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   Libraries Endangered by City's "Creative Accounting"


Libraries Endangered by City’s “Creative Accounting”

FROM:  Jane Ball Shipley
Save Libraries/Save Lives

TO: The Honorable Joan Pratt
Comptroller, Baltimore City

“One year later, you have done nothing that we can discern to further our suggestion that we need a performance audit of the Library....”
Dear Comptroller Pratt:
In the spring of 2002, David Yaffe and I met with you to discuss our concerns about the management of the Enoch Pratt Free Library.

At that time, we informed you of our grave concern about the financial impact of the expansion of Pratt Central Library and the planned large, regional library in Highlandtown. To operate these facilities, Pratt will need a substantial increase in city funding (which is unlikely). Lacking that increase, we fear Pratt will close additional neighborhood libraries.

We also informed you that although Maryland law dictates “The State shall pay all capital expenses for: The State Library Resource Center [Pratt Central],” City taxpayers were asked to approve a bond issue (vaguely worded in the voting booth) that facilitated a policy decision on the part of Library administrators to earmark $5.35 million in City assets (land and bond funds) to the expansion of Central. Given the pertinent State law, the policy decision to use these City assets to pay capital costs for Central is clearly illegal.

We further informed you that the citizens of Baltimore City are the only citizens of Maryland who are paying through local taxes as well as State taxes for the operation of the State Library. This unfairly subjects city residents to double taxation and is bankrupting our neighborhood libraries. Were we not forced to contribute in two ways to support the State Library, our City capital dollars could be spent on much-needed repairs of neighborhood libraries, and our operating funds could handsomely support more than the current twenty-one neighborhood libraries.

Moreover, Central gets the lion’s share of the library system’s budget. The $25.7 million spent for the libraries (not counting administrative expenditures) divides into two-fifths for neighborhoods and three-fifths for Central.

Here is an analysis from testimony submitted by the Maryland State Department of Education at the March 1997 hearing on the expansion of Central:

“The use of the Pratt Library’s collections and services save Maryland the cost of dual collections, buildings, and staffs. The State provided approximately 38% of SLRC’s operating budget in fiscal 1996. The city funded approximately 62 percent in fiscal 1996.”

If the State completely funded the operation of Central, as was planned when Central became the State Library in 1971, Baltmore City would have something like $23.5 million to spend on its neighborhood libraries. To make matters worse, Pratt officials often cite budget woes and ill-repair as excuses to close neighborhood libraries.

One year after we brought these matters to your attention, the library management continues on this course. The only thing that has changed is that the potential for disaster as a result of these priorities is more pressing because the State government is grappling with a fiscal crisis that will undoubtedly have an adverse effect on the City’s ability to fund its services. For these reasons, we again ask you to examine these spending priorities, an examination your auditor refused, in your name, to do last year.

Also last year, your auditor promised to “address” in “future audits” the ownership of the Mulberry Street property where Pratt’s administrators have moved their offices. We could find no mention of any action she may have taken in her January 15, 2003 audit report. As we told you in our meeting, our concern about the title of this property is driven by our fear that the Library vested this property’s ownership in the Board of Trustees rather than in the City in order to avoid the competitive bidding process mandated for all City capital expenditures when the Library renovated the property.

One year later, you have done nothing that we can discern to further our suggestion that we need a performance audit of the Library—an audit that would, among other things, analyze statistical data prepared by the Library to determine its performance in key areas. (For the record, we believe the Library’s printed data are accurate—our quarrel rests with the fact that statements made by Library officials often inflate these figures to the Library’s advantage.) We are sorry to report that the Library’s latest performance indicators of circulation and card registration continue their downward plunge. (Adult circulation, for example, is below a million for the entire Pratt system, which is less than the circulation achieved by each of the several branch libraries in Baltimore County.)

