Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-008 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency over Eligibility Repeat Finding: No Condition: For 10 out of 40 selections, Maryland Office of Homeless Services (MOHS) management did not have evidence of case manager review of the participant file for eligibility requirements. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: MOHS did not have proper controls in place to ensure documentation was retained to support the eligibility requirements of the grant. Effect: MOHS may not be in compliance with the eligibility requirements of the grant. Questioned Costs: Unknown. Recommendation: We recommend that MOHS: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-009 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency and Noncompliance over Reporting Repeat Finding: Yes Condition: Management was unable to provide evidence to support the data included in the SF-425 report submitted to the Federal department. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, financial reporting requires an entity to complete the SF-425, Federal Financial Report ? For HOPWA. Grantees are required to only complete the sections on Program Income (Part 10. L-O), and Indirect Expenses (Part 11). Cause: The agency did not reconcile the information presented in the Federal expenditure report to the underlying records maintained by the agency and Finance. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with the Uniform Guidance requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-011 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency and Noncompliance Over Special Tests ? Housing Quality Standards Repeat Finding: No Condition: For 11 out of 40 selections, MOHS management was unable to provide support for documenting proof of home inspections and the results in fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 24 CFR sections 574.310(b)(1)-(2): All housing that involves acquisition, rehabilitation, conversion, lease, repair of facilities, new construction, project- or tenant-based rental assistance (including assistance for shared housing arrangements), and operating costs must meet various housing quality standards. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: MOHS experienced challenges in connecting with the City?s VPN system and was not able to perform the inspections as required. Effect: MOHS may not be in compliance with the housing quality standards requirements under Uniform Guidance. Questioned Costs: Unknown. Finding 2022-011 (continued) Recommendation: We recommend that MOHS: (1) implement proper documentation controls to ensure the housing quality standards requirements are being followed and, (2) follow the AM 413-61 retention policy. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-010 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Material Weakness over Subrecipient Monitoring Repeat Finding: Yes Condition: For 3 out of 4 selections, the Mayor's Office of Homeless Services (MOHS) management was unable to provide evidence that subrecipient monitoring was performed. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Pursuant to 31 USC 7502(f)(2) (Single Audit Act Amendments of 1996 (Pub. L. No. 104-156)), 2 CFR sections 200.330, .331, and .501(h), a pass-through entity must identify the award and applicable requirements, evaluate risk, monitor, and ensure accountability of subrecipients. Cause: MOHS did not maintain adequate documentation of the requirements included in Uniform Guidance related to procedures required for subrecipient monitoring. Effect: The subrecipient could not be in compliance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend that MOHS establish and implement controls for the program and prepare and maintain a written plan perform risk assessments on potential subrecipients. Additionally, we recommend that MOHS provides training on the Uniform Guidance requirements related to subrecipient monitoring. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-020 U.S. Department of Health and Human Services AL No. 93.914 HIV Emergency Relief Project Grants Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: For 1 out of 1 selection, we were unable to agree the drawdown amount to the general ledger to ensure funds were being expended prior to requesting the reimbursement. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-020 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-020 U.S. Department of Health and Human Services AL No. 93.914 HIV Emergency Relief Project Grants Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: For 1 out of 1 selection, we were unable to agree the drawdown amount to the general ledger to ensure funds were being expended prior to requesting the reimbursement. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-020 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-016 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 60 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City may not be in compliance with the period of performance requirements. Questioned Costs: $338,882. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-017 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Reporting Repeat Finding: No Condition: For 2 out of 3 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported in the expenditure report to the state to ensure completeness, accuracy and compliance with required accounting basis. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-017 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditee Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-016 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 60 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City may not be in compliance with the period of performance requirements. Questioned Costs: $338,882. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-017 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Reporting Repeat Finding: No Condition: For 2 out of 3 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported in the expenditure report to the state to ensure completeness, accuracy and compliance with required accounting basis. