Detroit Loses $1 Million Check
There are many factors that contributed to the financial mess that led to Detroit filing for Chapter 9 bankruptcy protection, and I’m sure there are plenty of stories of inefficiency and incompetence like this involved:
In late February, cash-strapped Detroit received a $1 million check from the local school system that wasn’t deposited. The routine payment wound up in a city hall desk drawer, where it was found a month later.
This is the way Detroit did business as it slid toward its bankruptcy filing, which it entered July 18. The move exposed $18 billion of long-term obligations in a city plagued by unreliable buses, broken street lights and long waits for police and ambulances. Underlying poor service is a government that lacks modern technology and can’t perform such basic functions as bill collecting, according to Kevyn Orr, Detroit’s emergency manager.
“Nobody sends million-dollar checks anymore — they wire the money,” said Orr spokesman Bill Nowling. Except in Detroit.
“We have financial systems that are three, four, five decades in the past,” Nowling said. “If we can fix those issues, then we’ll be able to provide services better, faster, more efficiently and cheaper.”
Detroit doesn’t have a central municipal computer system, and each department bought its own machinery — much of which never worked properly, according to Orr, 55, who took over in March. The last such acquisition, 15 years ago, was of a system based on Oracle Corp. technology that wasn’t fully put to work.
The city is buying new software to improve income-tax collection, especially from suburban commuters who work in Detroit, said James Bonsall, the chief financial officer hired by Orr. The dysfunction extends beyond machinery, Nowling said.
Union rules have “bumped” workers into positions they aren’t qualified for as departments make cuts, he said. The city has no training programs and doesn’t evaluate employees in 2,500 job classifications.
“It has nothing to do with bad employees,” Nowling said. “These employees in some instances are still following work rules that were created 40 years ago.”
Detroit’s operational flaws are pronounced, according to a June 14 report from Orr.
It costs the city $62 to process each paycheck, every pay period, for its 9,560 employees, compared with an average of $18 for U.S. public employers, Orr said in the report. The main reason for the high cost is that almost 150 full-time workers produce Detroit’s payroll, including 51 uniformed officers.
The city’s income-tax receipts are processed by hand, among the 70 percent of accounting entries done manually, according to Orr. He said in his report that the U.S. Internal Revenue Service described Detroit’s tax-collection system as “catastrophic” in a July 2012 audit.
Detroit’s antiquated accounting processes have meant some bills go uncollected for as long as six years, according to Orr, cutting funds that could buy new squad cars, emergency vehicles or computers. Victims of heart attacks in Detroit are likely to die because of slow responses to emergency calls since so few ambulances are running, Orr said in an interview.
This, it seems, is what happens when an American city dies.