COSTELLO CONTINUES TO PRESS ON QUADRENNIAL AUDITS

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Today, the City Council’s Taxation, Finance, and Economic Development Committee held a hearing on a recently introduced resolution: Investigative Hearing – Reviewing Charter Required Agency Audits. I introduced the resolution in response to delays in the delivery of the first five of thirteen Charter-mandated agency audits. In January 2015, we held our first hearing on the status of the audits and plan for implementation. At that hearing, the Department of Finance committed to a completion date of June 30, 2015 for the first five of thirteen Charter-mandated agency audits–yet none have been completed to date.

Status of the first five Charter-mandated agency audits:

  • Department of Finance (Finance) – audited by City Auditor, to be completed November 30. However, the City Auditor believes this may be completed as early as end-October.
  • Baltimore City Recreation and Parks (BCRP) – audited by SB & Company, to be completed by November 30.
  • Department of Transportation (DOT) – audited by Hamilton, to be completed by November 30.
  • Baltimore Police Department (BPD) – audited by CLA, to be completed by December 15.
  • Department of Public Works (DPW) – audited by City Auditor, undetermined completion date. Financials should be provided to City Auditor by October 15, and within a week, performance scope should be completed, and third week of October, a timeframe for completion should be established, all of which will be shared with the Council.

Cause for the Delays:

Most of the above delays were attributed to Finance’s bandwidth to provide financial information to the City Auditor or external auditors for each of the respective agencies. The BPD delay was attributed to the events of April / May and a change in senior leadership.

Transparency:

In January, I requested that Finance publish a website with information on the status, scope, and process for its Charter mandated requirement to conduct the 13 quadrennial audits, which you may view here: http://finance.baltimorecity.gov/PublicInformation/QuadrennialAudits.aspx. This website is updated quarterly, but it currently lacks key information on timeframes and the performance scope for three of five agencies. Finance committed to update the website by no later than October 9.

Second Round of Audits:

The four City agencies slated for the second round of audits–Housing & Community Development (HCD), Fire (BFD), General Services (DGS), and the Mayor’s Office of Information Technology (MOIT)–have each selected external auditors, consistent with the Charter Amendment (each agency may choose the City Auditor or a pre-selected external auditor). The Board of Estimates will hear presentations for approval on October 7, 2015. If, as expected, the Board approves the proposals, the external auditors should receive notification within one business day, and receive initiation letters postmarked within the following week.

Concerns with Timeframe for Completion:

Due to the rash of delays, I remain skeptical of Finance’s ability to carry out the Charter Amendment by December 2016, although I was pleased to hear that the Director of Finance believes that this date is a “hard deadline which cannot be missed.” In response, I have requested that Finance expedite the third round of audits for the final four agencies–Department of Planning (Planning), Baltimore Development Corporation (BDC), Department of Law (Law), and Department of Human Resources (DHR). Originally, Finance planned to initiate this last round of audits after the completion of the second round, which would fall sometime around June 2016.

In addition to the cause for delays cited above, the Director stated that the three external auditors likely do not have the capacity to conduct more than one audit at a time without “staffing up.” The City Auditor stated that it only has the resources to conduct one or two of the remaining eight audits.

While I strongly believe that Finance ought to initiate the audits of the remaining eight agencies immediately, the capacity of the external auditors and the City Auditor has created a serious roadblock. As such, the Director of Finance has agreed to look into my request and circle back with the Council by no later than October 16, 2015.

Additional Information:

  • When the audits are delivered, they will include Recommendations for Executive Action. For example, if a finding of the DOT audit is that the agency could more effectively fill potholes with a different type of asphalt, then the report will recommend that the Director of DOT use a different type of asphalt. Agencies will have an opportunity to comment on the findings prior to the release of the audits, as is consistent with Generally Accepted Government Auditing Standards (GAGAS).
  • It is important to note that the responsibility for implementing the Charter Amendment lies solely with the Department of Finance. The City Council as well as the City Auditor (underneath the Comptroller) is NOT responsible for carrying out the Charter Amendment, and has no authority on this specific matter. I believe the City Council’s role is to provide adequate legislative oversight, which we have done to date, and will continue to do through December 2016.

Next Steps:

I have spoken with Chairman Stokes, who has expressed his willingness to hold monthly status hearings moving forward through December 2016. I will discuss this concept further with Council President Young and Chairman Stokes to determine the best approach to continue the Council’s role in oversight of the implementation of this Charter Amendment. I will also follow-up with the Director of Finance in two weeks to discuss my suggestion to expedite the third round of audits as well as other ideas for how to ensure the Charter-mandated audits are completed in advance of December 2016.