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-017 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditee Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-018 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Material Weakness and Noncompliance over Period of Performance Repeat Finding: No Condition: For 22 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: Unallowed expenditures could be charged to the grant. Questioned Costs: $201,213. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-019 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: For 1 out of 2 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported on the General Transportation report to ensure completeness, accuracy and compliance with required accounting basis. Additionally, Baltimore City Health Department (BCHD) was unable to provide the Healthy Start Aggregate Data Report report. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-019 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-018 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Material Weakness and Noncompliance over Period of Performance Repeat Finding: No Condition: For 22 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: Unallowed expenditures could be charged to the grant. Questioned Costs: $201,213. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-019 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: For 1 out of 2 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported on the General Transportation report to ensure completeness, accuracy and compliance with required accounting basis. Additionally, Baltimore City Health Department (BCHD) was unable to provide the Healthy Start Aggregate Data Report report. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-019 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-014 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Eligibility Repeat Finding: No Condition: For 11 out of 60 selections, no support was provided by management to verify all eligibility requirements of program participants. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. As defined in the compliance supplement, grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans? benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the state?s established poverty level, or 60 percent of the state median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the state?s poverty level (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: The agency did not have proper controls in place to ensure the eligibility requirements of the grant were met. Finding 2022-014 (continued) Effect: The City may not be in compliance with the eligibility requirements of the grant. Questioned Costs: $8,135.00. Recommendation: We recommend that the City: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-015 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 6 out of 40 selections, the transactions were incurred outside of the fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Additionally, at least 90 percent of the LIHEAP block grant funds payable to the grantee must be obligated in the federal fiscal year in which they are awarded. Up to 10 percent of the funds payable may be held available (or ?carried over?) for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the following fiscal year must be returned to ACF. There are no limits on the time period for expenditure of funds (42 USC 8626). Cause: The agency did not have proper controls in place to ensure the period of performance requirements of the grant were met. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $22,354. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Finding 2022-015 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-014 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Eligibility Repeat Finding: No Condition: For 11 out of 60 selections, no support was provided by management to verify all eligibility requirements of program participants. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. As defined in the compliance supplement, grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans? benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the state?s established poverty level, or 60 percent of the state median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the state?s poverty level (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: The agency did not have proper controls in place to ensure the eligibility requirements of the grant were met. Finding 2022-014 (continued) Effect: The City may not be in compliance with the eligibility requirements of the grant. Questioned Costs: $8,135.00. Recommendation: We recommend that the City: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-015 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 6 out of 40 selections, the transactions were incurred outside of the fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Additionally, at least 90 percent of the LIHEAP block grant funds payable to the grantee must be obligated in the federal fiscal year in which they are awarded. Up to 10 percent of the funds payable may be held available (or ?carried over?) for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the following fiscal year must be returned to ACF. There are no limits on the time period for expenditure of funds (42 USC 8626). Cause: The agency did not have proper controls in place to ensure the period of performance requirements of the grant were met. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $22,354. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Finding 2022-015 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-012 U.S. Department of Treasury AL No. 21.019 Coronavirus Relief Fund (CARES) Material Weakness over Subrecipient Monitoring Repeat Finding: Yes Condition: For 1 out of 1 selection, there was no evidence that subrecipient monitoring was performed. