The Office of Inspector General (OIG) conducted an audit of the Chicago Department of Transportation’s (CDOT) process for loading zone signs and the Department of Finance’s (DOF) process for residential disabled parking signs.

The objectives of the audit were to determine if,

• CDOT accurately recorded, calculated, and collected fees related to loading zone sign installations and renewals;
• DOF accurately recorded and collected fees related to disabled parking signs; and
• significant delays occurred during the application for and installation of loading zone and disabled parking signs.

Loading Zone Signs

We concluded that CDOT did not collect $3.9 million, or 59.9%, of the $6.4 million of annual loading zone fees invoiced in 2013, including amounts due from previous years. We also determined, however, that CDOT inaccurately calculated the installation fees for each of 95 loading zones we reviewed. CDOT charged per sign instead of per zone, causing business owners in the sample to overpay by a total of $10,550. Based on discussion with CDOT and this sample we find it reasonable to assume that all business owners with loading zone sign installations were inaccurately charged.

OIG also found that the City does not have a standardized process to maintain loading zone applications and that 88.4% of installations recorded within CDOT’s system lack complete data. Therefore, OIG was unable to review the entire population of installations to determine the average length of time from initial application to completion of the installation request. However, for the 95 loading zone installations reviewed, OIG determined that installation took an average of 337 days.

Finally, OIG identified a lack of segregation between the billing and collecting functions for loading zone application fees. At the time of the audit, CDOT had assigned a single administrative employee the responsibility of billing, receiving payment, transmitting payments and deposit tickets to DOF, and updating payment status in the program database.

Prior to the arrival of the current CDOT management team, the department had internally identified similar weaknesses in its collection processes and data reliability in a 2013 proposal entitled Loading Zone Restructuring. The proposal was presented to the Mayor’s staff in July of 2013 but has not been implemented. More information on this proposal is available in the background section of this report.

Residential Disabled Parking Signs

OIG determined that DOF collected all installation fees for disabled parking signs, but failed to collect 10% of annual renewal fees resulting in $3,250 of uncollected fees for the period we audited.

DOF did maintain complete data for residential disabled parking signs, and OIG therefore was able to determine that the City installed those signs in an average of 207 days from application to installation.

Recommendations

OIG recommends that CDOT seriously consider restructuring the loading zone process by actively pursuing changes such as those described in its 2013 Loading Zone Restructuring proposal, or that it engage with DOF and City Council to correct problems in the current billing and installation processes. CDOT should also determine all overpayments by business owners and develop the necessary corrective action to issue reimbursements. We recommend that DOF work with City Council to improve the residential disabled parking sign installation process. CDOT and DOF agreed with the OIG’s recommendations and responded with corrective actions the departments have taken or will take. The specific recommendations related to each finding, and CDOT’s and DOF’s responses, are described in the “Audit Findings and Recommendations” section of this report.

Management Response

CDOT and DOF responded to our audit findings and recommendations by describing corrective actions they have already taken and actions that they plan to take in order to address the issues identified in the audit. Both departments agreed with OIG that the sign  processes can and should be improved, and both departments committed to work with City Council to address those aspects of each process that involve aldermanic approval or potential changes to the Municipal Code.

The Office of Inspector General (OIG) conducted an audit of the City of Chicago’s water service focusing on account inventory, meter reading, and temporary water usage practices. The Department of Water Management (DWM) provides and manages water access while the Department of Finance (DOF) manages billing. The Municipal Code of Chicago (MCC) authorizes non-metered water service provision to single family homes and two-unit residences at a rate based on property characteristics rather than water usage. All other structures—old and new—are to receive metered water service. The City’s water system currently serves over 490,000 accounts in the city and suburbs.

The objectives of the audit were to determine whether the City,

• recorded meter read data in its water billing system in a timely manner;
• maintained a complete and accurate inventory of all locations receiving water service; and
• billed the legally required rate for temporary water usage from fire hydrants.

