Pursuant to Maryland statute, the State Department of Legislative Services Office of Legislative Audits (OLA) has completed its annual desk review of each local government’s annual auditing report – and counties fared well.

Pursuant to Maryland statute, all local governments, including counties, municipalities, and 17 special taxing districts, have to file regular audit reports with the State, including financial statements, accompanying notes, and auditors’ reports on opinions about the presentation of the financial statements. Financial statements must comply with generally accepted accounting principles, and audits must comply with generally accepted auditing standards. According to the report, OLA completes each desk review of the audits to:

• Identify areas of noncompliance with our audit guidelines and certain
  accounting and auditing standards pertaining to the presentation of the
  financial statements and auditors’ reports.
• Identify any instances of noncompliance with certain provisions of State law
  (for example, collateral for bank deposits, timely filing of audit reports).
• Identify local governments with potential financial problems relating to deficit
  fund balances or unfavorable trends and ratios, based on analyses of financial
  data over the most recent five-year period (July 1, 2011 through June 30,
  2016).

The report identifies a handful of counties with audit reports containing disclosures that cash deposits were not fully collateralized or otherwise insured. It identifies an adverse opinion against Baltimore City, which resulted from the Baltimore City Public School System failing to book its pension liabilities on its own statements as required under GASB  – an issue which the school system has since corrected.

All counties filed their reports in a timely manner and complied with relevant provisions of state law, and that no counties displayed signs of deficit fund balances or “unfavorable trends” or “ratios.” Legislative Auditor Thomas J. Barnickel III reports that

most of the financial statements filed by the local governments for the fiscal year ended June 30, 2016, along with the related independent auditors’ reports, complied with the accounting and auditing standards that we assessed.

At today’s hearing of the Joint Committee on the Management of Public Funds, Bob Garman, Assistant Director of Quality Assurance for OLA testified that while they found more local governments noncompliant than the previous year – about one third of all 203 local governments audited – most areas of noncompliance were relatively minor.