Baltimore,
Maryland
$15.9M
was paid back to the City of Baltimore after millions of dollars in errors were
found by investigations through the Baltimore Sun. Several of the largest commercial properties
in Baltimore were undercharged over $700,000 in taxes. These huge tax errors are coming from city
and state officials and agencies in miscalculating tax breaks.
The
$15.9M was collected by the city’s Billing Integrity Unit, a team the mayor
created in 2011. The money recouped is
from errors in four different tax breaks; meaning the government agencies were
either giving too much of a break or giving unqualified properties the
breaks.
Mayor
Stephanie Rawlings-Blake is trying to push off an audit of the tax bills in an
effort to fix the system first. In a
recent conference, Rawlings-Blake said, “We’re not against audits. We just want to make sure they’re done in a
timely way and are not wasteful of the taxpayer’s money.” In an effort to fix the system and collect on
the undercharged taxes, the Billing Integrity Unit is going through the various
tax credits and revamping the tax programs.
Joan Pratt, comptroller, said, "you can't self-audit
yourself." She is insisting that
the tax program goes through an unrelated audit, an independent audit.
Independence,
a New York State auditing standard, is a huge factor in all audits, including
government audits. Independence is
comprised of independence of mind and independence of appearance.
Independence
of mind states that auditors should not be affected by any influences that may
cloud his/her professional judgment.
Also, auditors should always act with integrity and make decisions based
on objectivity and professional skepticism.
Independence
in appearance states that the audit report
should not cause any third/unrelated parties to believe that the auditor(s) did
not reasonably act with integrity, objectivity, or professional skepticism.
In
Baltimore, Maryland, Rawlings-Blake allowing her team to go through the
mistakes without consulting an outside auditing group is a big mistake. One of the categories of independence threat
is the self-review threat. This 100%
applies here, even if the Billing Integrity Unit is not an auditing team, they
are going through their own system and their own programs, things they most
likely created. How many errors you found in a program you created would you publicly discuss? ...probably not many!
I
think that the comptroller should require that the city's tax credits and
programs go through an independent, outside audit. The auditor will come in with an open mind
and will review the different processes.
The auditors can then find where the errors are coming from, how to fix
them, and give some recommendations on how to avoid these huge losses in the future. Within the past decade, the City of Baltimore
has endured an $11 million loss in tax revenue because of the flawed tax
program.
If
there is ever a threat against an auditor or auditing team's independence, they
can always consult an independent
third party.
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