We found that DWM uploaded 100% of meter read data to the City’s water billing system in a timely manner, which is a critical step in the billing process. However, we also found that DWM allowed an estimated $3.9 million in free water use at private construction sites from June 2008 through December 2014. The revenue loss occurred because a permit fee for water used during construction activities was eliminated and the Department did not require property owners to install meters immediately after receiving a DWM water service connection.

In addition, we found that DWM was providing non-metered service to non-residential buildings and residential buildings with more than two units in violation of the MCC. DWM informed OIG that it identified 2,513 noncompliant, non-metered accounts in April 2011 and had worked to reduce that number to 837 by May of 2014. However, OIG’s examination of active accounts found that DWM had not identified all noncompliant non-metered accounts. Moreover, we found that DWM lacked a formal strategy for bringing noncompliant accounts into compliance in a timely manner.

We also found that the City provided $330,981 of water service to properties without collecting payment from property owners. DOF assigned an “inactive” status to accounts for 38 properties that were, in fact, receiving water service or had all necessary structures in place to receive water service. As a result, DOF failed to collect revenue for water used at 26 of those properties. DOF also lacked sufficient safeguards to prevent inappropriate classification of accounts as “permanently removed,” a classification limited to accounts for demolished buildings.

We reviewed a sample of water accounts and concluded that DWM maintained a complete inventory of properties with water service installed. However, we found gaps in the account verification process for new installations that could allow customers to receive water without being billed, although OIG saw no evidence that such an error has occurred.

Finally, we determined that DWM’s billing practices for temporary water usage from hydrants did not comply with the MCC. Specifically,

• DWM charged only one-third the rate prescribed by the MCC; and
• DWM granted fee waivers that are not authorized by the MCC.

In addition, DWM did not reliably track revenue generated from hydrant permits. As a result, we were unable to calculate the revenue lost due to DWM’s practices of granting fee waivers and charging a lower rate than required by the MCC.

OIG concluded that DWM effectively executed two processes that are crucial to the billing process—account creation and timely meter reading. However, DWM did not adequately charge for water use on private construction sites and hydrants, and gaps in DOF’s account status controls allowed some users to receive free water. OIG recommends that DWM ensure that all non-exempt customers are billed for water, bring all noncompliant, non-metered accounts into compliance with the MCC, and correct its billing practices related to hydrant permits. We recommend that DOF consider additional safeguards to prevent or detect inappropriate account classifications that could result in a failure to bill all accounts for water service.

In response to our audit findings and recommendations, DWM committed to begin requiring meter installations at the time new water service is requested and to take appropriate enforcement actions against noncompliant, non-metered accounts. DWM also stated that it will work with City Council to simplify the temporary water usage fee structure in order to ensure that it collects the appropriate fees for hydrant permits. DOF stated that it has created a weekly report that identifies accounts that may have been inappropriately deactivated for further review. DOF also stated that it has already reduced the number of users who can mark an account as permanently removed and will evaluate the feasibility of validating that the properties associated with permanently removed accounts were actually demolished.

FOR IMMEDIATE RELEASE: June 16, 2015

CONTACT: Rachel Leven, (773) 478-0534

OIG Publishes Audit of City Water Service Inventory and Revenue

The City of Chicago Office of Inspector General (OIG) has completed an audit of the City’s water service account inventory and revenue, managed primarily by the Department of Water Management (DWM) and the Department of Finance (DOF). OIG found that DWM maintained a complete inventory of water accounts and uploaded all meter read data to its billing system in a timely manner.

However, the audit also concluded that DWM lost an estimated $3.9 million in revenue from June 2008 through December 2014 because the City failed to charge for water used during new construction of privately-owned buildings. In response DWM states that it is changing its process to require meter installation at the time the City’s water main is tapped.