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Pursuant to 31 USC 7502(f)(2) (Single Audit Act Amendments of 1996 (Pub. L. No. 104-156)), 2 CFR sections 200.330, .331, and .501(h), a pass-through entity must identify the award and applicable requirements, evaluate risk, monitor, and ensure accountability of subrecipients. Cause: Program personnel were unaware of the requirement included in Uniform Guidance related to procedures required for subrecipient monitoring. Effect: The subrecipient may not be in compliance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend that the agency establish and implement controls for the program and prepare and maintain a written plan to monitor its subrecipients. Additionally, we recommend training on the Uniform Guidance requirements related to subrecipient monitoring. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-013 U.S. Department of Health and Human Services AL No. 21.023 Emergency Rental Assistance Program Significant Deficiency and Noncompliance over Reporting Repeat Finding: No Condition: Management was unable to provide evidence that the SF-425 Federal Financial Report was filed. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, financial and performance reporting requires Emergency Rental Assistance Program (ERAP) to complete the SF-425, Federal Financial Report and the ERA Compliance Report. Cause: Management was unaware of the SF-425 report requirement. Effect: Management was not in compliance with the reporting requirements of the grant. Questioned Costs: None. Recommendation: We recommend the department establish and implement controls to maintain compliance with reporting requirements in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-008 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency over Eligibility Repeat Finding: No Condition: For 10 out of 40 selections, Maryland Office of Homeless Services (MOHS) management did not have evidence of case manager review of the participant file for eligibility requirements. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: MOHS did not have proper controls in place to ensure documentation was retained to support the eligibility requirements of the grant. Effect: MOHS may not be in compliance with the eligibility requirements of the grant. Questioned Costs: Unknown. Recommendation: We recommend that MOHS: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-009 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency and Noncompliance over Reporting Repeat Finding: Yes Condition: Management was unable to provide evidence to support the data included in the SF-425 report submitted to the Federal department. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, financial reporting requires an entity to complete the SF-425, Federal Financial Report ? For HOPWA. Grantees are required to only complete the sections on Program Income (Part 10. L-O), and Indirect Expenses (Part 11). Cause: The agency did not reconcile the information presented in the Federal expenditure report to the underlying records maintained by the agency and Finance. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with the Uniform Guidance requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-011 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Significant Deficiency and Noncompliance Over Special Tests ? Housing Quality Standards Repeat Finding: No Condition: For 11 out of 40 selections, MOHS management was unable to provide support for documenting proof of home inspections and the results in fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 24 CFR sections 574.310(b)(1)-(2): All housing that involves acquisition, rehabilitation, conversion, lease, repair of facilities, new construction, project- or tenant-based rental assistance (including assistance for shared housing arrangements), and operating costs must meet various housing quality standards. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: MOHS experienced challenges in connecting with the City?s VPN system and was not able to perform the inspections as required. Effect: MOHS may not be in compliance with the housing quality standards requirements under Uniform Guidance. Questioned Costs: Unknown. Finding 2022-011 (continued) Recommendation: We recommend that MOHS: (1) implement proper documentation controls to ensure the housing quality standards requirements are being followed and, (2) follow the AM 413-61 retention policy. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-010 U.S. Department of Housing and Urban Development (HUD) AL No. 14.241 Housing Opportunities for Persons with AIDS Material Weakness over Subrecipient Monitoring Repeat Finding: Yes Condition: For 3 out of 4 selections, the Mayor's Office of Homeless Services (MOHS) management was unable to provide evidence that subrecipient monitoring was performed. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Pursuant to 31 USC 7502(f)(2) (Single Audit Act Amendments of 1996 (Pub. L. No. 104-156)), 2 CFR sections 200.330, .331, and .501(h), a pass-through entity must identify the award and applicable requirements, evaluate risk, monitor, and ensure accountability of subrecipients. Cause: MOHS did not maintain adequate documentation of the requirements included in Uniform Guidance related to procedures required for subrecipient monitoring. Effect: The subrecipient could not be in compliance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend that MOHS establish and implement controls for the program and prepare and maintain a written plan perform risk assessments on potential subrecipients. Additionally, we recommend that MOHS provides training on the Uniform Guidance requirements related to subrecipient monitoring. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-020 U.S. Department of Health and Human Services AL No. 93.914 HIV Emergency Relief Project Grants Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: For 1 out of 1 selection, we were unable to agree the drawdown amount to the general ledger to ensure funds were being expended prior to requesting the reimbursement. