O'Malley Talks About Critical SHA Audit

O'Malley, who spoke to reporters about the audit after a Board of Public Works meeting, said the administration continues to work with auditors, and he pointed out that two employees cited in the audit no longer work for the state.

"A lot of these matters are still under review and fall short of what we would expect from people that work within this administration," O'Malley said. "There appears to have been certainly ethical lapses, and there seems to have been, how can I say it, there may well have been some corners cut in the procurement process that are unacceptable and that need to be addressed and that we need to tighten up."

The governor also noted that matters cited in the audit have been referred to the attorney general's office, which is in keeping with the state's practice of referring possible questions of a criminal nature.

The audit, released Friday by the Maryland Department of Legislative Services, probed allegations received through a fraud and waste hotline about conflicts of interest involving several senior SHA management employees for certain construction-related contracts.

The review found that one employee appeared to have solicited funds from firms that either had contracts with the State Highway Administration or were seeking them. The employee was a partial owner of an out-of-state company that promoted sports activities, and the audit found that seven firms doing business with SHA were listed as sponsors for a charity event hosted by the company in April 2009.

The audit also noted that SHA did not ensure that the firms complied with state ethics laws and SHA policies relating to the hiring and involvement of former employees on agency contracts.

"This is significant because SHA employees were routinely hired by firms doing business with SHA," wrote Bruce Myers, the legislative auditor, in a letter to lawmakers summarizing the audit's findings.

A former senior management employee was hired by a firm doing business with SHA within 12 days of retiring from the agency, the audit said. That former employee, who is not named in the audit, had significant involvement in approving a $16 million contract awarded to the firm. The former employee was involved in the contract in his work as an executive of the firm.

The audit also found that SHA circumvented the established bid evaluation processes that resulted in two $16 million contracts being awarded. The review found there were "significant disparities" between technical evaluations that were not resolved.

In addition, the audit found that SHA solicited the cooperation of firms that were involved in the hotline allegations to redirect contract funds for unrelated projects or to conceal overspending on other contracts. That, the audit said, went around oversight by the state's Board of Public Works.

As a result, state auditors have expanded their review at SHA of redirected contract money. Auditors plan to issue a related report in the near future, Myers wrote.