Baltimore’s grant administration is plagued by accounting shortcomings
Many recurring problems could be resolved, auditor Josh Pasch tells the BOE, if “at the very highest level of leadership, you are taking an active role and interest.”
Above: Expenses and revenues for key government activities during the last fiscal year. (Baltimore CAFR, FY20)
Baltimore City spent $1 out of $3 on police and public safety last year and 3.2 cents of every dollar on sanitation and waste removal, the city’s annual financial report shows.
Police funding ($929.7 million) remained the largest single expenditure in fiscal 2020, fully 40% more than spending on public education ($556.4 million, much of it from the state) and 55% more than general government costs ($400.9 million).
The Comprehensive Annual Financial Report (CAFR) also revealed a number of “material weaknesses” in the city’s accounting of federal and state grants ($215 million in federal grants alone).
City Auditor, Josh Pasch told the Board of Estimates today that $49 million received by city agencies was not promptly and properly recorded by the finance department.
The number of accounts labeled as “unidentified cash receipts” with “significant uninvestigated balances” was considerably higher than in prior years, where the balances ranged from $12 million to $22 million, Pasch said.
The Silo Approach
Asked why, Pasch cited “lack of communication” between city agencies and the finance department as a key problem, compounded by multiple agency IT systems that could and should be integrated.
“Finance does not know what to book some of the revenues to, so the money basically gets put in a suspense account,” or a catch-all section of the general ledger, he said.
When City Council President Nick Mosby mused that the accounting issues were most likely “exacerbated by the urgency of the Covid-19 [pandemic],” Pasch repeated that the root cause was the “silo approach” found across city government.
Pasch said many of the same accounting problems come up every year. They could be resolved, he told the board, if “at the very highest level of leadership, you are taking an active role and interest in the programs and how to make accountability better.”
Administrator Chris Shorter was tasked today to fix the poor internal controls and lack of coordination uncovered by the CAFR report. (Office of the Mayor)
Scott Vows to Fix It
The report found “repetitive findings,” stretching over the last four years, of poor internal controls, inadequate sub-recipient monitoring and questioned costs across a spectrum of federally funded programs administered by the city.
Pasch cited, as examples, Community Services Block Grants, Home Investment Partnerships, Continuum of Care, Maternal and Child Health Services and HIV Emergency Relief.
His office also detected reporting and cost accounting problems with the Capitalization Grants for Clean Water, Highway Planning and Construction, the Coronavirus Relief Fund and Children’s Health Insurance Program (CHIP).
In response, Mosby and Comptroller Bill Henry agreed that the City Council should hold hearings to “get into the meat of some of these findings,” Henry said.
Mayor Brandon Scott vowed that “this important, non-sexy, tough work” will be tackled by the new city administrator, Chris Shorter, and veteran finance director, Henry Raymond.
“It’s going to take a lot of collaboration and bumping of heads to get this done. But we will get it done the right way. Because it’s the only way the city is going to move forward,” Scott said.