- The Washington Times - Sunday, December 4, 2011

Maryland’s State Highway Administration broke state laws by using $11.3 million in funds since 2008 for unapproved purposes and to conceal overspending on projects, according to an government audit.

The Office of Legislative Audits found the agency routinely allowed architectural and engineering firms to use state funds meant for construction-inspection services to pay for unrelated work on projects, without getting required approval from the state Board of Public Works.

Auditors compiled the report, released Friday, as a follow-up to their July audit of the State Highway Administration, which revealed allegations of fraud and found numerous irregularities within the agency, including that a high-ranking official coaxed construction firms to sponsor a golf tournament he was helping to organize. The audit also found that employees at times left the agency and were hired shortly thereafter by firms to which they had awarded contracts.

“You have very, very detailed rules … but there’s always an inclination for people trying to build the roads to cut a corner here and a corner there,” said Sen. James C. Rosapepe, Prince George’s Democrat and co-chairman of the General Assembly’s Joint Audit Committee. “Obviously, we have problems with that, in terms of getting the balance right.”

From January 2008 to April 2011, SHA officials received a total of $70 million for 16 construction-inspection contracts, according to the audit. Auditors examined 10 of the contracts — totaling $45.5 million — and found that $11.3 million, or about 25 percent of the funds, was used improperly.

The contracts were awarded on a regional basis and not for specific projects. State auditors declined to name firms involved or specify projects on which SHA officials improperly used the funds.

In one example, a firm given a $16 million contract to do construction inspection in Montgomery and Prince George’s counties was paid $4.4 million from that contract to do work not related to inspections or to work on projects in other parts of the state.

“The contracts usually ran for, like, three years,” said legislative auditor Bruce W. Myers. “So there could be many, many projects that they’ve been used for.”

Auditors said SHA officials also extended contracts without approval from the Board of Public Works, allowing them more time to spend tens of millions in unused funds.

Investigators also said the agency showed “no discernible basis” for determining the value of inspection contracts it requested from the state. In three cases, the agency requested identical $10 million contracts for inspection of projects that respectively covered $55 million, $80 million and $297 million worth of construction.

In a letter sent to auditors last month, SHA officials said they plan to develop an improved financial-tracking system and have taken immediate steps to improve oversight, such as reviewing past use of contract funds and warning managers not to misuse funds.

Former SHA Administrator Neil J. Pedersen resigned this summer as the agency’s director, shortly before the July audit was made public. He has since been replaced in an interim role by state Transportation Deputy Secretary Darrell B. Mobley.

Melinda Peters, project director for the Intercounty Connector, will take over as permanent SHA administrator this month. SHA officials are scheduled to meet Dec. 13 with the Joint Audit Committee to discuss possible improvements to the agency.

“I think that sometimes just shaking up the leadership helps shake up the culture,” Mr. Rosapepe said. “That’s an important step, but at the end of the day, it’s all about people making the ship run right.”

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