CITY OF HARTFORD

INTERDEPARTMENTAL MEMORANDUM
Date:
To:

August 21, 2015

Internal Audit Commission

From:

H. Patrick Campbell, Chief Auditor

Telephone:

860.757.9951

Subject:

Special Review of Tax Collectors Office Delays in Processing Certain Payments

Made by Check via the Bank of America Lockbox

HPC

At the request of a an Internal Audit Commission member, which was subsequently discussed
with and approved by the Internal Audit Commission, we were asked to review reported delays
by the Tax Collectors Office in processing certain payments made by check on behalf of
taxpayers. We were informed that due to the delays in processing the checks in question, a
number of property owners were informed that their accounts were delinquent and some checks
which they had presented for payment were returned from the bank for insufficient funds. These
checks returned by banks for insufficient funds are also referred to as Non-Sufficient Fund or
NSF checks.
Background
Beginning in February 2015, the Treasurers Office noticed that there was an increase in the
number of taxpayer checks being returned by Bank of America (BOA) due to insufficient funds
or stop payment orders. After further inquiries, the Treasurers Office found that this was
occurring because BOA had returned to the Tax Collectors Office checks that they had received
in their lockbox for the City of Hartford (the City) but not processed. The Tax Collectors Office
then held the taxpayers checks returned to them by BOA for an extended period of time before
processing and presenting them for deposit. These delays in processing and depositing the
checks returned by BOA contributed to the increase in taxpayer stop payment orders and NSF
checks. It was subsequently learned that the taxpayer checks were being returned to the Tax
Collectors Office by BOA due to a change in the lockbox check process that had been reviewed
with and confirmed by Tax Collector Office management.
The Tax Collectors Office receives payments from Real, Personal and Motor Vehicle property
owners for taxes due in the form of cash, checks, money orders and credit cards. Property
owners have the option of paying for taxes due either in person via cash, check, money order or
credit card at the Tax Collectors Office in City Hall, via checks sent in the mail either directly to
the Tax Collectors Office or to a designated BOA lockbox account or via credit card on-line.
The process and checks that resulted in a delay in processing relate to a number of those sent by
property owners to the BOA lockbox account. The Tax Collectors Office currently uses the

Quality Data Services, Inc. (QDS) Tax module to bill Real, Personal and Motor Vehicle taxes
and process and account for related property owner payments. QDS was implemented by the Tax
Collectors Office in July 2014 replacing the MUNIS Tax module.
Sometime in January 2015, the Tax Collectors Office began receiving packets of tax payments
and checks through next day express mail that were rejected from the BOA automated lockbox
process. These checks were then required to be manually recorded in QDS and prepared for
deposit by the Tax Collectors Office.
Review Results
Various tests and reviews of why this occurred, the checks involved and resulting processing
issues disclosed the following:
1. At the Citys request and based on billing data it receives from the Tax Collectors Office,
BOA has the ability to accept or reject the automatic processing and deposit of checks it
receives in the designated lockbox from taxpayers. When the Tax Collectors Office was
using the MUNIS Tax module to bill and collect taxes, the agreement with BOA was to
accept and process for deposit all payments sent to the lockbox by taxpayers. At some point
after the City implemented the QDS Tax module, the BOA lockbox process was changed to
not accept checks that included back taxes. In instances where the taxpayers checks
included payments for back taxes, they were not automatically processed and deposited by
BOA but were instead sent back to the Tax Collectors Office by next day express mail to be
manually recorded in QDS and prepared for deposit.
In an email correspondence from a BOA representative to Tax Collectors Office
management, the following was noted, I have attached the new test file. This file had the
working stop file, and multiple payments were stopped due to back tax flag. Please let me
know if you have any issues with it. BOA indicated that this was the basis for the change in
the process. The Tax Collector, however, indicated there was never any intention or specific
direction on his Offices part to change the process so that checks that were previously
handled by BOA would be returned to the City for processing. The Tax Collector further
indicated that this would not make sense as it would cause additional unnecessary work on
the part of the Tax Collectors Office. Both BOA and Tax Collectors Office management
have indicated that they believe their respective offices handled this transition in accordance
with their understanding of what was required/expected. Regardless, as a result of this
change, checks that were stopped in the lockbox process due to the back tax flag were not
deposited by BOA and were instead returned to the Tax Collectors Office to be manually
deposited and processed. Once this occurred and the Tax Collector was notified of the
problem by the Treasurers Office, the Treasurers Office worked with the Tax Collector and
BOA to ensure that BOA processed and deposited all checks sent to the lockbox by taxpayers
as had been the case previously.
2. The checks originally sent to the BOA lockbox by taxpayers but not processed due to the
previously noted change in the BOA lockbox process were returned to the Tax Collectors
Office beginning in January 2015. The problem of the BOA lockbox not accepting certain
taxpayer checks was fixed by the end of March 2015. During this three month period, BOA