“We [have found] copies of bills totalling $106,144 from the private law firm that Pratt Library has retained since at least 1997. A member of the Library Board of Trustees is a partner in this firm. We have found no evidence that the Library went through mandated channels for retaining and reimbursing the firm.”

Last year, your auditor reported that she had “spoken to Library officials” about the Gift Shop losses. Your auditor said she “obtained a satisfactory explanation” from Library officials about a loss that has totaled $252,130 in the period from fiscal year 91-92 through fiscal year 00-01, inclusive. She did not tell us what sort of explanation for such an unnecessary loss in a financially-challenged library an auditor would find “satisfactory.” We remain unsatisfied and deeply dismayed with this loss.

In addition, your auditor promised to “continue to review the gift shop operations during future audits of the Library.” When we examined the January 2003 audit report, we found that your auditor changed her accounting practices and buried the data on the Gift Shop, effectively preventing us or other interested citizens from determining if the Gift Shop is continuing to lose money. We deplore the use of “creative” accounting methods to lump (and hide) the Gift Shop income and expense figures. Why is it that the only separate line item relating to the Gift Shop is an inventory of its assets that fails to provide information on any loss or gain from the previous year? We assume that the Gift Shop must continue to lose money or else the figures we seek would have remained transparent in this year’s audit, as they were in those of previous years, before we began examining the audits and publicizing our findings.

This year, despite the fact that we provided you with copies of the bills from the private law firm that Pratt has hired—bills that as of April 2002 totaled $106,144.38—your auditor had this to say in her January 15th report:

“The Library may be party to legal proceedings which normally occur in its operations. The Library Board of Trustees utilizes the Baltimore City Law Department to address such proceedings. The legal proceedings, in the opinion of the City Solicitor, in general, are not likely to have a material impact on the financial statements of the Library.”

Although the Library Board of Trustees does sometimes use the City Solicitor’s office, the City lawyers apparently play second fiddle to the private law firm that the Library has retained since at least 1997. (Representatives of the City Solicitor’s office failed to join the private lawyers at the latest hearing involving the Library’s on-going lawsuit, for example.) We informed you that a member of the Library Board of Trustees is a partner in this private law firm. We have found no evidence that the Library went through mandated channels (i.e., sought Board of Estimates approval) for retaining and reimbursing this law firm. The unnecessary hiring of a private law firm for current legal proceedings may not “have a material impact on the financial statements of the Library,” as your auditor maintains, but it certainly has an adverse effect on the Library’s financial health.

To end on a positive note, last year we told you that during its sole meeting each year, the Board of Trustees was farcically “approving” the Library’s budget months after it had gone into effect. We are happy that the Board of Trustees changed its by-laws late in 2002 to mandate four meetings a year instead of one. This will allow timely approval of the Library’s budget. We assume that you took the necessary action to promote this improvement.

This year, we hope you will finally take the following actions and achieve even more improvement: 1) examine the fiscal impact of the Library’s management decisions; 2) conduct an investigation into the cost to Baltimore City residents of having the State Library embedded in our City public library system; 3) investigate the ownership status of the Mulberry Street property and the procedures the Library used to chose its renovation contractors for that property; 4) call for a performance audit; 5) provide the “hidden” figures for the Gift Shop in an amended audit report; 6) investigate the procedure used by the Library to retain a private law firm and any potential conflicts of interest; and 7) amend the statement about lawsuits in the January 15th report so that it reflects reality.

In her letter to us, the City Auditor maintained that “The Department of Audits is committed to improving the City’s accountability to its citizens and assuring its operations are being managed effectively and efficiently.” We find this a laudable goal and believe that your attention to the issues we have once again raised will help you and the Department under your jurisdiction meet it.

Jane Ball Shipley and
David L. Yaffe
Save Libraries/Save Lives

Save Libraries/Save Lives is an advocacy group for the defense of Baltimore’s neighborhood libraries. This letter has been edited and abridged for print publication. Contact the authors at

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This story was published on June 4, 2003.
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