Editorial: So what does it mean?
Hyattsville's financial records are unreliable and everyone in charge is missing simple errors
Bottom line: Hyattsville’s accounting staff, independent auditor, and elected officials missed obvious errors in the fiscal year 2021 financial statements. This would be concerning under the best of circumstances. Hyattsville does not have the best of circumstances: the audits are late and past auditors spent years telling1 city council that unaudited numbers provided by staff may not be reliable.
At a bare minimum, residents deserve a public explanation of why everyone in the process missed the FY 2021 financial statement mistake and what changes staff, the auditor, and our elected officials have made to prevent future errors. Sometime in the future, Brooks and auditor Lindsey + Associates will issue FY 2022 financial statements that they claim are accurate. They should explain why we ought to believe them.
The error
The FY 2021 error was easy to find. Hyattsville’s original fiscal year 2021 audited financials said that the city spent $923,065 on the fire department, more than 15 times the budgeted amount ($50,000) as well as the amount they spent in FY 2020 ($50,000). I have been told that this was because the outstanding loan balance to the fire department (a receivable) was incorrectly categorized as spending (an expenditure).
Any accountant, auditor, or elected official worth their salt should have asked “why did Hyattsville spend so much more than authorized in the budget?” and the miscategorization would have been discovered. I myself have undergone six audits in my current position, and in every one I have been asked to explain any situation where the actual amount of income or spending varies more than 10% from the budgeted amount.
But Hyattsville’s accounting staff, who are responsible for the financial statements, and Hyattsville’s independent auditor, who is responsible for saying that the financial statements are accurate, seemingly did not read the report closely enough to ask that question.
Instead, Hyattsville posted inaccurate financial statements on its website for weeks. They even sent these inaccurate statements to the state and to creditors. Surprisingly, it seems like neither the mayor nor the city council noticed the mistake. Instead, it took questions from residents to catch it. If they missed such a big mistake, who knows what other smaller ones might still be there?
I want to be very clear: I know of no fraud or malfeasance related to city money. But “no fraud or malfeasance” is the absolute lowest bar a local government should be trying to clear. “Accurate audited financial statements” is the next lowest bar, and Hyattsville hit that one right with its shins.
Budget risks
The city council is considering an FY 2025 budget that relies on unaudited numbers from FY 2022 and FY 2023, but we’ve been told over and over that these unaudited numbers have a “reasonable possibility” of being inaccurate. Twice, city staff have miscalculated how much money the city even has in the general fund — first in the FY 2024 budget process (yes, I identified that error too) and again in the original FY 2021 audit. CohnReznick, the city’s former auditors, told city council via letter three times that they were finding significant accounting errors during the audit process that CohnReznick had to fix.2 While audits are happening over a year after the facts, decisionmakers are relying on inaccurate information.
It might seem confusing if you're not an accountant to read terms like "GAAP3 basis" and "budgetary basis" when looking at how much money a city has. But it's important to pay attention to both methods when making a budget. Let's say I tell you I have $25 in my bank account and ask you to make a budget. But then I tell someone else I want to spend $10 on chocolate, so please start making the chocolate. In accounting-speak, I’ve issued a purchase order for $10 of chocolate. You can't just ignore that $10 chocolate purchase order. You either need to start the budget with $15, or you need to start the budget with $25 but include a $10 line item for chocolate. This is why accounting rules for local governments say they need to show financial information under both methods. Given that Hyattsville first said they ended FY 2021 with $17.1 million in the general fund for budget purposes, then changed it to $23.3 million, I’m not confident they know the precise amount of money available for budgeting.
Other risks
Would that the problems ended there. Instead, Mayor Robert Croslin sent an unauthorized letter on audit-related legislation to the state senate, in violation of the city code. He circumvented the open process — city council meetings with open observation and publicly posted agendas — where residents could have contacted their councilmembers to express opinions on the city’s official position. He’s already said that he didn’t want public presentations by the auditor, despite it being common practice in other cities. The tone at the top is clear — no transparency, no accountability, no rule of law.
Meanwhile, the city council violated the Open Meetings Act. And finally, overlapping with Kevin Ward’s term as mayor, we know that the city was skipping at least one part of the competitive procurement process by not posting procurement solicitations to eMaryland Marketplace as required by the current policy. Were other steps being skipped? Who knows. The promised audit of the procurement process never materialized. Meanwhile, Hyattsville’s financial statement audits have been late for over a decade. This is not a new problem
In 2023, a director in Montgomery County Public Schools pled guilty to misconduct in office. His misconduct: failing to follow financial management policies, also known as internal controls. Todd Watkins didn’t steal any money, according to news reports. But Charles Ewald, who reported to Watkins, was able to steal over $100,000. Internal controls matter. Financial policies matter. Compliance matters. Unfortunately for those of us with tax dollars flowing into Hyattsville’s coffers, none of these things appear to be priorities for the current administration.
In written letters, not public presentations.
“As audit procedures were applied to various accounts, additional adjustments and review was required to prevent potential misstatements of the financial statements.”
Generally accepted accounting principles (GAAP)