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-020 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-020 U.S. Department of Health and Human Services AL No. 93.914 HIV Emergency Relief Project Grants Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: For 1 out of 1 selection, we were unable to agree the drawdown amount to the general ledger to ensure funds were being expended prior to requesting the reimbursement. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-020 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-021 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance over Cash Management Repeat Finding: Yes Condition: We were not able to agree the expenditure amount of expenditures per the drawdown request to the expenditure details per the general ledger. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.305, if unearned revenue balances are identified, balances must be consistent with the requirement to minimize the time between drawing and disbursing Federal funds. If advance payments are identified, verify that the non-Federal entity minimized the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity. Under the reimbursement method, ascertain if the entity paid for the costs for which reimbursement was requested prior to the date of the reimbursement request. When a program receives program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, or interest earned on such funds; ascertain if these funds were disbursed before requesting additional Federal cash draws. Review records to determine if interest in excess of $500 per year was earned on Federal cash draws. If so, determine if it was remitted annually to the Department of Health and Human Services, Payment Management System. According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director Conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1) program documentation; (2) timesheets; (3) deliverables; (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all Federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Finding 2022-021 (continued) Cause: The agency did not reconcile information presented in the expenditure report to the underlying records. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: The City may not be in compliance with the cash management requirements in accordance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with cash management requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-022 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 40 selections, the transactions were incurred outside of the grant?s period of performance. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $117,153. Recommendation: Management agrees with the finding. We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-023 U.S. Department of Health and Human Services AL No. 93.940 HIV Prevention Activities Health Department Based Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The Federal Financial Report was not approved by authorized personnel and the submission date was not provided. Additionally, management was unable to provide the Performance Progress and Monitoring Report. Criteria: In accordance with 2 CFR ?200.303, The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, the grant agreement requires the Federal Financial Report to be submitted no later than 90 days after the period of performance end date through recipient online accounts in the Payment Management System and the Performance Progress and Monitoring Report. Cause: The agency did not reconcile information reported in the expenditure report to the state to the underlying records. Finance and the agency use different parameters for running reports and neither department reconciled the other reporting completed. Effect: The City may not be in compliance with the reporting requirements in accordance with Uniform Guidance. Finding 2022-023 (continued) Questioned Costs: Unknown. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-024 U.S. Department of Health and Human Services AL No. 93.977 Sexually Transmitted Diseases (STD) Prevention and Control Grants Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 4 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. According to 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $276,183. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers are recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-016 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 60 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City may not be in compliance with the period of performance requirements. Questioned Costs: $338,882. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-017 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Reporting Repeat Finding: No Condition: For 2 out of 3 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported in the expenditure report to the state to ensure completeness, accuracy and compliance with required accounting basis. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-017 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditee Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-016 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Period of Performance Repeat Finding: Yes Condition: For 10 out of 60 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: The City may not be in compliance with the period of performance requirements. Questioned Costs: $338,882. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-017 U.S. Department of Health and Human Services AL No. 93.767 Children?s Health Insurance Program (CHIP) Material Weakness and Noncompliance Over Reporting Repeat Finding: No Condition: For 2 out of 3 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported in the expenditure report to the state to ensure completeness, accuracy and compliance with required accounting basis. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-017 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditee Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-018 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Material Weakness and Noncompliance over Period of Performance Repeat Finding: No Condition: For 22 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: Unallowed expenditures could be charged to the grant. Questioned Costs: $201,213. