Legislators question Spring Grove spending

State officials apologize for `sloppy' handling of renovation project

October 17, 2001|By Michael Dresser | By Michael Dresser,SUN STAFF

An embarrassed state health department apologized profusely yesterday for its "sloppy" and legally questionable handling of a $6.7 million renovation project at Spring Grove Hospital Center, but insisted that all but $26,000 of the money could be accounted for.

Health officials also told legislators that management problems at the mental hospital did not divert money from patient care at the 200-acre complex in Catonsville.

But the state auditors who uncovered financial irregularities last year in the hospital's dealings with State Use Industries, Maryland's prison labor agency, called the department's assurances "extremely misleading."

The auditors said they would scrutinize the department's claims in a follow-up audit. The matter has also been referred to the attorney general's office for possible criminal and civil action.

Members of the General Assembly's Joint Audit Committee, who questioned department and State Use Industries officials, were skeptical of the officials' reassurances.

"Somebody's still going to have to come up with some answers," said Sen. Nathaniel McFadden, co-chairman of the committee.

Legislators were dismayed to learn that one of the key players in the decision to bypass the state's standard procurement safeguards was still employed by the health department -- though no longer at Spring Grove.

Paul Kotula, former deputy superintendent at the hospital, is still employed by the department because the attorney general's office found no evidence of criminal behavior, said Oscar Morgan, director of the Mental Hygiene Administration. Morgan said the department would seek advice from the State Ethics Commission on what to do about Kotula's employment.

The Office of Legislative Audits reported in December that it had found numerous cost overruns and violations of state procurement practices during an examination of Spring Grove's financial records.

Auditors reported that Spring Grove officials bypassed oversight by the Board of Public Works by contracting with State Use Industries to oversee a series of renovations of buildings at the facility for use as office space.

State Use Industries' mission is to provide work opportunities and experience for prison inmates. But in this case, auditors found, virtually no prisoners were employed and the agency brought in subcontractors -- with no evidence of competitive bidding -- and took a 10 percent administrative fee.

The auditors found that hospital officials paid large sums based on bogus invoices and misled the legislature's budget committees about the nature of its funding requests. Auditors concluded that what should have been a $2.5 million project cost $6.7 million -- and that much of the money could not be accounted for.

Health department officials said they could not defend the handling of the project. "The department is very embarrassed by the whole situation," said Arlene H. Stephenson, deputy secretary for public health services.

Stephenson said officials believed at the time that using State Use Industries was a legitimate way to expedite the project when the department desperately needed office space. "They did things that were sloppy and they did things that were very questionable," she said.

But Richard Bandelin, who led the department's internal investigation into the matter, said he had been able to verify that almost all of the $6.3 million paid to contractors had gone for actual work. He said he's trying to account for $26,000.

"We believe there was no great fraud in terms of work that we paid for not being done," he said. "At no time was any money taken from direct care."

Bandelin said he could not tell whether the state had received quality and value comparable to what it would have received through a proper bidding process. His investigation is continuing.

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