The very first finding in a new state audit of Baltimore schools is eye-catching:
Administrators failed to bill for hundreds of thousands of dollars that the school system was owed by outside organizations that it loaned its employees out to.
Testing the cases of four loaned employees, the Office of Legislative Audits found the school system never billed the $352,500 it was owed for two of them.
Equally striking: the exact same problem had been identified six years earlier, the last time the state conducted an audit of City Schools.
Loaning out employees for free was just one of many problem practices identified in 2012 and again in the latest audit of the Baltimore City Pubic School System (BCPSS).
Under-billing vendors, improperly awarding overtime, failing to select the lowest bidder in contract awards – the new audit reveals millions of dollars wasted as a result of these and other issues.
“BCPSS needs to establish better practices and internal controls and ensure the processes are effectively operating to comply with its policies and to control costs,” wrote legislative auditor Thomas J. Barnickel III.
CEO: Many Issues Resolved
In her response letter, CEO Sonja Santelises described the audit as “useful” and “an opportunity to reflect internally on how we can improve.”
She then focused on the improvements made since the 2012 audit. Of the 26 findings from the previous audit, the OLA was able to determine that 19 were satisfactorily addressed
“Most notable, in human resources and payroll, facilities construction, renovation and maintenance and inventory control and accountability and school board operations,” Santelises wrote.
The 20 findings in the latest audit include six holdovers issues and 14 new problems.
Santelises said the school system agreed in whole or in part with all of the 2018 report findings and that many of them “have already been resolved.”
Among the issues identified in the audit:
• Goods were purchased without prior approval and vendors were sometimes paid before services were received.
More than $10 million of purchase orders (representing 2,000 purchases) were retroactively processed, meaning they were not approved until after receiving the vendor’s invoice. “A significant portion” of these purchases – $3.6 million, to be exact – were for goods or services for the Information Technology Division or Chief Operating Office.
• Pay raises and new hires were made without proper review.
In 2017, $85,000 of salary adjustments were made by six employees who were permitted to do so without any independent review. One of them “processed approximately 8,500 of these adjustments totaling $14.7 million,” the auditors said, pointing out that “similar conditions were noted in our two preceding audit reports.”
• Poor control of overtime.
In a test of overtime payments for 23 employees, none had been approved in advance as required by policy. During 2016 “these 23 employees individually were paid overtime ranging from $2,821 to $51,849, with total collective overtime payments of $392,813.”
• Overpayments of overtime.
Although identified as a problem in a prior audit, city schools had still not corrected the overtime rate paid to employees in a certain union. The result: excess payments totaling $208,000 in 2015 and 2016.
• Overpayments to bus and taxi companies.
Various contract issues resulted in excess payments to bus companies of more than $1 million over a three-year period ending in June 2016. Among the issues was an incorrect formula to calculate fuel price fluctuations, which resulted in bus contractors being overpaid $498,000 in 2014 and 2015.
• Contracting issues.
The auditors noted failure to document the basis for the use of pre-qualified vendors for certain services and why, in some cases, higher priced vendors received work prior to lower cost vendors.
• Computer system security risks.
There were inadequate controls over sensitive, personally identifiable information, according to the audit. Over 64,000 Social Security numbers along with names and addresses, for example, were stored without encryption.