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-019 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: For 1 out of 2 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported on the General Transportation report to ensure completeness, accuracy and compliance with required accounting basis. Additionally, Baltimore City Health Department (BCHD) was unable to provide the Healthy Start Aggregate Data Report report. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-019 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-018 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Material Weakness and Noncompliance over Period of Performance Repeat Finding: No Condition: For 22 of 40 expenditure transactions selected for testing, the transactions were incurred outside of the period of the performance for the grant. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Cause: There was a timing delay at the end of the fiscal year between the agency billing the grant and when the actual expenditure was recorded in the GL system to create the SEFA. Effect: Unallowed expenditures could be charged to the grant. Questioned Costs: $201,213. Recommendation: We recommend the City establish and implement internal controls that provide reasonable assurance that grant expenditures recorded in the general ledgers were recorded in the proper grant period. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-019 U.S. Department of Health and Human Services AL No. 93.778 Medical Assistance Program (Medicaid; Title XIX) Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: For 1 out of 2 selections, we were unable to agree the expenditure details from the general ledger to the amounts reported on the General Transportation report to ensure completeness, accuracy and compliance with required accounting basis. Additionally, Baltimore City Health Department (BCHD) was unable to provide the Healthy Start Aggregate Data Report report. Criteria: In accordance with 2 CFR 200.303: Internal Control, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.302: Financial management. (a) Each State must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The agency did not reconcile information presented in the expenditure report to the general ledger. Finance and the agency use different parameters for generating reports and there was no documentation of the reconciling differences. Effect: Expenditures reported to the Federal government could be inaccurate. Questioned Costs: Unknown. Finding 2022-019 (continued) Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-014 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Eligibility Repeat Finding: No Condition: For 11 out of 60 selections, no support was provided by management to verify all eligibility requirements of program participants. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. As defined in the compliance supplement, grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans? benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the state?s established poverty level, or 60 percent of the state median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the state?s poverty level (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: The agency did not have proper controls in place to ensure the eligibility requirements of the grant were met. Finding 2022-014 (continued) Effect: The City may not be in compliance with the eligibility requirements of the grant. Questioned Costs: $8,135.00. Recommendation: We recommend that the City: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-015 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 6 out of 40 selections, the transactions were incurred outside of the fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Additionally, at least 90 percent of the LIHEAP block grant funds payable to the grantee must be obligated in the federal fiscal year in which they are awarded. Up to 10 percent of the funds payable may be held available (or ?carried over?) for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the following fiscal year must be returned to ACF. There are no limits on the time period for expenditure of funds (42 USC 8626). Cause: The agency did not have proper controls in place to ensure the period of performance requirements of the grant were met. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $22,354. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Finding 2022-015 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-014 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Eligibility Repeat Finding: No Condition: For 11 out of 60 selections, no support was provided by management to verify all eligibility requirements of program participants. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. As defined in the compliance supplement, grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans? benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the state?s established poverty level, or 60 percent of the state median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the state?s poverty level (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). According to AM 413-60, Grant Documentation, Grant Manager/Program Manager/Director conducts ongoing monitoring and control of all reimbursement receipts and deposits until grant ends; as well as all program and sub-recipient (when applicable) documentation, to include: (1). program documentation; (2). timesheets, (3) deliverables, (4) activities; (5) vendor payments; (6) program data/charts/numbers; and (7) financial and compliance report. According to AM 413-61, Grant Management Financial Reporting, Grant Manager/Program Manager/Director maintains all documentation, either electronic or hard copy, for all federally funded grants for the term of the grant for a minimum of seven years for review and audit by the granting agency or its designee. Cause: The agency did not have proper controls in place to ensure the eligibility requirements of the grant were met. Finding 2022-014 (continued) Effect: The City may not be in compliance with the eligibility requirements of the grant. Questioned Costs: $8,135.00. Recommendation: We recommend that the City: (1) follow AM 413-60 and AM 413-61 for documentation and retention of the review and approval of eligibility criteria; and (2) provide training about procedures related to the documentation of eligibility evaluations. