The Maryland State Highway Administration conspired with various firms to hide millions of dollars in both cost overruns and unspent funds even while gaining state approval for millions of dollars in more funding, according to a recent report.
The Office of Legislative Audits found that highway officials cooperated with vendors to shuffle at least $11.3 million from 10 construction inspection contracts to hide overspending and to use funds for other contracts unrelated to what the money was approved for. Some funds may have even been diverted to other agencies under the Department of Transportation.
Contracts with millions of dollars in unspent funds were extended multiple times without approval by the state Board of Public Works, though highway officials couldn't justify their requests for millions of dollars more in funding, the audit found. And the board approved $10 million in new contract funding in November 2009 while highway officials sat on $36.4 million in unspent funds from existing contracts - information that was withheld from the board.
Comptroller Peter Franchot called the contract agreements a shameful conspiracy between the state highway administration and its vendors to acquire more funds at a time when the state's Transportation Trust Fund has dried up and Gov. Martin O'Malley is proposing a 15-cent gasoline tax increase.
"I consider the conduct of the State Highway Administration to be offensive as a Board of Public Works member, and believe the findings of the audit should be offensive to all Maryland taxpayers," Franchot said. "This is precisely the sort of taxpayer abuse that the Board of Public Works is designed to prevent."
The Board of Public Works is made up of Treasurer Nancy Kopp, O'Malley and Franchot.
Highway officials also failed to specify which tasks vendors were supposed to complete to fulfill contracts. Instead, they were simply given a maximum dollar amount to spend on performing construction inspections - contract costs that varied wildly in the estimates given by state officials, according to auditors.
The administration's deceptive agreements with the firms "are indicative of a less than arm's-length relationship between those parties that, in turn, could raise questions regarding the integrity of the procurement process for subsequent contracts involving these firms," wrote legislative auditor Bruce Myers.
The audit followed a June legislative report that uncovered potentially criminal ethics violations by State Highway Administration employees, findings that are being reviewed by the Attorney General's office, according to state Transportation Secretary Beverley Swaim-Staley.
Highway officials have been working with the board since May to correct problems in its current contracts, Swaim-Staley said, and she's made it the mission of Melinda Peters, the incoming head of the State Highway Adminstration, to revamp the agency's contracting process.
"She knows her first challenge is to restore integrity in this process, and to continue to follow through on the improvements that we've committed to," Swain-Staley said. "This was sloppy contract management, and it cannot continue."
