A new audit of Baltimore City’s finances found a laundry list of problems with how the health department and other agencies have managed federal funds, in many cases identifying problems the city had already been dinged for in previous years.

The 316-page report, compiled by a third-party auditing company, identified two dozen faults in the management of grants across the Baltimore City Health Department, the Finance Department and the Mayor’s Office of Homeless Services, among other agencies. The auditor did not discover any instances of fraud.

While results of the audit are dated, applying to the fiscal year that ended in June of 2022 — or two fiscal years ago — the findings show that many of the same problems in the city’s management of federal funds have persisted from year to year. Over half of the problems identified in the new audit are classified as “repeat findings,” with numerous issues surfacing in annual audits dating back to 2017.

It’s a pattern that has irked Comptroller Bill Henry, whose office said in a statement Tuesday that the audit findings show the city is in “dire need” of “drastic” improvements to its grants management processes. Henry singled out the Health Department’s deficiencies and expressed urgency to make quick and substantial improvements before vulnerable communities feel the consequences.

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“The Health Department has said the exact same thing in their corrective action plan year after year in every single audit,” Henry said. “It’s incredibly frustrating to hear an agency say they know how to fix a problem and still make only minimal progress, time after time.”

The audit notes repeated issues with agencies’ reporting processes, record-keeping and oversight of federal grants. Two programs administered by the health department that provide HIV prevention and care services for uninsured and underinsured residents were cited for significant reporting, record-keeping or monitoring issues, while the audit found that, in five different cases, the finance department and other agencies had different reporting processes and no record showing that the differences were ever reconciled.

Unfixed, the issues risk penalties or reduced funding from federal agencies.

The audit examined more than $177 million worth of grant programs, or about 63% of the federal funds spent by the city in the 2022 fiscal year.

In a statement, health department spokesperson Yianni Varonis pointed to steps the agency has taken to address shortcomings in its grant processes, including a recent meeting with city auditors to start a work group aimed at resolving grants management problems citywide. The health department has also updated policies to get in step with federal requirements, hired additional auditing and compliance staff and is overhauling its process for managing contracts, Varonis said.

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Both the health and finance departments pointed to steps the city has taken since the audited period to shore up grants management. Responding to a presentation of the audit at last week’s Board of Estimates meeting, Deputy Director of Finance Yoanna Moisides noted her department has since brought on a new director and stressed progress since the audited period in the implementation of Workday, the software Baltimore adopted in 2021 to transition away from paper timesheets and modernize other back-end functions, like accounting and procurement.

At the same time, staffing issues have strained many agencies, and Moisides told the board that the finance department’s grants management team is comprised of just three people.

Though the health and finance departments touted progress since the audited period, the findings come amid revelations of a recent and potentially costly failure by one city agency to claim reimbursements from the federal government. Earlier this year, the Mayor’s Office of Homeless Services missed a consequential deadline to get reimbursement from the U.S. Department of Housing and Urban Development on more than $10 million in payments to nonprofit housing providers, The Baltimore Banner reported — an error that may leave the city to eat the costs while jeopardizing its grant status with the federal agency.

Asked at a press conference last week about the audit findings in light of the fumble by the homeless services office, Mayor Brandon Scott pointed to monthly meetings his administration is holding aimed at restructuring the city’s grants management process. The first-term Democrat acknowledged there’s “much work to be done,” but also pointed to moves underway to modernize internal systems and minimize technological limitations he said have contributed to much of the issue.

While Henry expressed hope that future audits will reflect the improvements the city has made over the last two years, he also stressed that the problems highlighted in the new report can’t all be resolved through software changes alone.

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“I know we’re all expecting Dr. Workday’s magical tonic to take care of some of this,” the comptroller said at least week’s spending board meeting, referring to the new software. But he said numerous problems identified by the report are “culture issues” that hinge more on the execution of personnel than back-end software.

The latest audit findings also come as the city is working under federal deadlines to spend hundreds of millions of dollars in pandemic aid. Scott praised the execution and compliance measures of his pandemic aid office, which he has funded with over $12 million of the federal windfall, as a model for restructuring grant management in other parts of city government.

“We’ll be putting those kinds of things in place for all other agencies,” he said.

adam.willis@thebaltimorebanner.com

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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