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-015 U.S. Department of Health and Human Services AL No. 93.568 Low-Income Home Energy Assistance Program Significant Deficiency and Noncompliance over Period of Performance Repeat Finding: No Condition: For 6 out of 40 selections, the transactions were incurred outside of the fiscal year 2022. Criteria: In accordance with 2 CFR ?200.303: The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Additionally, at least 90 percent of the LIHEAP block grant funds payable to the grantee must be obligated in the federal fiscal year in which they are awarded. Up to 10 percent of the funds payable may be held available (or ?carried over?) for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the following fiscal year must be returned to ACF. There are no limits on the time period for expenditure of funds (42 USC 8626). Cause: The agency did not have proper controls in place to ensure the period of performance requirements of the grant were met. Effect: The City was not in compliance with the period of performance requirements. Questioned Costs: $22,354. Recommendation: We recommend the City establish and implement controls to maintain compliance with reporting requirements. Finding 2022-015 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-012 U.S. Department of Treasury AL No. 21.019 Coronavirus Relief Fund (CARES) Material Weakness over Subrecipient Monitoring Repeat Finding: Yes Condition: For 1 out of 1 selection, there was no evidence that subrecipient monitoring was performed. Criteria: In accordance with 2 CFR ?200.303, The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Pursuant to 31 USC 7502(f)(2) (Single Audit Act Amendments of 1996 (Pub. L. No. 104-156)), 2 CFR sections 200.330, .331, and .501(h), a pass-through entity must identify the award and applicable requirements, evaluate risk, monitor, and ensure accountability of subrecipients. Cause: Program personnel were unaware of the requirement included in Uniform Guidance related to procedures required for subrecipient monitoring. Effect: The subrecipient may not be in compliance with Uniform Guidance. Questioned Costs: Unknown. Recommendation: We recommend that the agency establish and implement controls for the program and prepare and maintain a written plan to monitor its subrecipients. Additionally, we recommend training on the Uniform Guidance requirements related to subrecipient monitoring. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-013 U.S. Department of Health and Human Services AL No. 21.023 Emergency Rental Assistance Program Significant Deficiency and Noncompliance over Reporting Repeat Finding: No Condition: Management was unable to provide evidence that the SF-425 Federal Financial Report was filed. Criteria: In accordance with 2 CFR ?200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, financial and performance reporting requires Emergency Rental Assistance Program (ERAP) to complete the SF-425, Federal Financial Report and the ERA Compliance Report. Cause: Management was unaware of the SF-425 report requirement. Effect: Management was not in compliance with the reporting requirements of the grant. Questioned Costs: None. Recommendation: We recommend the department establish and implement controls to maintain compliance with reporting requirements in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-001 Programs: All Material Weakness over Grant Accounting Function Repeat Finding: Yes Condition: Due to lack of formal procedures and accountability at various departments, the City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts. There is a lack of communication between the departments that receive grants and the Baltimore City Department of Finance (Finance) that consolidates information received from the various departments and uses it to assemble financial statements. Grant revenues and expenditures are often allocated to incorrect general ledger accounts which could result in overcharging certain grant accounts, overstating deferred revenues for other grant accounts, and improper billings of certain grants. Criteria: The City is responsible for properly tracking and accounting for State, Federal and other grants in accordance with accounting principles generally accepted in the United States of America and following Administrative Manual (AM) Grant Policies 413-00 through 413-70. Cause: Finance reports grant revenue, grant accounts receivable and grant deferred revenue balances based on the information provided and maintained by various departments that receive State, Federal, and other grants. Finance does not have the authority to enforce timely preparation and reconciliation of grant account balances from departments. The City?s general ledger software makes it difficult to properly track revenues and expenditures for multi-year grants that go across fiscal and award years due to reporting constraints with the software and the ability to record items to prior year codes. The City also does not have staff dedicated to properly account for the grant activity and related details required. Effect: The City is not able to establish accurate balances of grant accounts receivable and grant deferred revenue accounts; expenditures reported on the Schedule could be misstated. Questioned Costs: Unknown. Recommendation: We recommend enforcement of the AM Grant Policies 413-00 through 413-70 to ensure timely and proper tracking and accounting for grant revenues and expenditures. We also recommend timely and proper reconciliation of grant account balances from central general ledger to systems maintained at individual departments that receive grants. In addition, the City should continue its investment in and implementation of new general ledger software that would be able to accommodate the accounting and recordkeeping for grants received by the City and dedicate staff to properly account for its grant activities. Finding 2022-001 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-002 Programs: All Material Weakness over Financial Reporting Repeat Finding: Yes Condition: The City had a number of post year-end adjustments to its fiscal year 2022 financial statements. Such adjustments relate to errors (both material and immaterial) undiscovered throughout the fiscal year. