The Enoch Pratt Free Library (EPFL), Baltimore, MD, has plenty of books, but not enough bookkeepers. For the second year in a row, an audit of the EPFL’s finances has unearthed “significant” internal bookkeeping problems, the most serious of which delayed a scheduled $3.2 million payment to the City of Baltimore for almost a year. “We examined journal entries in the library’s general ledger and found that the library was unable to provide documentation for the majority of the journal entries tested,” City Auditor Robert L. McCarty wrote in a March 25 report to Baltimore’s Board of Estimates. It was just one of several stinging critiques unveiled at a May 15 public meeting. A library spokesman blamed “staffing issues” for the problems cited in McCarty’s report, and said efforts are being made to straighten out EPFL’s accounting practices, partly through the addition of new part-time employees. But time is running short; city auditors will be returning soon to scrutinize the library system’s books again in preparation for its regular FY13 review slated to begin in mid-July. “It’s all being taken care of,” Roswell Encina, the library’s director of communications, told Library Journal. Of the criticism in the audit of FY12, Encina said, “We welcome it. It helps us be more efficient. … If that’s what the city feels we should be working on, we respect that.” Asked if EPFL’s accounting problems amounted to a full-blown crisis or were not a large concern for the city, McCarty said, “Somewhere in the middle. It’s definitely a concern.” Established in 1882, EPFL is one of the nation’s oldest free public library systems. With a budget of $34.5 million for FY12, it operates a Central Library on Cathedral Street in Baltimore and 21 additional branches. About 42 percent of EPFL’s funding comes from the city, while the Maryland State Department of Education contributes some 48.5 percent.

A pattern of problems, but not purposeful

EPFL’s books are scrutinized annually by the city, and a pattern of problems has emerged. A year ago, five “significant deficiencies” were found in the library network’s FY11 accounting. Four of those were still not corrected, McCarty reported last week, and six more problems related to FY12 were outlined in detail. But McCarty said no malfeasance or illegal activity is suspected. “We found nothing to suggest that,” the city auditor said, “otherwise we would have disclosed it as such.” “There were no city dollars or donor dollars that were wasted or misallocated,” Encina added. The single most serious bookkeeping problem cited in the report appeared to be EPFL’s failure to pay $3.2 million owed to the city for FY12. This was state grant money the library turns over annually “to reimburse expenditures the city pays on the library’s behalf.” As of June 30, 2012, McCarty noted, the library had paid back only half of the $6.4 million it owed the city. McCarty did note the remaining $3.2 million had been paid as of April 11—some two weeks after the auditor’s report was finalized. Still, the payment was roughly 10 months late. And, the auditor noted, EPFL now owes the city its grant money for FY13, which ends on June 30.

Beyond the big ticket

Among the other “deficiencies in internal control” cited in McCarty’s report were:

• As of June 30, 2012, EPFL could “not determine how much money was due to the city for fines and fees,” and in fact had not written a check for payment in this area since April of that year. Normally, the city receives a monthly payment for money earned by the library through overdue book penalties, video rentals, photocopying and even coffee sales, all falling under the heading of “fines and fees.” Over the last five years, the library collected an average of $297,800 from patrons for such items.

• EPFL still owes the city $29,213 in fines and fees from 2011. The library claimed that $5,300 of this amount was federal grant revenue. Meanwhile, it was still trying to account for the remaining $23,913 and was expecting to finish this assessment by June 1. “If satisfactory documentation cannot be found, the library will remit these funds to the city at that point,” the report stated.

• Of $300,000 budgeted “exclusively” to buy books and other patron materials, more than $11,000 was spent for items that did not fall under this category.

• Errors were found in the “financial statements as originally prepared by the library.” This finding included a warning that, “The library’s current process of preparing year-end financial statements, lack of monitoring of all postings and adjustments, and lack of review processes could result in a reasonable possibility that a material misstatement of the library’s financial statement will not be prevented, or detected and corrected in a timely basis.”

• EPFL did not “adequately monitor” its endowment fund assets of cash, temporary investments, and consolidated investments.

Short staffed

In a finding from its FY11 audit, repeated in last month’s report to the Board of Estimate, McCarty wrote that EPFL’s business office “did not have a sufficient number of adequately trained accounting staff for the timely preparation of its annual financial report.” Encina told LJ that EPFL agreed with this assessment, and cited a number of staffing issues complicated by an ongoing city hiring freeze. In 2011, the library’s chief of fiscal services retired (a new one was later hired) and the fiscal technician responsible for “day to day accounting activities” died suddenly. And a vital part-time CPA suffered a serious illness.

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