"They ended up sending me down to Montgomery County on night duty," said Hagerty, a former engineering document reviewer in the construction office.

The report does not say Pedersen was involved in any questionable activities. Swaim-Staley said that "from [her] perspective, he is not stepping down because of this audit."

Hagerty said Pedersen was "operating above it all." He said that before he called the hot line, he had sent information on possible violations to the administrator's office only to have supervisors threaten to fire him for doing so.

Jack Cahalan, a Transportation Department spokesman, said the way Pedersen handled internal complaints is one of the questions Mobley will look into.

The auditors said they are continuing to investigate the diversion of contract money at the agency and will soon issue another report on subsequent findings.

In addition to the golf sponsorships, the auditors identified a series of "questionable" SHA activities:

•Before leaving the SHA's employ, a senior manager approved a decision to use an outside firm to provide construction management rather than have employees do the job — the first time the agency had done so. Twelve days after the manager retired in December 2008, he was hired by the company that received the $16 million contract. Auditors said that could violate ethics rules requiring former employees not to have an interest in an SHA consultant contract for a full year after leaving the agency payroll.

•Subsequently, the same manager agreed to a request by an SHA employee that he submit bills under that contract for work performed under another contract in a different part of the state.

•The highway administration failed to make sure that contractors complied with state laws and agency policies on employment of former SHA employees. In some cases, firms "actively promoted" the hiring of former SHA employees in bid submissions.

•Agency officials circumvented the SHA's own processes in evaluating the bids for two $16 million contracts in late 2008. The report said officials failed to score the competing bids on 10 out of 14 categories, potentially altering the outcome of the contract award.

•In awarding that work, the process under which contract awards are reviewed by an independent screening committee was "compromised." It said two of the four screeners were not officially designated to serve on the committee and had been involved in the original evaluation process.

•SHA officials asked the two firms that received the $16 million contracts — both of which had been golf tournament sponsors — to move money from those jobs to conceal overspending on other projects. That, auditors said, thwarted oversight by the Board of Public Works. In one case, according to the report, the manager who solicited the sponsorships asked another SHA employee whether it was possible to "rob some funds" to move $60,000 from one contract to another.

In its reply, the Transportation Department disputed none of the auditors' findings. It said work was halted on the contracts in question earlier this year.

Swaim-Staley said companies that broke state rules could lose their contracts.

"If contractors are not following procedures, we will have to make a determination about the future of the work we do with them and can do with them," she said.

michael.dresser@baltsun.com