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Cause: Finance reports financial information based on the information provided and maintained by various departments that process property tax activities, water and sewer activities, capital asset activity, and internal fund balance/transfer activity. Finance does not have the authority to enforce timely preparation and reconciliation of activity and account balances from departments. The City?s general ledger software, makes it difficult to properly track property tax receivables, water billings, capital assets, and certain internal fund balances. Management informed us that Finance does not have staff dedicated to review these transactions throughout the year and rather relies on department personnel to process transactions and Finance performs manual post-closing reviews of such balances and related activity. Due to the voluminous amount of activity in these accounts, it is difficult to perform a thorough post-closing review and detect all material errors. Additionally, because of the number of errors detected, information provided throughout the year may be materially incorrect. The City does not have adequate financial reporting software that can generate financial statements for a governmental entity and requires significant manual changing of data to create the financial statements. The City has invested in new software but as of June 30, 2022 was still working to customize the software for the City?s needs and had not yet fully implemented any functions of the software. Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We strongly recommend the City to develop a formal written procedure to develop monthly and year-end financial reporting procedures and checklists and to consider obtaining more resources to assist in preparation of financial statements. Finding 2022-002 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-003 Programs: All Material Weakness over Water and Wastewater Billing Function Repeat Finding: Yes Condition: Department of Public Works (DPW) is responsible for accurate and timely billing for water and wastewater utilities. In fiscal year 2017, the City changed its billing rate model and implemented a new UMAX billing system for billing of City residents. A significant number of accounts have not been billed since the system has been implemented and a significant number of accounts have been billed inconsistently. The Bureau of Payroll and Accounting Services with the help of DPW had to make an estimate of revenue earned in fiscal year 2022 and not billed. Criteria: The City is responsible for timely and accurate billing for City residents and recordation of water and wastewater utility services in accordance with accounting principles generally accepted in the United States of America. Cause: During the transition of the City?s water and wastewater utilities billing system, errors in the transfer of underlying database information caused a significant number of customer accounts to be not billed or billed inconsistently. Effect: The City?s water and wastewater utilities system is not able to establish accurate water and wastewater utilities revenue and accounts receivable balances without manually calculated adjustments and this is a greater risk of error due to manual adjustments. Questioned Costs: None. Recommendation: We strongly recommend the City develop a formal written procedure to develop timely and accurate billing for water and wastewater utilities. The City should reconcile all accounts to the water billing system. The City should properly train and develop staff prior to implementation of any new systems. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-004 Programs: All Material Weakness over Fixed Assets Accounting Repeat Finding: Yes Condition: There were significant post-close adjustments recorded to fixed assets to correct the year-end reporting for capitalized assets. Additionally, errors were detected in the depreciation calculation that resulted in additional adjustments. Criteria: In accordance with Uniform Guidance, the City must maintain an adequate system of internal control over financial reporting in order to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles, which includes the proper capitalization and recordation of fixed assets. Cause: Finance reports depreciable and non-depreciable fixed assets based only on the information provided at the end of the fiscal year by various City departments that purchase and dispose of fixed assets and account for construction during the fiscal year. Finance is responsible at the end of the year to account for each department?s expenditures in construction as well as track what projects have been completed during the year in order to properly reclassify the completed project to the correct depreciable asset (e.g., infrastructure, building, improvements, etc.). Effect: The City had significant audit adjustments for the year ended June 30, 2022. Additionally, the financial information produced by the City may be inaccurate. Questioned Costs: Unknown. Recommendation: We recommend that the City develop a formal written procedure to reconcile capital expenditures recorded in various funds to the capitalized assets reported on the entity-wide basis. We also recommend that the City develop written capitalization policies. The City should use the new general ledger software to track fixed asset additions and depreciation calculations as well as track the financial resources used for the additions and disposals. The City should ensure that Federal purchases are tracked in accordance with Uniform Guidance. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Finding 2022-004 (continued) Auditor?s Conclusion: Finding remains as stated.