OIG further found that,

• DWM provides non-metered water service to non-residential buildings and residential buildings with three or more units in violation of Municipal Code of Chicago (MCC) § 11-12-210;
• DOF failed to bill and/or collect $330,981 from 26 accounts incorrectly coded as inactive or permanently removed;
• DWM charges a fee for hydrant permits that is approximately one-third the rate prescribed in the MCC and issues fee waivers that are not expressly authorized by the MCC.

In response to the audit findings, DWM states that it no longer issues fee waivers for temporary water use and commits to improving its overall fee structure for hydrant use in coordination with City Council. In addition, DOF took immediate actions in response to OIG’s audit including back billing appropriate accounts.

“With a large and complex operation such as the provision of water service by a major municipality, the question is less whether there are opportunities for improvement, but how leadership responds when and where opportunities are identified,” said Inspector General Joe Ferguson. “We are therefore especially pleased to report that both DWM and DOF have been quick to analyze their practices and respond to OIG’s recommendations from this audit. I encourage DWM to continue its work to bring non-metered water service accounts up to date with modern urban infrastructure and technology.”

The full report, and City’s response to the findings, can be found online at the OIG website: bit.ly/WTRAUD.

Follow OIG on Twitter @ChicagoOIG for the latest information on how OIG continues to fight waste, fraud, abuse, and inefficiency in Chicago government.

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FOR IMMEDIATE RELEASE: August 4, 2015

CONTACT: Rachel Leven, (773) 478-0534

OIG Releases Advisory Regarding the City’s Wellness Program

The City of Chicago Office of Inspector General (OIG) has released an advisory regarding Chicago Lives Healthy, the City’s employee wellness program. The advisory finds that the City is spending over $3 million annually on the wellness program contract with American Healthways Services, LLC, but does not track or measure the program’s performance and benefits in a way that sheds light on whether the program is meeting the City’s goal.

Research attempting to measure whether wellness programs deliver a return on investment or health improvements has yielded mixed results. The advisory suggests that, if Chicago Lives Healthy is renewed for 2016, the City establish a performance measurement framework for the program. Without such a framework, the City cannot make evidence-based, cost-benefit decisions about the future of Chicago Lives Healthy.

The City has declined to make any changes to the way it measures the program. In its written response, the City explains that it will continue to monitor Chicago Lives Healthy as it has done in the past.

“Chicago Lives Healthy is an admirable first attempt by the City to promote improvements in employee health. However, there are serious questions as to whether the program is achieving any demonstrable benefits and if it will ever do so,” said Inspector General Joseph Ferguson. “The uncertainty surrounding the effectiveness of this and other employee wellness programs makes it critical that the City use the data and lessons gleaned from the first two years of the program either to set and track explicit goals tailored to measurable, targeted policy objectives or allow the current multi-million dollar contract to sunset at the end of fiscal year 2015 and until such time as the City can identify measurable expectations and outcomes. In light of the current fiscal challenges, the City—however well-intentioned—simply cannot afford to invest in programs that have no discernable impact.”

The full report and City’s response can be found online at the OIG website: http://bit.ly/WellProg.

Follow OIG on Twitter @ChicagoOIG for the latest information on how OIG continues to fight waste, fraud, abuse, and inefficiency in Chicago government.

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This advisory finds that the City is spending over $3 million annually on the wellness program contract with American Healthways Services, LLC, but does not track or measure the program’s performance and benefits in a way that sheds light on whether the program is meeting the City’s goal.

The advisory suggests that, if Chicago Lives Healthy is renewed for 2016, the City establish a performance measurement framework for the program. Without such a framework, the City cannot make evidence-based, cost-benefit decisions about the future of Chicago Lives Healthy.

The City of Chicago Office of Inspector General (OIG) has completed a follow-up to its June 2015 audit of the City’s Water Service Account Inventory and Revenue. OIG concludes that the Departments of Water Management (DWM) and Finance (DOF) have begun implementation of the corrective actions related to the original audit findings.

