Report: Bad checks cost city more than $380,000 over five years

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Nearly $381,000 in bad checks were written to the city of Pittsburgh for copies of police records, permit fees and taxes, and other services from 2008 to 2013, the city controller said in a report released Wednesday that called for new technology and better controls at the point of payment to head off problems for departments that accept checks from the public.

Controller Michael Lamb’s report focused on checks paid to the city but returned by banks as “unable to deposit” for insufficient funds or an inability to locate the account.

Mr. Lamb’s summary said the city needs a new method at the point of payment that would help city employees identify potentially bad checks. Better communication between departments would prevent, for example, the Bureau of Building Inspection from issuing a permit if a check bounces and spurring it to revoke the license when it does.

“That type of communication doesn’t appear to be going on right now,” Mr. Lamb said. The report also says the city incurred bank fees averaging about $9,500 a year related to returned and “re-cleared” checks, which are those that the bank tried to process a second time after they initially failed to clear.

How much money the city failed to collect as a result of the bad checks was not clear. Douglas Anderson, the deputy controller, said the office counted the total value of bad checks but “would have no idea” if the city later was able to collect what it was owed, for example, through liens in the case of property taxes.

Mr. Lamb’s report recommends identifying and evaluating the locations where the city accepts payments, installing check validation scanners, which could instantly reveal bad checks. It also called for hardware upgrades that would enable remote depositing. The report recommends software upgrades that would track transactions and deposits and generate logs that could be emailed to the finance department and supervisors.

“We’re not talking about some enormous capital investment,” he said. “At the counter, at the point of transaction, there are things we can do to eliminate this.”

Mr. Lamb said the city should increase credit card payment options. Currently, the only way to use a credit card to make a payment to the city is a phone system for real estate tax bills.

“It’s something we should have done here a long time ago,” he said.

City Finance Director Paul Leger, who started his job May 1, said he had no basis to challenge the controller’s numbers and concurs with the findings.

However, he noted that in the case of real estate taxes, for example, the city does charge a $30 fee if a check is returned or bounces and sends a new bill.

“Most people do pay promptly,” he said.

Mr. Leger said his office is working to overhaul cash-management after a 2013 report by the controller and Gleason and Associates, a private firm hired by Pittsburgh Intergovernmental Cooperation Authority, one of the city’s state-appointed financial overseers, found weak or nonexistent controls that could create opportunities for fraud and cash-skimming. The ICA ordered the report after former police Chief Nate Harper was indicted for siphoning department money into a fund that he used for personal purchases.

The new policy should be finished “very soon,” he said, though implementing it will take longer.

“This has been a concern of the mayor since he got in,” Mr. Leger said.

Robert Zullo:, 412-263-3909 or on Twitter @rczullo. First Published July 2, 2014 12:00 AM

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