Finding 2022-005 Programs: All Material Weakness over Information Technology Security Repeat Finding: Yes Condition: The review of the network security in fiscal year 2022 indicated that the ?severe/critical/high risk legacy vulnerabilities? identified in the vulnerability scanning over the last twelve to eighteen months are not being remediated in a timely manner. Other areas for improvement include, but are not limited to: ? Lack of a formally documented entitlement review of privileged accounts such as domain administrators. ? Inadequate segregation of duties for those personnel with the responsibilities for making program changes and for those personnel with the responsibilities for the migration to production. ? Inability to restore mainframe operations at the secondary data center. Criteria: The City is responsible for maintaining a safe and secure network for daily operations as well as data maintenance and storage. Cause: The City did not have proper Internet Technology (IT) security in place, leaving their systems at risk. The City also did not have sufficient equipment and IT support to immediately transfer to remote operations. Effect: The absence of timely remediation increases the risk to the organization that those vulnerabilities may be exploited leading to disruption of the City?s operations and/or theft/loss of data. Inadequate segregation of duties leads to increased risk to unauthorized changes when individuals that make changes have access to the production environment. Questioned Costs: None. Recommendation: We recommend that the City: (1) implement IT training programs surrounding the various threats and how to identify them; and (2) maintain a more secure network for its daily operations and the storage of its data. Finding 2022-005 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-006 Programs: All Material Weakness over Schedule of Expenditures of Federal Awards (SEFA) Reporting Repeat Finding: Yes Condition: During our fiscal year 2022 audit, we observed that the detail expenditure information in the accounting software differed from the expenditures reported by various City departments. We were not able to determine if the Federal expenditures and subrecipient payments for all grants from the City was complete. Additionally, there were unreconciled amounts passed through to subrecipients. Finance is responsible for preparing the schedule of expenditures of Federal awards based upon grant information obtained from the financial accounting records and other information provided by each department or agency. Per discussion with Finance, we became aware that grant information and documents are not maintained by Finance. Grant documents are necessary for Finance to obtain required information for the Schedule, such as AL titles and numbers, pass through identification information and subrecipient information. Criteria: In accordance with 2 CFR 200.303, Internal controls: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.508, Auditee responsibilities: The auditee must: (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. In accordance with 2 CFR 200.510, Financial statements: (b) Schedule of expenditures of Federal awards: the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. For a cluster of programs, also provide the total for the cluster. Finding 2022-006 (continued) Criteria: (continued) (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule; and (6) Include notes that describe that significant accounting policies used in preparing the schedule and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the Schedule. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The determination of which major Federal programs will be audited are affected by the accuracy of the Schedule at the time of audit. Without proper internal controls over financial reporting, inaccurate reporting of the City?s financial information could occur. As a result, individual program reports throughout the year could have inaccurate information. Questioned Costs: Unknown. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the Schedule is fairly presented. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.
Finding 2022-007 Programs: All Significant Deficiency and Noncompliance Over Reporting Repeat Finding: Yes Condition: The City's single audit report and the data collection form were not completed within nine months after the end of the audit period. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: The City does not maintain a centralized grant accounting function or standardized policies and procedures, including requirements to periodically submit and reconcile expenditures; instead, each department maintains its own grant information. The lack of submission of grant documents and accurate information by the various agencies and departments to Finance weakens internal controls over grant reporting and hinders the ability of Finance to accurately prepare the schedule of expenditures of Federal awards. Internal controls over financial reporting should be designed to prevent, detect or correct errors in a timely manner. Without adequate controls, the City cannot provide reasonable assurance that the schedule of expenditures of Federal awards is fairly presented. Controls have not been established by the City to ensure complete and accurate reporting for the Schedule for the 2022 fiscal year. Effect: The City was not in compliance with Uniform Guidance. Questioned Costs: None. Recommendation: We recommend that Finance establish policies and procedures to ensure that the Federal funds are properly identified and reported accurately in the Schedule in accordance with Uniform Guidance requirements. We also recommend that individuals responsible for administering Federal assistance programs with the City receive training in grant administration. Finding 2022-007 (continued) Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the corrective action plan on current findings in Part V of this report. Auditor?s Conclusion: Finding remains as stated.