City Government
11:12 am
Thu July 3, 2014

City Lost More Than $70,000 In Bad Checks In 2013

An example of a check returned to the city by the bank because it was illegible.
An example of a check returned to the city by the bank because it was illegible.
Credit Liz Reid / 90.5 WESA

Since 2008, the city of Pittsburgh has lost more than $380,000 from checks returned by banks, due to non-sufficient funds or other problems.

Controller Michael Lamb announced the losses at a press conference Wednesday, saying he had just issued recommendations to the Department of Finance about how to fix the problem.

Chief among his recommendations: compile a list of all the points of entry for payments by check coming into the city.

“You have them throughout the city, where people are paying for things like records, permits, the various things that we do,” Lamb said. “Mostly we’re talking about licenses and permits is where we see the biggest problems.”

Aside from checks bouncing, Lamb said some checks were simply illegible, and pointed to an example of a check where a previous dollar amount and date had been crossed out and new information had been filled in.

“At the counter, at the point of transaction, there are things we can do to eliminate this kind of stuff,” Lamb said. “The $380,000 we’re talking about here, the bulk of that could have been eliminated with simple check handling procedures.”

In addition to training cashiers to reject checks that are illegible or have other obvious issues, Lamb said the city should implement an electronic check validation system.

“It has become standard operating procedure for most businesses right now,” Lamb said. “We’re not talking about some enormous capital investment here. It’s the kind of thing that citywide would cost us less than what we’re losing.”

Lamb’s third recommendation was that the Department of Finance enhance and standardize communication with departments when checks are returned by the bank. For example, Lamb said it was not currently clear if the Bureau of Building Inspection was notified when checks for permits bounced, so that they could then revoke those permits due to non-payment.

Lamb said Department of Finance Director Paul Leger has been responsive to his suggestions so far. At the time of publication, Leger was not available for comment on a timeline for possible implementation.

One possible solution to the problem that was not included in Lamb’s recommendations is for the city to begin accepting credit cards. Lamb said he recently spoke to City Council about the issue and is hopeful that it would move forward, but that his investigation focused solely on check handling procedures.

“We know that increased use of credit cards eliminates both this kind of problem and helps eliminate opportunities for fraud, because there’s no negotiable instrument that crosses a desk,” Lamb said.