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July 1st, 2010
CITY CONTROLLER RELEASES AUDIT SHOWING CITY ONLY COLLECTS 53% OF BILLS OWED
Hundreds of Millions of Dollars Uncollected, Widening City’s Budget Deficit
(LOS ANGELES) – In her continued attempt to reduce the City’s budget deficit, City Controller Wendy Greuel released her audit today of the City’s billings and collections practices, which found that for the Departments sampled, only 53% of the City’s bills were collected.
“In three years since the previous audit was released, the City has gone from a 52% collections rate to a 53% collections rate – that’s not acceptable,” said City Controller Wendy Greuel.“Collecting more money wouldn’t close the entire budget deficit, but it would help save the City money and protect critical services for Angelenos.”
The Departments surveyed in this audit billed a total of $553.4 million for fiscal year 2008-09, and only collected $293 million, which is an under-collection of $260.4 million annually. Among the most egregious examples of uncollected funds are parking citations and Emergency Management Services (EMS) billing accounts, where the City is only collecting 53% and 38% of the money it is owed, respectively.
“I don’t know of any business that would stand for such a low collection rate, particularly a business the size of the City of Los Angeles. It’s simply not sustainable, and the City cannot and should not allow this to continue.” said Controller Greuel.“The Mayor and the City Council now have two audits and a consultants report to guide them to centralizing the billing process, which will save the City millions of dollars each year.”
This audit is a follow-up to a 2007 Controller audit which found the City’s billing and collections practices to be out of date. The major finding of the previous audit – to centralize the City’s billing process – remains unimplemented, while hundreds of millions of dollars the City should receive – and desperately needs – remain uncollected.
Some of the key findings of the audit include:
- The City still has not created a centralized billing process under the Office of Finance, which should result in millions in increased collections.
- While the City finally hired a consulting firm to provide a blueprint for implementing a centralized process, no action has been taken to implement the proposals. More than three years later, the City should have made more progress.
- It is important to note that the consultant’s report is overly optimistic about how much the City could generate from centralization. The consultant estimates an additional $274 million could be collected over the next six years; however, most of that would come from outsourcing EMS billings, not from increased centralization.
- The Police Commission and Fire Department do not refer delinquent accounts to the Office of Finance or an outside collection agency quickly enough
- The Fire Department had not referred 60% of the accounts within 45 days, which is the Department’s policy.
- The Police Commission sat on nearly $500,000 worth of delinquent accounts, even though many were two to four years old.
- The Fire Department needs to hire a contractor to ensure that accurate billing information is collected when an EMS service is provided, which they have been talking about for over 3 years.
- The Department was in the process of preparing a Request for Proposal for a contractor in June 2007, yet no contractor has been hired.