State Health Secretary Adele A. Wilzack and her top officials kept more than half a million dollars in special, unbudgeted accounts instead of returning it to the state treasury in the last year and a half, legislative auditors have found.
The special accounts outside the regular budget were used in part to cover a deficit created by one unit of the health department that officials refuse to identify.
Keeping the extra cash in a way that goes unnoticed in legislative scrutiny -- a violation of state rules -- is one example of what auditors say are "significant weaknesses" in the state agency charged with managing more than $2 billion annually.
The audit looked at the finances of the secretary's office and those of her three top deputies over the period of a year and a half ending last July. It was conducted at the same time that legislative auditors were uncovering major problems in another health department unit -- the Maryland State Games.
The audit found that some of the same problems that plagued the State Games -- a lack of accountability and fiscal controls designed to prevent abuse -- appear to be widespread in the department itself.
Among other things, the auditors say:
* The health department moved $1.2 million from one account to several others, a move that gives lawmakers a false reading of what it costs to run various programs and also violates state law.
* The agency lost the opportunity to earn at least $80,000 in interest because it didn't collect bills on time.
* It is failing to regularly audit local health departments and private contractors who get millions of federal dollars, a condition of getting the money.
* The health department hired a private firm for $1.6 million annually to do its photocopying, without first checking to see whether the state could do it more cheaply. Auditors estimate that the agency would save $400,000 a year if it used an existing state copying office.
Many of the criticisms are directed at programs overseen by the deputy secretary for operations, a post held until recently by John M. Staubitz. Mr. Staubitz's responsibilities included the agency's fiscal operations, its personnel department, its office of birth and death certificates, as well as special projects.
He was fired last month amid allegations of financial impropriety in the Maryland State Games program, which he also supervised.
Health officials have acknowledged that they don't know how much the department has spent on the scandal-ridden State Games program. They are investigating the possibility that bills from State Games somehow were charged to and paid by other health department programs.
Health officials have taken issue with some of the audit's findings, particularly the idea that they are keeping money in a slush fund.
William Groseclose, coordinator of the agency's audits, said the money was accumulated from refunds the agency got from grantees after audits revealed overpayments.
He said the recovered funds were used to pay other grantees whose costs are higher than anticipated, all with the approval of the state comptroller.
Health officials also said state employees are too overloaded to take on their photocopying account. They blamed a slowdown in audits of federally funded programs on a hiring freeze.
The audit's criticism of top management of the agency follows a "very poor" rating given just six months ago to the health department's single biggest program -- medical assistance.
That audit uncovered serious problems, including $565,000 in lost investment income because the department didn't collect bills on time, and 14,227 people who were receiving medical benefits even though they didn't qualify. In this case, auditors said eight of the 11 problems they have repeatedly identified over the years continue to go unaddressed.
"Given the size of the Medicaid program and the other kinds of things we found and the repeat items, I am very concerned," said Anthony J. Verdecchia, the legislative auditor.
Nelson J. Sabatini, who directs the medical benefits programs, said he does not question the audit findings and has moved to correct many of them.
He said the agency lost income because it gave advances to hospitals to cover the care of people who were candidates for medical benefits but whose applications were mired in the agency's bureaucracy.
Overall, the audit paints a picture of a state agency lacking in some basic accountability measures.
For instance, employees routinely failed to sign their time slips as required by state law; expensive equipment wasn't recorded on the department's control lists -- the fifth time this problem has been brought to the agency's attention; and there was no independent verification to ensure that money received by the agency's fiscal services division was actually deposited. In fiscal year 1990, this division handled $95.7 million.