Baltimore City – Last week, the Board of Estimates noted a report of the Baltimore City Single Audit and the  Annual Comprehensive Financial Report (ACFR) for Fiscal Year 2021 (July 1, 2020 through June 30, 2021). It can be found on the Comptroller’s website.

The Single Audit is a report on how well the City adheres to rules required by the usage of federal funds. The ACFR is the official financial report for the city of Baltimore; a compiled set of financial statements that complies with the accounting requirements established by the Governmental Accounting Standards Board (GASB). Per ART. V, § 9 of the Baltimore City Charter, the ACFR is prepared by the Department of Finance (DOF) and audited by the City Auditor. The DOF engaged SB & Company to prepare the report. 

Findings: 

• Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. (Material Weakness) 
• The City had significant post year-end adjustments to its fiscal year 2021 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. (Material Weakness) 
• The City does not have a system that ensures proper approval and storage of employee timekeeping information among different departments. In addition, the timekeeping system that was used for the period July 1, 2020 – December 31, 2020 did not have the capability to maintain timekeeping records to support the time charged to certain Federal programs. (Material Weakness) 
• There was a significant number of water utility accounts that have not been billed since the new meter system has been implemented and a significant number of accounts have been billed inconsistently. The City’s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments (Material Weakness) 
• There are certain “severe/critical/high risk legacy vulnerabilities” – meaning information technology management systems - that have not been remediated. The absence of timely remediation increases the risk that vulnerabilities may be exploited leading to disruption of the City’s operations and/or theft/loss of data. (Material Weakness) 
• Certain agencies were unable to provide employee timesheets and other applicable payroll documentation for the period July 1, 2020 through December 31, 2020 in order to validate compliance and internal controls over Activities Allowed and Allowable Costs/Cost Principles. (Significant Deficiency). 
• There were agencies who did not provide evidence that City grant subrecipient monitoring was performed in accordance with federal uniform grant guidance. (Significant Deficiency) 
• There were instances where differences between the drawdown amounts for Federal grants when compared to the general ledger were not investigated to ensure funds were being expended prior to requests for reimbursement. (Significant Deficiency). 
• For one grant program, there were 17 out of 40 selections where the service dates occurred outside of the period of performance indicated in the grant award. (Significant Deficiency) 

The Department of Audits and SB & Company thanked the Department of Finance for their extensive collaboration. 

Response 

Workday, the enterprise application now used by the City of Baltimore for financial management and human resources, has been phased into City operations beginning in early 2021. Best practices dictated a gradual roll out of use of the system, which is not reflected in the ACFR. The transition from numerous stand-alone systems and spreadsheets into one, unified system has and will continue to provide opportunities for increased accuracy, accountability and unprecedented communication and collaboration between City agencies. 

The Workday transition and the findings highlighted in the ACFR have prompted DOF to design a large-scale city-wide action plan. This work is ongoing and includes daily Workday meetings on all open configuration and data issues as well as daily sub-group meetings focused on grants reviewing data loads and cost allocations. 

Work to implement and refine the new system is also informing revisions and enhancements to the City’s grants management policies notably, the Grants Management Office, in conjunction with Citywide stakeholders and Workday Project team have rewritten Administrative Manual policies including: 

• Grant Award policy (AM 413-50)  
• Grant Documentation policy (AM 413-60) 
• Grant Closeout policy (AM 413-70), and a newly created policy  
• Grant Subrecipient Monitoring and Management (AM 413-51) 

The Director of Finance Michael Moiseyev said, “These corrective actions are our top priority. Workday was long overdue, and I know that its implementation, along with our corrective action plan, will be positively reflected in the FY23 report.” 

“We conduct audits to support and improve performance and accountability. Many of these findings were captured in previous reports and are being worked on daily,” said Comptroller Bill Henry. “Bottom line – I want to assure residents and all of our constituents that we will be relentless in holding agencies accountable in building a stronger, more reliable financial system."