The purpose of the 2015 audit was to determine whether the City recorded meter read data in its water billing system in a timely manner, maintained a complete and accurate inventory of all locations receiving water service, and billed the legally required rate for temporary water usage from fire hydrants. Our audit found that,

• DWM uploaded 100% of meter-read data to its billing system in a timely manner;
• beginning in June 2008, the City did not charge a permit or use fee for water used during private construction activities, resulting in estimated lost revenue of $3.9 million;
• DWM provided non-metered service to nonresidential buildings and residential buildings with more than two units in violation of Municipal Code of Chicago (MCC) § 11-12-210;
• the City provided $330,981 of water service to some properties without collecting payment from the property owners;
• DWM had a complete inventory of water service accounts, but gaps in the account verification process could allow future new customers to receive water without being billed; and
• DWM charged only one-third of the daily rate required by the MCC for temporary use of water from hydrants, issued fee waivers without express MCC authorization, and failed to track hydrant permit revenue.

Based upon the results of our audit, we recommended that the City,

• consider the feasibility of requiring meter installation immediately upon receipt of new water services;
• develop procedures to ensure all revenues collected on its behalf are completely and accurately recorded in its financial records;
• determine what, if any, action it should take to recoup the permit fee payments the City received but that were ultimately misallocated because of coding errors;
• develop and document a cost-effective strategy to enforce MCC § 11-12-210 by identifying the complete population of noncompliant, non-metered water service accounts and transitioning the accounts to metered service;
• continue its efforts to collect the $330,981 that should have been billed on 26 accounts;
• develop a method to detect or prevent the inappropriate classification of accounts as inactive;
• work with the vendor that administers the City’s billing system to limit the number of users who can mark accounts as permanently removed;
• consider whether it would be cost-effective to institute a process for periodically reviewing accounts marked as permanently removed to verify that staff appropriately classified those accounts;
• design and implement a method to ensure that the City’s account verification process identifies all new water service installations;
• correct the rates charged for temporary water usage to match the rates prescribed in MCC § 11-12-290;
• ensure its fee waiver policy complies with the MCC; and
• work with DOF to assess the cost-effectiveness of implementing practices that would allow it to track hydrant permit revenue.

In December 2015, OIG inquired with DWM and DOF regarding the status of the corrective actions the Departments committed to in response to OIG’s audit and any other actions they may have taken.

Based on the Departments’ follow-up responses, OIG concludes that DWM and DOF have begun implementation of their corrective actions. Once fully implemented, OIG believes the corrective actions reported by the Departments may reasonably be expected to resolve the core findings noted in the original audit.

An OIG inquiry determined that the City does not currently have a comprehensive risk management program and lacks the ability to analyze claims trends across the wide variety of claim types as is recommended best practice for local governments. This is a matter of significant concern because the City spends many tens of millions of dollars annually to pay claims. Based on the limited data available, OIG estimates that in 2013 and 2014 the City paid over $457.8 million in claims—$203.1 million for workers’ compensation, $146.3 million for police misconduct and other public safety claims, $54.9 million to settle a dispute with its parking meter contractor, and $53.5 million on other claims, such as property damage or personal injury due to vehicle accidents—averaging $4.4 million per week. We have raised our concern about the City’s lack of comprehensive risk management with the Department of Finance (DOF), which concurs that “regular analysis coupled with action taken as a result of that analysis may decrease claims and the associated liability.”[1]

We address this advisory to the Mayor’s Office because successful risk management depends on support and direction from the top. High-level support is also necessary because effective risk management requires coordination and cooperation across departments and direct access to all data and information needed for effective proactive claims analysis and risk management. We therefore urge the City to invest in a comprehensive approach to risk management that addresses all claim types. A successful approach will reduce the number and severity of personal injuries and property damage to the public and employees, and reduce the cost of claims, settlements, and judgments against the City.

[1] See page three of the memorandum from DOF to OIG dated March 15, 2016 in Appendix C.

