2002 independent audit found little misspending

City paid $35,000 for effort that uncovered one purchase, for $61.85

December 12, 2003|By Tom Pelton | Tom Pelton,SUN STAFF

An independent audit that cost taxpayers $35,000 last year uncovered almost none of the $20,000 that federal prosecutors say former Baltimore Police Commissioner Edward T. Norris illegally spent from a little-known police account.

U.S. Attorney Thomas M. DiBiagio charged Norris on Wednesday with abusing the fund by using the money to pay for hotel stays and expensive meals, and to finance romantic liaisons with women.

In an effort to investigate allegations raised by The Sun in August last year about the misspending of funds from the police supplemental account, Mayor Martin O'Malley hired the Ernst & Young accounting firm to conduct an independent audit.

The firm, in a report it gave the city Nov. 1 last year, said auditors had looked for purchases from the account that might have been personal. They found one by Norris, a $61.85 purchase of clothing at the Nordstrom's store in Towson.

That conclusion fell far short of the total that federal prosecutors say Norris spent on such items as gifts from Victoria's Secret lingerie store, liquor for his home and trips to New York for romantic encounters. Norris, who became state police superintendent a year ago, resigned that post Wednesday and pleaded not guilty at a hearing yesterday.

Ernst & Young, which has a contract worth about $140,000 annually to perform routine auditing for the city, did not return phone calls seeking comment.

W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass., said taxpayers should demand an investigation of Ernst & Young to find out how it missed what appears to be blatant misspending.

`An embarrassment'

"The question I have is: How did they miss it, especially in an account they were specifically asked to look at?" asked Hoffman. "Clearly, this is now an embarrassment not only for Ernst & Young, but for the city of Baltimore, and if I were a taxpayer or a citizen, I would demand an explanation."

The only expenditure by Norris that was questioned by Ernst & Young was the Nordstrom's purchase, and the auditors recommended that he repay that amount.

The auditors also recommended reimbursement of the $600.21 that the auditors said a police lieutenant colonel spent to fly his wife to a conference in San Diego. That allegation turned out to be false, according to the city's finance department, and the auditors did not interview Stanford Franklin, the police official involved, or ask him for his records, Franklin said.

"We did feel that we could identify any `obviously personal' purchases, where a benefit to the Police Department did not exist," the auditors wrote in their report.

`Beyond the scope'

"A number of questions were raised. ... The explanations provided sounded reasonable, however, [and] we did not extend our procedures to perform further `investigation' into these items. Such an investigation is beyond the scope of typical audit procedures."

As part of a review of the auditing process, the city's finance director, Peggy Watson, went further than Ernst & Young and asked Norris to repay $7,663 for expenditures that she found questionable.

Watson said yesterday that she is satisfied with Ernst & Young's performance, recognizing that it was constrained by apparently false information supplied by the police and a lack of spending guidelines for the account.

The auditors suggested that city officials might consider going further than they did and identifying more items if the city felt it appropriate.

"What the Justice Department did, I couldn't have found and Ernst & Young couldn't have found. We don't have subpoena power," Watson said. "The documents we looked at didn't say they were spending the money on lingerie."

A spokesman for O'Malley, Stephen Kearney, said the auditors don't have the power of federal prosecutors.

"The city's top law enforcement official swore he was telling the truth and backed it up with documents. No amount of Monday-morning quarterbacking is going to turn a financial audit into a grand jury invested with unlimited resources, subpoena power and investigators traveling to Canada," Kearney said.

O'Malley defended his decision to stand by his commissioner for four months after The Sun reported that Norris had spent money from the account on expensive dinners, hotels and gifts.

"I thought this was sloppy accounting and a lack of judgment. I was not aware of the other things," O'Malley said. "If I had known of the personal behavior, I would have fired him right away."

Sun staff writer David Nitkin contributed to this article.

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