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Baltimore City racked up nearly $45 million in unpaid contractor bills between 2005 and 2017, unrealized revenue that finance officials decided to write off because they had no legal recourse if contractors refused to pay.
That was the finding of the Baltimore Office of the Inspector General in a report released Tuesday that also covered more recent unpaid and unbilled invoices for permits issued by the Department of Transportation.
According to the inspector general’s report, officials from the Department of Finance gave a presentation as the city was transitioning financial operations into Workday — software for handling core functions like payroll and contractor invoicing — that stated the city accrued $44.7 million in now-unrecoverable debts over 12 years, spanning mayoral administrations from Martin O’Malley to Catherine Pugh. Maryland law requires that lawsuits to collect a debt are filed within three years of when a debt was accrued, a provision the inspector general says finance officials cited to justify writing off those old debts, though they acknowledged the city could still pursue the money by billing the contractors.
The decision to write off the $44.7 million, mentioned briefly in a three-page synopsis of related findings by the inspector general, was relayed to the watchdog office by an unnamed witness of the Department of Finance presentation, which the watchdog also reviewed.
Inspector General Isabel Cumming and Deputy Inspector General Matthew Neil told The Baltimore Banner that their office was not able to assess each of the invoices comprising the $44.7 million but noted that the total was listed on the city’s books as the Workday transition got underway in late 2020 and early 2021. The unpaid invoices spanned across city agencies and averaged about $3.7 million in unrealized funds per year over the 12-year period.
Additionally, an inventory of outstanding bills in the Workday system shows $1.4 million in unpaid permits between 2017 and August of 2020, a period now outside the statute of limitations to pursue the debt in court. How much of that listed balance is really unpaid, though, remains unclear: An official with the city’s Bureau of Revenue Collections told the inspector general that they have stopped filing lawsuits for some Department of Transportation permits because they often found that the balance had in fact already been paid.
The report by Cumming’s office focused on more recent unbilled or erroneously billed invoices for a certain type of construction and roadwork permit, known as “right of way” permits, issued by the Department of Transportation. The investigation found that one company, which reported the issue to the watchdog, had not been billed by the city for $245,365, while a second company had an unpaid balance of $3.9 million. The finance department’s Bureau of Accounting and Payroll Services and the transportation department have since resolved $3 million of the debt by the second company, which the inspector general reported had a remaining balance of $1.4 million as of September.
A supervisor with the Bureau of Accounting and Payroll Services told the inspector general’s office that the first company may not have received invoices because of issues related to the Workday transition, short staffing in the agency or because invoices were sent to other contractors listed on the same permit.
In the case of the second company, the inspector general found that finance officials had been sending bills to the contractor’s physical mailing address, despite the company’s requirement that bills come through email.
In its recommendations, Cumming’s office asked the Department of Finance, the Department of Transportation and the city’s Bureau of Revenue Collections to coordinate with one another to ensure consistent procedures for right-of-way permits, and urged agencies to “carefully monitor” outstanding bills to avoid losing out on payments when the statute of limitations lapses.
In a response included in the investigation synopsis, Department of Transportation Director Corren Johnson said the agency stopped collecting payments at the time of permit pick up due to changes during the pandemic, but has taken steps this year to return to the old system. Johnson said the agency notified contractors that effective Nov. 1 payment will be due for permits at the time of pickup.
The agency acknowledged need for changes to its right of way permitting process and, among other measures, said it is instituting a monthly meeting to go over customer invoices and review unpaid balances.
Finance Director Michael Moiseyev, meanwhile, told the inspector general that the Bureau of Accounting and Payroll Services has created bills for all of the known right-of-way permits that were improperly billed or not billed at all. The department also added a position in late 2022 to oversee contractor payments, relieving that workload from a staffer who was overseeing both outgoing and incoming charges.
Finance officials did not directly address the $44.7 million in debts written off in their response.
adam.willis@thebaltimorebanner.com
This story has been updated to correctly identify the Bureau of Accounting and Payroll Services.
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Adam Willis covers city government for The Banner, including the impacts of the large COVID-19 stimulus package that Baltimore received from the federal government.
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