FOR IMMEDIATE RELEASE: June 30, 2016

CONTACT: Rachel Leven, (773) 478-0534

OIG Advisory Suggests the City Embrace 

Comprehensive Risk Analysis to Address Millions in Claims Payments

The City of Chicago Office of Inspector General (OIG) has released an advisory identifying the absence of a comprehensive risk management program in Chicago and highlighting the substantial operational and fiscal benefits of implementing such a program. Based on the limited data available, OIG estimates that in 2013 and 2014 the City paid over $457.8 million in claims including $203.1 million for workers’ compensation, and $146.3 million for police misconduct and other public safety claims.

The advisory follows OIG inquiry into the state of the City’s risk management practices as well as an attempt by the Department of Finance (DOF) to analyze some of the City’s claims. Based on this work OIG’s advisory highlights three concerns for the Mayor’s Office:

1. The City currently lacks the kind of comprehensive risk management program found in comparable cities elsewhere in the United States.
2. Presently, to the extent the City undertakes risk management and claims related activity, responsibility is fragmented—being dispersed principally among DOF, Department of Law (DOL), and the City Council Committee on Finance. Moreover, the capability to address identified risks requires the voluntary cooperation of other City departments.
3. Similarly, the data needed for a comprehensive analysis resides in different forms and at least three separate databases controlled by DOF, DOL, and the Committee on Finance. The lack of complete and accurate claims data, organized through a centralized program, prevents comprehensive analysis.
4. DOF’s limited analysis excluded police misconduct and workers’ compensation claims, both of which are particularly expensive categories. DOF argued that “non-vehicle accident public safety claims” are “unique and dissimilar from claim types that are common across departments.” The Department also faced obstacles in acquiring worker’s compensation data. OIG’s advisory establishes that comprehensive risk management—as described by the Government Finance Officers Association and conducted in other cities—includes analysis of such claims.

Consolidating, refining, and augmenting this fractured system will require the Mayor and City Council to centralize and empower a risk management function at a high level of City government. Specifically, OIG suggests that the City create a Chief Risk Officer or equivalent office endowed with sufficient authority and resources to drive a risk management culture City-wide. OIG recommends that the role include robust data analysis, public reporting requirements, routine communication and collaboration with departments, as well as periodic review by City Council.

OIG’s report includes examples of comprehensive risk management in New York City, Los Angeles County, Maricopa County, and the City of Sacramento as well as documentation of OIG’s prior inquiry and DOF’s pilot analysis.

In response to OIG’s advisory the City stated that it would establish a cross-departmental risk management working group, including project management support to address the data concerns outlined in the advisory. The working group will include worker’s compensation claims in its analyses. However, the City states that, “at the outset, police misconduct will be excluded from the scope…In order to avoid pre-supposing the results of the Department of Justice review or duplicating those efforts.”

“Full inhabitation of our fiduciary responsibility to the taxpayers,” said Inspector General Joe Ferguson, “impels the City to move from its historical paradigm of reacting to claims in a fragmented manner as a cost of doing business, to a proactive model. A model that identifies trends and implements operational reforms that reduce the number of events giving rise to claims, such as is now commonplace in comparable municipalities like New York City. The creation of a working group is a good first step. I encourage the Mayor to include in its mission the completion of regular reports to City Council and the public on claims trends, recommendations for corrective actions, and progress towards risk reduction. In addition, police misconduct is a critical and expensive area of risk, and I urge the Mayor to plan for its regular examination and inclusion in the working group.”

The full report, and the City’s response to the findings, can be found online at OIG’s website: http://bit.ly/CARMS

Follow OIG on Twitter @ChicagoOIG for the latest information on how OIG continues to fight waste, fraud, abuse, and inefficiency in Chicago government.

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The City of Chicago Office of Inspector General (OIG) has completed a follow-up to its June 2015 Loading Zone and Residential Disabled Sign Processes audit of the Departments of Transportation (CDOT) and Finance (DOF). OIG concludes that CDOT and DOF have partially implemented corrective actions related to the audit findings.