returned a considerable number of checks to the Tax Collectors Office to be processed

manually. Tax Collector Office management informed us that the checks were stored
securely in a locked safe within a locked vault and that there was a delay in processing them
as staffing levels are currently not adequate to manually process such a large number of
transactions. In certain instances, when property owners realized that the checks they had
issued to the City for their taxes due had not been cashed, they either placed stop payment
orders on them or spent the money in their bank accounts that had been designated to clear
the checks once they were presented for payment. During the three months ended March 31,
2015, 76 taxpayer checks totaling $358,247 were unable to be processed by the Tax
Collectors Office due to returns for stop payments and taxpayer accounts with non-sufficient
funds. This was a significant increase in the 29 checks totaling $76,104 that were returned
for stop payments and taxpayer accounts with non-sufficient funds during the same three
month period ended March 31, 2014. Tax Office management did not explore or initiate
other potential options to expedite the more timely deposit of these checks including
determining the feasibility of obtaining the assistance of other City check processing
operations or returning the checks to BOA.
3. The problem with the BOA lockbox was not identified and resolved as promptly as it could
have been. The delay in processing the checks returned to the Tax Collectors Office by
BOA resulted in a number of other actual or potential issues and concerns including, but not
necessarily limited to, the following:
a. Lost investment income
b. Additional processing time and effort by the Tax Collectors Office
c. Taxpayer customer service issues
As previously noted, this all resulted from a change made in the BOA lockbox check process as a
result of the implementation of and the transition to the QDS Tax module. The other issues
resulted from the checks not being followed-up on and processed in a timely manner after being
returned to the Tax Collectors Office by BOA. Although this should be a one-time condition
that should not occur again once problem has been resolved, we recommend that Tax Collectors
Office management ensure that appropriate action is taken to follow-up on and address
anomalies, such as unexpected packets of tax payments and checks returned by BOA, in a more
timely manner in the future.
As indicated above, Tax Office management informed us that the delay in processing the checks
returned to them by BOA was due to Tax Office staffing limitations. In addition, Tax Office
management indicated that the delays in processing the checks did not solely occur after the Tax
Office got them from BOA but that there was a delay in BOA even getting the checks to the Tax
Office. According to a BOA representative, the BOA procedure for returning checks is to
express mail them the next day by FEDEX or UPS so it is not clear to what extent BOA
contributed to the delay in processing the returned checks or how much of the delay could be
attributed to BOA or the Tax Collectors Office. We recommend that a process and procedures
be established by the Tax Collectors Office to have BOA notify designated management in their
office when checks are returned to the City by BOA for manual processing. This should include
a prompt investigation and resolution of the reason for the BOA processing problem.

copy: City Council Members

Internal Audit Commission Members
A. Cloud, City Treasurer
J. Figueroa, Chief of Staff, Mayors Office
D. Hill, Chief Operating Officer
M. Nelson, Tax Collector, Finance Department
L. A. Ralls, Acting Director, Finance Department
P. Segarra, Mayor