Baltimore's finance department does not perform business inspections in an "efficient or effective" manner and has failed to maintain records to support whether employees show up for work or not, new audits released Wednesday show.
The performance and financial audits of the city's finance department are the second and third of 26 voter-mandated audits in Baltimore that must be completed by the end of 2016. The latest audits were conducted by City Auditor Robert McCarty.
The financial audit found the agency's financial statements are "free from material misstatement, whether due to fraud or error."
That said, auditors said they found "numerous errors" in preliminary financial statements, and lack of documentation about payroll records.
"The Bureaus within the Department of Finance did not consistently maintain records that documented the employees' daily attendance and could not provide approved leave, or compensatory time and overtime earned slips," the auditors found. "The lack of adequate controls over payroll attendance can create the opportunity for abuse."
For the performance audit, the auditors looked at the performance of finance department inspectors, who check businesses for proper licenses and to make sure taxes are collected.
The audit found that the seven inspectors did not perform their duties in an "efficient and effective manner," including attempted to inspect businesses that were closed and, in one case, inspecting a business not located in Baltimore City. Auditors wrote that less than 10 percent of attempted inspections they sampled were completed.
McCarty said auditors found the same payroll documentation problems with inspectors as they found elsewhere in the agency.
"Some inspectors may have been overpaid or underpaid," McCarty said.
Finance director Henry Raymond said he was pleased the audits found no "fraud, waste or abuse" in the agency. He disagreed that inspectors' work was inefficient, and said they need to check on vacant businesses from time to time to make sure they have not reopened and are skirting taxes.
"There's no way to know who's in business and who's not in business unless you do the inspections," Raymond said.
Mayor Stephanie Rawlings-Blake categorized the audit's findings as "relatively minor." She said the administration is happy to work with auditors to improve the finance department.
"We take seriously all of the recommendations," she said.
City Council President Bernard C. "Jack" Young said he believed the administration would address the issues.
"Finance does not dispute a lot of this stuff," he said. "They're putting policies and procedures in place so this doesn't happen again."
Young said he believed the books of many cities across the country are in similar shape to Baltimore's.
"We are not the only ones in this situation," he said. "We can do better and we should do better."
Comptroller Joan Pratt's Department of Audits typically conducts more than 10 audits per year. While an audit is performed each year of the city's overall budget, more exhaustive audits of individual agencies have been far rarer.
Baltimore council members, frustrated that some departments hadn't undergone agency-wide performance and financial audits in decades, took the issue to the voters in 2012. Voters approved a charter amendment requiring that 13 key agencies be audited every four years. Under the charter amendment, all of the audits must be completed by the end of the mayor's term in December 2016.