Our original audit revealed that CDOT conducted site surveys and billing for loading zone signs, while DOF conducted site surveys and billing for disabled parking signs. Aldermen reviewed both types of sign requests, and, if approved via ordinance, CDOT installed the signs. The purpose of the audit was to determine if the applicable fees were collected and to identify any delays in the installation processes.

Regarding the loading zone sign process, OIG found that the City had failed to collect $3.9 million in recurring loading zone fees invoiced in 2013, and miscalculated installation fees resulting in overpayments of $10,550 by business owners who requested signs. Also, CDOT took an average of 337 days after receiving an approved request to install a loading zone sign. Based on our findings, OIG recommended that CDOT restructure the loading zone process to improve efficiency, as the department itself had proposed in 2013, or pursue alternative means of correcting problems with its billing and installation processes. Possible alternatives identified by OIG included creating a complete inventory of signs, thereby enabling CDOT to identify business owners responsible for annual fees, and developing procedures for collecting unpaid fees. In addition, we recommended that CDOT take measures to ensure that the installation fees charged, accurately reflected the Municipal Code of Chicago (MCC) requirements, and that the Department work with City Council to establish reasonable and specific timeframes for installation.

Regarding the residential disabled parking sign process, OIG found that the City had collected 100% of installation fees for signs installed in 2013, but failed to collect $3,250 in annual renewal fees and took an average of 207 days after receiving an approved request to install a disabled parking sign. Based on our findings, we recommended that DOF review all disabled parking sign records to ensure that they were marked with the appropriate billable status, and review the process to ensure accuracy moving forward. Also, we recommended that DOF work with City Council to develop a more cost-effective and timely way to provide residential disabled parking signs.

CDOT and DOF agreed to implement corrective actions in response to our recommendations. In April 2016, OIG followed up with the Departments regarding the status of the corrective actions, as well as any other actions they may have taken. Based on their responses, OIG concludes that, although CDOT did not restructure the loading zone process, it has fully implemented three of the recommended corrective actions, including by simplifying the sign approval process in cooperation with City Council, and it has partially implemented the fourth. DOF has begun the process of addressing our recommendations, but has not yet fully implemented one of the recommended corrective actions.

FOR IMMEDIATE RELEASE: July 05, 2016

CONTACT: (773) 478-0534, Rachel Leven

OIG Follow-Up Report on Audit of Loading Zone and Disabled Parking Sign Processes

The City of Chicago Office of Inspector General (OIG) has released a report in follow-up to a June 2015 audit of the City’s loading zone and residential disabled parking sign application processes.

Among the 2015 audit findings, OIG reported that the City failed to collect $3.9 million in recurring loading zone fees. OIG also found that it took the Chicago Department of Transportation (CDOT) an average of 337 days to install a loading zone sign upon receipt of a request. Based on our findings, OIG recommended that CDOT consider either restructuring the loading zone process or pursuing alternative means of correcting its billing and installation problems. In addition, we recommended CDOT ensure that installation fees accurately reflected Municipal Code of Chicago requirements and that CDOT work with City Council to establish reasonable and specific timeframes for installation.

In response to OIG’s follow-up inquiry, CDOT stated that, although it has not restructured the loading zone process, the Department has simplified the sign approval process in cooperation with City Council. The loading zone installation process now only requires the local alderman’s approval, rather than full City Council approval. CDOT also reported that it is in the final stages of addressing the problems OIG identified in its loading zone billing process.

Regarding the disabled parking sign process, OIG recommended in its 2015 audit that the Department of Finance (DOF) both examine all existing disabled parking sign records to ensure that they were marked with the appropriate billable status and review the billing process to ensure accuracy moving forward. OIG also recommended that DOF work with City Council to consider more cost-effective and timely ways to provide residential disabled parking signs.

In response to OIG’s follow up inquiry, DOF stated that it has worked with the City Council Committee on Pedestrian and Traffic Safety to schedule meetings regarding more timely ways to process requests for disabled parking signs. The Department also stated that it reviewed the records of installed disabled signs from 2014 onwards, and found that 2% of the related permits had not been billed for annual fees. According to DOF, it continues to examine its system. Once it determines what caused the 2% inaccuracy rate, it will resolve any problems.

