Date: December 21, 2017

To: James Rovella, Chief of Police, Hartford City of Hartford

Police Department Police Department
Private Duty Job Fee Billing and Collection
From: Craig S. Trujillo, CPA, Chief Auditor Audit Report 1810
CST

Tele: 860.757.9952

I. Executive Summary

In accordance with our audit plan for the fiscal year ending June 30, 2018, we completed an audit in December 2017 of the City of Hartford Police
Department Private Duty Job Fee Billing and Collection Operations. The purpose of the audit was to evaluate and test internal accounting and
operating controls, the accuracy and propriety of transactions processed, the degree of compliance with established operating policy and procedures,
and to recommend improvements where required. The results of our audit were reviewed with Deputy Chief of Police, D. Rendock and the recently
appointed City Interim CFO, M. McCaw for the old outstanding balances. The summary that follows includes only the exceptions disclosed and
recommended operating improvements. Included are management’s actions taken or planned including timeframes to resolve each finding and/or
recommendation in this report. We thank Police and the City Finance Department management for the cooperation and courtesies extended to us
during our audit.

We are pleased to report that the Police Private Duty Job Fee Billing and Collection Operations were generally found to be satisfactory. However, the
XL Center owes the City over $700,000 for Police Private Duty Jobs dating back to 2016. The Capital Regional Development Authority (“CRDA”),
a quasi-public agency of the State of Connecticut, has operational responsibility for the XL Center, which is directly managed by Spectra, a
Philadelphia based American Sports and Entertainment company that manages over 400 properties in the US and Canada. These balances were found
to be very problematic from a collections standpoint in the City Finance Department. Also, noted in the details which follow, some procedures and
controls could be strengthened and some duties adequately segregated.

II. Background and Scope of the Audit

Businesses in the City of Hartford (City), including utility companies, entertainment venues, sponsors of special events, road maintenance firms, and
the City Department of Public Works (DPW) frequently require off-duty police officers to direct traffic at a work site or provide security or other
services for events. The Hartford Police Department (HPD) Private Duty Jobs (PJ) Office is responsible for working with businesses, coordinating
the jobs and scheduling police officers to work. The HPD Fiscal Division is responsible for billing customers using the General Revenues Module
Billing application of the Financial Management System (MUNIS). At the end of an assignment, PJ slips originally generated by the PJ Office are
completed and signed by the customers and turned into the HPD Fiscal Division for payroll processing and billing. The Revenue Management Unit
(RMU) of the Finance Department is responsible for the collection of outstanding unpaid customer PJ fees. RMU is also responsible for establishing
PJ billing rates annually, recording customer payments in MUNIS, and referring and managing delinquent balances assigned to TaxServ LLC, the
 City of Hartford
Police Department
Private Duty Job Fee Billing and Collections Audit

City’s designated collection agency. Police officers on PJ also collect payments from businesses on site for those that are required to prepay. Billings
for the fiscal year ended June 30, 2017 totaled more than $7.2 million and collections totaled approximately $6.4 million. As of June 30, 2017, the
PJ accounts receivable balance totaled approximately $988,000.

The scope of our audit included various reviews and tests of transactions recorded during in 2016 and 2017. Audit procedures include; reviews and
evaluations of policies, procedures and related internal operating and accounting controls; a review and evaluation of billing rates; reviews of
segregation of duties; tests of the billing and collection operations by Police and City Finance and reviews of old outstanding balances and collection
efforts.

III. Audit Results

Old Outstanding Balances

Controls were not adequate to ensure that customers with unpaid past due balances do not continue to receive services. Continuing to provide services
to customers with unpaid balances unnecessarily increases the City’s potential exposure to lost revenue in the event that these customers are unable
or unwilling to pay amounts due. As of June 30, 2017, twenty customers owed the City of Hartford more than $988,000. It should be noted that three
of the twenty customers, although owing the City more than $931,000, have continued to receive PJ services from the City. Specifically, one customer
(XL Center) made a payment of $239,007 in September 2017. It was not clear or readily apparent why this customer’s remaining $737,673 past due
balance was not paid or what actions were being taken to follow-up on and collect the balance. Contrary to existing PJ policy, all the above customers
are receiving PJ services even though they have old outstanding balances due the City. The collection responsibility for these balances resides with
the Revenue Manager in the City Finance Department. Also, the City is not assessing late fees and interest on the old outstanding balances. This matter
was referred to the newly appointed City CFO for resolution who agreed to address these issues promptly.

