Questionable septic system upgrade contracts totaling $1 million have been referred to the attorney general’s criminal division, according to an audit of the Maryland Department of the Environment released Thursday.
The average cost of 57 MDE-administered contracts awarded to two contractors was about $19,000, more than $7,200 higher than other projects statewide. And the cost for the 57 projects was more than $400,000 higher than similar projects, the auditors found.
The two contractors were the only bidders on 50 of the projects, with one of the contractors submitting two bids to meet a three-bid requirement. Two of the projects were for the contractors’ homes, the auditors found. The audit said MDE allowed contractors to act as agents for property owners, which allowed them to solicit and collect bids and then adjust their own bids.
When auditors brought the contracts to the department’s attention “MDE could not provide an explanation,” the auditors wrote in their report.
MDE spokesman Jay Apperson said Thursday that the department proactively revised its procedures in July 2010.
“So, we had already addressed the concerns raised by this audit finding,” Apperson said.
The MDE spokesman said the grants are now reimbursed at fixed rates for each type of upgrade and the rates are based on competitive bidding.
Auditors said the department’s process for reviewing and awarding grants before July 1, 2010, lacked adequate oversight, but noted changes have since been made that should reduce the potential for questionable awards.
The MDE spokesman added that none of the findings was critical of the overall effectiveness of the Bay Restoration Fund under which the contracts were awarded. The spokesman said the septic upgrade program has been successful overall, improving more than 3,000 systems through November. The program is designed to reduce the amount of nitrogen from sewage that reaches the Chesapeake Bay, where it can fuel algae blooms that rob oxygen from the water.
The auditors also found $225,000 in consulting contracts given to a former employee over a four-year period appeared to violate state law.
Apperson said the contracts were an “isolated and unusual incident.”
“It’s not indicative of any systemic problem with internal controls governing our procurement process,” he said.
The MDE spokesman said the department would not identify the employee or the septic system contractors, citing ongoing investigations. The attorney general’s office has received the audit and is reviewing it, spokesman David Paulson said.
Problems were also noted in upgrading and security of the department’s information technology and in tracking registration of owners of properties with lead paint contamination.
Apperson said the department concurs with most of the audit findings and will implement its recommendations where possible.