“In addition to the internal changes that both DOF and CDOT have undertaken,” said Inspector General Joe Ferguson, “CDOT and City Council are working together to examine the loading zone approval process and determine where efficiencies can be made both for the benefit of the applicants and tax payers. I look forward to seeing similarly forward moving collaboration from DOF’s conversations.”

Both the original audit report and the full follow-up report can be found online at the OIG website: http://bit.ly/SGNADT2

Follow OIG on Twitter @ChicagoOIG for the latest information on how OIG continues to fight waste, fraud, abuse, and inefficiency in Chicago government.

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The Office of Inspector General (OIG) conducted an audit of the Department of Finance’s (DOF) billing for emergency medical services provided by the Chicago Fire Department (CFD).

The City began billing users for ambulance transports in 1985 “in order to take advantage of available reimbursements from Medicare, Medicaid and private insurance companies.”[1] According to CFD, the City’s total cost of providing emergency medical services—including both ambulance and fire company services—was $529.2 million in 2012, the most recent year for which CFD has performed this analysis. DOF does not bill for emergency medical services other than ambulance transports. Municipal Code of Chicago (MCC) § 4-68-130 gives DOF the authority to set “reasonable fees, as determined by the comptroller, for ambulance services rendered by public ambulances.” DOF bills for ambulance transports through a contract with a vendor.

The objective of the audit was to determine if DOF billed for emergency medical services accurately and completely. OIG found that,

• DOF billed accurately for emergency ambulance transports, but opportunities exist to strengthen its compliance practices;
• DOF’s billing for emergency ambulance transports was not complete, resulting in an estimated $160,799 of missed fee revenue in 2014;
• DOF could increase fee revenue by an estimated $696,594 annually if it expanded the range of City-provided emergency medical services subject to fees; and
• DOF could reduce costs by eliminating incentive fees from future contracts or, if the fees are maintained, clarifying how they are awarded.

OIG concluded that DOF billed accurately for emergency medical transports, but opportunities exist to increase fee revenue and reduce costs. We recommend that DOF consider reviewing unbilled accounts to ensure the completeness of billing, and expanding the range of services subject to a fee. We also recommend that DOF consider eliminating incentive fees from its contract with the billing vendor as a means of reducing costs. If it does not eliminate incentive fees, we recommend DOF more carefully review documentation used to justify monthly incentive payments.

In response to our audit findings and recommendations, DOF stated that it would evaluate the costs and benefits of implementing additional compliance activities to further align its compliance program with federal guidelines. DOF also committed to reviewing unbilled accounts to determine if any could have been billed. The Department stated that it will consider eliminating incentive fees from future vendor contracts, and work with CFD, the Office of Emergency Management and Communications (OEMC), and the Office of Budget and Management (OBM) to evaluate the costs and benefits of expanding the range of emergency medical services subject to fees.

[1] The City’s website states that “prior to 1985, this service was provided free of charge.” City of Chicago, Department of Finance, “Ambulance Bills,” accessed March 16, 2016, http://www.cityofchicago.org/city/en/depts/fin/supp_info/revenue/ambulance_bills.html.

FOR IMMEDIATE RELEASE: July 21, 2016

CONTACT: Rachel Leven, (773) 478-0534

OIG Audit Finds City Bills Accurately for Emergency Medical Services

The City of Chicago Office of Inspector General (OIG) has completed an audit of the Department of Finance’s (DOF) billing for emergency medical services (EMS) provided by the Chicago Fire Department. Based on the audit results, OIG concluded that DOF bills issued for emergency medical transports were accurate, but that the Department failed to bill for all transports eligible for billing and that opportunities exist to increase fee revenue and reduce costs.

