Baltimore finance department sent $2 million refund to wrong party, Inspector General reports

Published 8/9/2022 1:56 p.m. EDT, Updated 8/15/2022 9:54 a.m. EDT

The exterior of Baltimore City Hall.

A series of cascading errors by Baltimore’s finance department and city vendors led the Bureau of Revenue Collections to inadvertently send the wrong entity a check for $2 million, nearly $60,000 of which has not been recovered, according to a new report from the Office of the Inspector General.

The chronicle begins after a third-party vendor responsible for processing numerous city payments bungled a payment meant to satisfy a company’s roughly $1 million property tax bill, accidentally paying Baltimore on behalf of a different organization, the owner of which held about $1,600 in outstanding property tax. A public synopsis of the report, published Tuesday morning, does not name the parties involved.

The finance department attempted to transfer the payment from the organization’s account to the original company’s account — but instead applied another nearly $1 million payment to the organization, which received a check for $2,014,571.63. Rather than alerting the city, the organization’s owner deposited the check into their bank account on April 1.

The report synopsis blames the duplication error on “the city’s software system for property tax bills, provided to DOF by a contracted software vendor.”

The Bureau of Revenue Collections sent five demand letters on April 28 to the owner, organization and other addressees associated with them. The OIG sent subpoenas to the organization’s bank, which provided documents showing that the owner spent $58,355.55 of the funds and had an overdrawn balance. None of the money went to the organization’s $1,600 property tax bill, which remains outstanding.

The bank placed a hold on the owner’s account and wired the remainder back to Baltimore, but could not recover the spent money. The OIG alerted “appropriate law enforcement agencies,” which are conducting an ongoing investigation into the owner.

If the investigation leads to a successful prosecution, the city may be able to recoup the $60,000. The credit reporting company Experian advises consumers not to spend an unexpected windfall if a financial or bank error is made in their favor: “Even if the bank doesn’t notice its mistake, the money’s real owner will. When the bank investigates their customer’s complaint and finds the money in your account, they’ll naturally question why you didn’t report it.”

In her public synopsis of the report, Inspector General Isabel Mercedes Cumming recommended the city review the payment vendor’s and software vendor’s contracts for any financial loss protection agreements; finance director Henry Raymond said in a written response included in the report synopsis that his department will work on it with the law department.

Cumming also wrote that the finance department should coordinate with the software vendor “to develop processes to prevent future erroneous refund issues.”

Raymond blamed the erroneous refund on two factors: first, he wrote, the payment vendor transposed digits in the original company’s account number. Second, when the finance department “attempted to reverse the payment from [redacted’s] account and apply the payment to the correct vendor in [redacted software system], the payment did not reverse, but duplicated, creating a $2,014,571.63 credit,” he wrote. “To date, the vendor has been unable to recreate or explain the duplication. DOF will continue to follow up with the vendor to obtain an explanation.”

Raymond wrote that his department brought the matter to the OIG and law department once the error was discovered. He also updated the department’s policies, including a review of all refund transactions over $10,000 to confirm that the amount and recipient are correct, as well as a measure to ensure that accounts with outstanding bills do not receive refund checks.

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Raymond announced his retirement in November of last year, saying he would leave City Hall by April. The nearly 40-year veteran has stayed on past then as the administration seeks to hire a replacement.

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