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Audit of Baltimore finances shows 'significant deficiencies' in water billing, handling of grant money

An annual audit of Baltimore's finances found three "significant deficiencies," including in how the city handles water billing and grant money, according to City Auditor Robert L. McCarty.

McCarty, who reports to Baltimore Comptroller Joan M. Pratt, presented the audit's findings to the Board of Estimates last week. The audit covers all city spending for fiscal year 2014.

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Though the audit found 16 errors and other issues, McCarty said only three problems are considered "significant." The significant problems are a lack of control over the preparing of financial statements and recording of grant revenues, "systemic errors" affecting customers of the city's water bill system, and "widespread and pervasive errors" in how low-income energy grants were handled.

Baltimore finance director Henry Raymond said his department "concurs with the findings and is taking appropriate actions."

The audit uncovered $10 million in invoices that were recorded improperly and millions in grant revenue that was not recorded correctly.

"There was a lack of management review over certain accounts," McCarty said.

The audit also identified "systemic errors" in city water billing, affecting 70,000 accounts. That finding was an extension of a 2012 audit of city water-billing errors that resulted in $9 million in refunds. The 2014 audit stated that "as management has not corrected or replaced its water bill system ... systemic errors and limitations" still exist. The most recent audit will not trigger more refunds because it did not identify specific accounts that were overbilled.

Officials with Baltimore's water and wastewater system told the board they intend to switch to an upgraded billing system next month.

Problems with how low-income energy grants were awarded resulted in $7.2 million in questionable costs, the audit said. It recommended the city "improve internal controls" to fix the issue.

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