Baltimore officials acknowledge depreciation schedule gaffe
October 03, 2011
Accountants for the city of Baltimore, Maryland, mistakenly misclassified approximately 5 percent of its fixed asset
holdings by failing to factor in depreciation
, according to the Baltimore Sun. Consequently, resurfaced roads, renovated parks and refurbished buildings were overvalued by $223 million.
A government press release explained that some completed construction projects were misclassified as construction-in-progress despite the fact that accounting rules dictate they should be transferred to a fixed assets
category once they are finished.
According to Baltimore's finance director, Edward J. Gallagher, the fixed assets have since been moved to the correct accounting category and their values will be depleted at the appropriate depreciation rates
"None of these accounting issues affect the city's cash flows … and Baltimore's budget remains in balance," said Gallagher, as quoted by the news source. "If we were a corporation, it would be something to frown on, but since we're not selling anything, I'm not too concerned about it. These things happen."
If a corporation had made the mistake, it would cease to be in compliance with Generally Accepted Accounting Principles and would have to file an amended tax return.