Specifically, while DOF reviewed accounts to guard against overbilling, which can result in penalties and fees, the Department did not routinely review unbilled accounts to assure that they were accurately designated as not-billable. As a result, DOF’s billing for emergency ambulance transports was not complete, resulting in an estimated $160,799 of missed fee revenue in 2014.

In addition, although DOF is authorized to set reasonable fees for all ambulance services, currently DOF only bills for services that involve transporting the patient to the hospital. For example, when a patient is evaluated and treated on scene without transport, the City does not bill the patient for any services. However, if the patient is evaluated, treated, and transported to the hospital, the City bills the patient for all three services. OIG estimated that DOF could collect an additional $696,594 per year if it were to bill for incidents where ambulance crews provide treatment, but do not transport patients. Although Medicare and Medicaid will only pay for services that involve a transport, cities such as Dallas, San Antonio, and San Francisco charge private insurers and self-pay patients for such “treat-no-transport” services.

In response to these revenue findings, DOF stated that it would institute a monthly review of unbilled accounts. The Department will also undertake a cost/benefit analysis to determine whether it should charge for treat-no-transport services. If charges are implemented, the Department stated that it would, “work to develop a plan to minimize the impact on low-income patients and patients [who are] declining treatment.”

Finally, by comparing ambulance billing contracts held by other municipalities with DOF’s contract, OIG estimated DOF could save between $883,211 to $1.5 million annually by adopting certain compensation provisions. DOF stated that it will take this opportunity into account later this year when it negotiates a new contract.

“Our audit indicated that DOF has a robust billing system and that opportunities exist for adjustments that would improve both revenue and cost outcomes,” Inspector General Joe Ferguson stated. “DOF’s commitment to working through these issues and thereby further improving its management of the program should foster confidence in the Department as a proactive steward of public fiscal resources and services.”

The full report, and DOF’s response to the findings, can be found online at OIG’s website: http://bit.ly/DOFEMS

Follow OIG on Twitter @ChicagoOIG for the latest information on how OIG continues to fight waste, fraud, abuse, and inefficiency in Chicago government.

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The City of Chicago Office of Inspector General (OIG) has completed a follow-up to its July 2016 audit of the Department of Finance’s (DOF) billing for emergency medical services provided by the Chicago Fire Department (CFD). Based on DOF’s responses, OIG concludes that the Department has partially implemented corrective actions related to the audit findings.

The purpose of the July 2016 audit was to determine if DOF billed accurately and completely for emergency medical services through its contract with a billing vendor. Our audit found that,

• DOF billed accurately for emergency ambulance transports but opportunities existed to strengthen its compliance practices;
• DOF’s billing for emergency ambulance transports was not complete, resulting in an estimated $160,799 of missed fee revenue in 2014;
• DOF could increase fee revenue by an estimated $696,594 annually if it expanded the range of City-provided emergency medical services subject to fees; and
• DOF could reduce costs by eliminating incentive fees from future contracts or, if the fees are maintained, clarifying how they are awarded.

Based upon the results of our audit, we recommended that DOF,

• take measures to ensure that it bills completely for all billable transports, and consider expanding the range of services subject to a fee;
• consider eliminating the incentive fees from its contract with the billing vendor as a means of reducing costs; and
• if it does not eliminate incentive fees, more carefully review documentation used to justify monthly incentive payments.

In March 2017, OIG inquired with DOF regarding the status of the corrective actions the Department committed to in response to OIG’s audit and any other actions it may have taken. On the following pages we have summarized the four original audit findings and recommendations, as well as the Department’s response to our follow-up inquiry.

Based on DOF’s follow-up response, OIG concludes that DOF has implemented corrective actions to address the original audit’s first and second findings, partially implemented corrective actions to address the third finding, and has initiated implementation of corrective actions to address the fourth finding. Once fully implemented, OIG believes that the corrective actions reported by DOF may reasonably be expected to resolve the core findings noted in the original audit. We urge the Department to implement corrective actions, whether partially implemented or pending implementation, to resolve the third and fourth findings in our original audit report.