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Mobtown Beat

Audit Agony

Logistical, staffing issues barriers to money-saving checks on city government

Photo: Edward Ericson Jr., License: N/A

Edward Ericson Jr.

City Auditor Robert McCarty reads a prepared statement from Comptroller Joan Pratt to kick off testimony at City Council committee hearing.

Baltimore City’s financial transactions are in a computer database that would allow for auditing today, if only it were someone’s job to extract the data.

That is what members of a City Council committee learned in a Sept. 20 hearing on auditing “best practices.”

The hearing was convened to learn how Baltimore and other cities handle their audits. After much debate and many amendments, the council agreed in August to put a charter amendment before city voters that would for the first time require the audits of the 13 largest city agencies at least every four years. People who backed that effort now say the charter measure is too weak.

A Philadelphia city auditor said his department saved hundreds of millions of taxpayer dollars by auditing every city agency every other year, and a Baltimore researcher testified that most other big cities audit a lot more than Baltimore does. The meeting opened with Baltimore City Auditor Robert McCarty, who read a three-page text he said was supplied by the absent comptroller, Joan Pratt.

McCarty’s text was heavy on words like “unfunded mandates,” “federal assistance,” and bond rating. Summarized, he said his office audits the Comprehensive Annual Financial Report, known by its acronym, CAFR, because the city’s bond rating and its ability to obtain and keep federal money—over $200 million in this fiscal year—depend on that. His department handles other audit duties as resources permit, McCarty told members of the council’s Taxation, Finance and Economic Development committee, which is chaired by Carl Stokes (D-12th District). He said it would take 28 more auditors to do what the proposed charter amendment would require.

Noting that the city charter requires department audits at “appropriate intervals,” Stokes said, “currently we are out of compliance with the charter because we don’t do regular audits, correct?”

“Correct,” McCarty said.

Deputy Finance Director Henry Raymond disputed that. “The city is not out of compliance with its charter,” he told the committee, because every financial transaction is logged in the CityDynamics database. “If there is an expenditure of $30 for contractual services, there is a report saying who that vendor was,” Raymond said. “We’re not required to supply this on an agency level.”

The problem is formatting. If McCarty’s people do it, they can’t audit the results. And the auditor has no authority to order the heads of other departments to format the data either.

Raymond later told the committee that his department “will provide the data in the format the auditors need.”

The computer system is three years old. It was unclear why some departments had not been audited in 30 years or more.

Stokes asked McCarty what he plans to do if the director of Recreation and Parks does not hand over auditable financial statements by the end-of-September deadline. “When do you demand [compliance],” Stokes asked, “in order to do your charter-mandated duties?”

“I’ll meet with the acting director,” McCarty replied. “It does not seem like it can’t be done.”

“You’re giving people a license to steal,” Stokes said. “I’ve never seen a business where they don’t check the till at the end of the day.” He said assurances that the data were in the CityDynamics system were unbelievable unless someone was auditing the process by which those figures were entered. Recreation and Park takes cash payments, for example. They have not been audited in decades.

“We are in the process of finalizing the financial statements for Recreation and Parks,” Raymond said.

Harvey Rice, the first deputy to the Philadelphia comptroller, told the committee that his department audits all 40 of that city’s agencies annually, in addition to the single audit of the overall budget and the school district. The department also does performance audits, drilling down to see things like who enters the cash receipts at small agencies and if they’re being watched. The department does this with 86 auditors, nearly three times McCarty’s audit staff. Rice said his department had suffered budget cutbacks as well.

Mary Alice Ernish, who founded Audit Baltimore to advocate for more and better audits, told the committee that the city’s audit staff is “exceeded by only New York City and Philadelphia.” She said the city’s auditor needs to be more independent and report to City Council and be overseen by an audit committee. “We could produce millions of dollars in savings” with these best practices, she said.

Former city Recreation and Parks Director Chris Delaporte told the committee that, during his 2006 tenure, there were several million dollars “off the books,” adding that he personally caught someone who had embezzled more than a quarter-million dollars.

“I’ve seen a lot of this,” Delaporte said. “I can tell you, we’re wasting a lot of money.”

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