practices?
Yesterday on the floor of Council, Councilwoman Blondell Reynolds Brown warned against scapegoating Johnson. She’s right. This ought to be about accountability, not scapegoating. The succession of Council hearings on this subject have proven that systemic issues have long existed, pre-dating Johnson’s tenure. But neither Johnson nor Dubow—both of whom have served the city honorably—have addressed those issues with the urgency required, letting over a year go by between finding out about the problem and issuing the RFP that ultimately resulted in the pricey contract to Horsey’s firm.
If you’re a taxpaying Philadelphian—black or white, male or female—someone who pays a mortgage, obeys the law, and loves your city…well, you’ve got to look at all this and wonder how anyone in city government could have the gall to talk about raising new taxes when not only haven’t local officials demonstrated the ability to collect those they’re already owed—they’ve now proven incapable of accounting for millions of taxes that have already been paid. You deserve better customer service than that.