Management Action Plan

Completion Date: June 30, 2018

Responsible Person: M. McCaw, Interim CFO

Management acknowledges that a significant outstanding receivable exists for the XL Center. The Capital Regional Development Authority
(“CRDA”), a quasi-public agency of the State of Connecticut, has operational responsibility for the XL Center, which is directly managed by Spectra.
Given the unique nature of this operational arrangement and the State's interest and role in the XL Center, management will seek to bring resolution
to the XL Center private duty jobs receivable and formalize documentation of the operating agreement for private duty jobs with this entity through
the Municipal Accountability Review Board, which will evaluate the City's financials as an anticipated Tier 3 municipality. The timeframe to complete
this action plan with respect to the XL Center will be dictated by the MARB’s priorities.

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 City of Hartford
Police Department
Private Duty Job Fee Billing and Collections Audit

Segregation of Duties.

Effective July 1, 2008, the City established new policies and procedures for invoicing PJs in accordance with Section 29-15 of the Municipal Code.
With the exception of Tier 1 customers, prepayment is required in order for a PJ to be scheduled and completed. Tier 1 customers are large companies,
in good standing that pay their City invoices within 30-45 days. Tier 2 customers are required to prepay before services are provided by police
officers. One person is primarily responsible for PJ fee billing, the receipt and processing of PJ pre-payment checks, and payroll related PJ duties.
The extent of the roles and responsibilities of this employee results in a lack of segregation of duties and related exposures due to certain control
deficiencies. Of particular concern would be employees that can perform billing functions, can delete or adjust invoices and have access to checks.
We recommend that the checks be remitted directly to the Finance Department Revenue Manager by the police officer collecting the prepayments
with a copy of the check remitted to the police fiscal office for processing.

Management Action Plan

Completion Date: January 31, 2018

Responsible Person: D. Rendock, Deputy Chief of Police

The Hartford Police Department will work with the Interim CFO or her designee to review the current Private Police Services fiscal controls and
validation checks for improvement. Due to fiscal constraints, the workforce was downsized in 2016 and the remaining staff assumed collateral duties.
The Department has cross-trained staff.

Billing and Private Duty Job Fee Rates

Various tests of the billing process and reviews of related operations disclosed the following:

1. Several years ago, Blum Shapiro Business Consulting was engaged to help the City establish policy and procedures for certain key operations.
One of those was the PJ operations at the Hartford police department. The Blum Shapiro draft report was never finalized or adopted by the City.
We recommend that City Finance and HPD management work together to finalize and adopt the PJ policy and procedures document.
2. Procedures and controls need improvement to ensure that all PJ fees are billed as required. We found that PJ fees for three separate jobs, week
ending July 9, 2016, were not billed as required. As a result, 24 hours with associated fees totaling $1,752 were not billed to three customers.
The police officers were paid for these hours worked. The HPD Fiscal Division does not perform reconciliations to ensure that all PJ slips are
recorded in MUNIS for billing or that all PJ hours and dollars paid to police officers are billed in MUNIS as required. Performing these
reconciliations should prevent PJ fee billing errors and omissions.

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 City of Hartford
Police Department
Private Duty Job Fee Billing and Collections Audit

3. There are a significant number of unapplied credits totaling more than $12,000 in the Billing System. These amounts ranging from $.01 to more
than $8,000 were up to ten years old. Credits effectively reduce amounts invoiced without the receipt and application of a payment. We found
that there were no procedures or controls, including a supervisory review and approval, over the recording of credits to customer accounts. In
addition, there were no requirements or standards for documenting reasons for initiating and recording credits to account balances. Although the
Billing Clerk informed us that the credits were generally receipts applied to the wrong invoice or adjustments to correct billing errors due to the
lack of documentation, we were unable to determine the propriety of the credits we noted. Finance and Police should work together to clear all
outstanding credit balances.
4. Most of the PJ work involving contractors require permits to be obtain from the Department of Public Works. There is no process or procedure
to ensure that contractors have obtained permits where required when receiving related PJ services.

Management Action Plan

Completion Date: June 30, 2018

Responsible Person: M. McCaw, Interim CFO, D. Rendock, Deputy Chief of Police

Finance and HPD Management will finalize a policy and/or procedure with respect to Police Private Duty Jobs to address the items noted above.
The Hartford Police Department will work with the Interim CFO or her designee to review the Private Police Services operation regarding fiscal roles
and responsibilities. The Department does perform an internal reconciliation process and transacted $7.2 Million billings during the audit period. July
2016 in which the reconciliation error occurred, the Department and Finance had laid off the employees primarily responsible for the Private Police
Services billing. While the Hartford Police Department has a procedure to review the work permit at the jobsite for compliance, it is not the department
[DPW] responsible for the issuance of obstruction permits.

Distribution

City Council Members

Internal Audit Commission Members
S. Bassett, Partner, RSM US LLP
L. Bronin, Mayor
A. Cloud, Treasurer
L. Davis, Assurance Manager, RSM US LLP
W. Long, Deputy Police Chief
M. McCaw, Interim Chief Financial Officer
T. Montanez, Chief of Staff, Interim COO
L.A. Ralls, Finance Director
D. Rendock, Deputy Police Chief
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