When health officials set out to rebuild some of the long-vacant wards of Maryland's oldest mental hospital into modern offices, they lost little time slashing red tape.
They skipped notifying virtually every state oversight organization. They ignored customary bidding safeguards for state construction projects. And they made plans to use prisoners instead of contractors to fix up the old stone dormitories at Spring Grove Hospital.
But what began as a modest $2.5 million project - billed as a chance to save the state money - ended up embarrassing two government agencies and costing taxpayers at least $6.7 million.
Legislative auditors have issued three critical reports in recent months detailing financial irregularities and demanding that all overcharges be identified and repaid. Project records were in such disarray that auditors could not determine exactly how much money may have been misspent.
The problems uncovered by the audits, internal reviews and recent interviews expose a breakdown in the state's oversight of a program to rehabilitate prison inmates and in the management of its mental hospitals. For example:
Spring Grove never set aside a specific sum for the office renovation. Instead, the hospital overrode spending controls, paid its maintenance workers hundreds of thousands of dollars in unbudgeted overtime and shifted money in its operating budget to conceal the spiraling costs from the General Assembly.
Much of the money was passed out in no-bid contracts to private construction firms. State Use Industries, the corrections agency that was supposed to supply prison laborers, tacked on a 10 percent "administrative fee" before subcontracting the work.
Little inmate labor went into the four-year project itself. Some prisoners assigned to the hospital were sent instead to install tile at the home of their supervisor. He has been fired.
To avoid returning unspent funds to the state, the hospital's deputy superintendent forwarded millions of dollars to pay for construction that had not even begun. Invoices detailing what work had been done were sketchy, overlapping or missing altogether.
Auditors who reviewed a small portion of the project - 13 of 158 upgrades - found that $100,000, or 10 percent of the money spent, had been squandered on duplicate billings.
Today, under pressure from state auditors and lawmakers, the health department is still trying to trace where the money went.
"We're now reviewing every single bid and reconciling every single dollar," said Richard Bandelin, assistant facilities director.
State lawmakers, who began looking into the audit's findings during the past legislative session, plan to hold a follow-up hearing this summer. Some say they're particularly troubled because the Mental Hygiene Administration, which runs the psychiatric hospitals, had to be bailed out a few months ago from a $41 million deficit.
"It's a very serious issue," said Del. Samuel I. Rosenberg, a Baltimore Democrat and co-chairman of the Joint Audit Committee. "These are not your normal audit findings. We have to figure out how did something of this magnitude happen ... [and] is there a systemic problem, or is this something where bad actors would have manipulated any system you have."
Mental health advocates worry that money may have been wasted, particularly at a 200-year-old institution that cares for a fraction of the patients it once did, at a time when more people are seeking state-paid psychiatric help.
"When you take real estate that developers would absolutely salivate over and turn it into state offices, is this the best use of the land?" said Paul Seifert of the International Association of Psychosocial Rehabilitation Services, representing community providers.
Health officials defend their decision to create offices for their licensing division, dental and podiatry boards and other commissions at Spring Grove. They argue that they're making better use of a large dorm that had housed little more than a gym and several other vacant buildings on the sprawling Victorian-era campus.
Project called `successful'
"We feel the project was successful," said Timothy Santoni, deputy director of the Mental Hygiene Administration. "We have both upgraded the hospital where the patients reside and created some office space we would otherwise have to go out and rent."
State Use Industries has stopped doing construction work for outside agencies since the first legislative audit came out in December. The agency's director, Steve Shiloh, issued a statement calling the Spring Grove project a mixed success that provided "some inmates with much-needed work skill and work ethics."
However, he acknowledged, "The credibility of both State Use Industries and Spring Grove Hospital has been brought into question. Would we do it again? In hindsight, no, we would not."
