The state attorney general has been asked to launch a criminal investigation in the wake of auditors' findings that Morgan State University made up to $2.4 million in "questionable" and duplicate payments to a prominent contracting company.
The auditors, who work for the legislature, found extensive problems with how Morgan State managed some of its projects - circumventing rules governing state approval and execution of contracts.
Looking at other areas of Morgan management, the audit report discovered that the Northeast Baltimore university had overpaid two employees a total of $121,400, belatedly identified the overpayments and did not refer the matter to the attorney general for criminal investigation.
Legislators said they were disturbed by the audit findings and expect to question the university when hearings on its budget begin next week. "My initial reaction is, these are very serious findings that deserve strong scrutiny on the part of the legislature," Del. John L. Bohanan Jr., the St. Mary's County Democrat who chairs the House Appropriations Committee's education subpanel, said yesterday after the report was released.
Bohanan predicted that "there will be strong sentiment from some members of the legislature" to restrict Morgan's independence from the state's university system, though he does not advocate that approach. The vice chairman of Morgan's Board of Regents, Martin R. Resnick, said he is worried about such repercussions. "One small infraction like this could do something like that," Resnick said. "We have tried so hard to be able to control our own business."
The audit focused largely on one contract with Whiting Turner Contracting Co. that included a $3.1 million "allowance" that the university used without state approval to pay the contract for cost overruns on other projects. That was initially reported by The Sun last month.
Bruce A. Myers, the chief legislative auditor, said yesterday that in his 10 years in the post, he never had seen a multimillion-dollar allowance written into a public contract without plans on how to spend the funds.
Resnick said the regents were assured in a meeting with Morgan President Earl S. Richardson last week that Peeter Kiik, Morgan's director of design and construction, "acted independently," without the knowledge of Richardson or Kiik's boss, Abraham Moore, the university's vice president of finance. Kiik resigned Jan. 21 after the legislative auditor determined that the college violated state regulations in its dealings with Whiting Turner.
The auditors referred the questionable spending issues to the attorney general's criminal division for investigation after determining there were "payments for goods and services that may not have been received and duplicate payments."
Myers said the referral to the attorney general's office is not confined to questions about a single Morgan official.
The auditors made no allegations concerning Whiting Turner, whose owner, Willard Hackerman, did not respond to a request for comment.
Raquel Guillory, a spokeswoman for the attorney general's office, said the criminal division received a referral for investigation from the legislative auditor but would not comment further.
Morgan State's administration said last night in a statement that it would not comment because of the referral to the attorney general. In the audit report, the university expressed regret about not following state rules, and said it had taken steps to prevent what it called an "isolated occurrence."
Morgan State is an historically black public institution of 6,700 students that receives about $67 million in state tax revenue. Along with St. Mary's College of Maryland, Morgan State has chosen not to be part of the state's 11-campus university system. In recent years, Morgan fought for and gained greater autonomy to manage its own procurement and buildings projects.
In addition to possibly returning Morgan State to the university system, another legislative option might be "to scale back their autonomy to manage their own capital projects," Bohanan said. He emphasized that he was not advocating such a move at this point.
Spokesmen for Gov. Martin O'Malley and Comptroller Peter Franchot said they had not reviewed the audit. Howard Freedlander, Treasurer Nancy K. Kopp's spokesman, said, "She's read the audit and has concern."
The audit covered the period from Nov. 2003 through Jan. 2007. A large section focuses on Morgan State's management of a $4.3 million contract that the university awarded in 2005 to Whiting Turner to construct a new telecommunications hub.
In seeking approval from the Board of Public Works, on which the governor and other officials sit, Morgan State did not disclose that $3.1 million of the $4.3 million contract was an allowance for work that "was not defined or detailed" when the university sought bids, the audit says.
As of mid-2007, about $3 million of the allowance had been spent by Morgan State on unrelated projects, the audit said. The state requires that funding for public construction projects be used only for those specific projects.
By processing about $3.6 million in change orders to the telecommunications hub project, Morgan State increased the contract amount to $7.9 million, Myers said. The audit found $2.4 million in "questionable payments on the project," including $825,250 in overpayments to Whiting Turner.
" ... We were advised that the overpayments resulted from duplicator contractor billings and MSU was unaware that the overpayments had occurred until we questioned the payments in July, 2007," the audit says.
Though Whiting Turner acknowledged the invoices were submitted in error, Morgan State had not recovered the money from the contractor, Myers said.
Other details that emerged yesterday included overpayments to two Morgan State employees who were on both the regular and contractual payrolls for the same work. Their overpayments totaled $121,400, the audit said.
The workers who were overpaid were not named in the audit, but Morgan's written statement said the overpayments did not involve officials involved in managing construction projects.
The audit also showed that Morgan State did not meet its goals for minority-owned business participation in campus building projects. Nonetheless, Morgan State said in a statement that its participation rate ranked first among all higher education institutions in Maryland in 2006.
Del. James E. Proctor Jr., the vice chairman of the Appropriations Committee who also heads the higher education committee of the Legislative Black Caucus, said he was troubled by the audit findings, in particular that Morgan was not hitting its minority participation goals.
Proctor, a Prince George's County Democrat, said he remained supportive of Morgan State and believed it was premature to speculate about what actions Annapolis should take. If he had to cast a vote today, he said, he would support maintaining the school's autonomy to manage its own procurement and capital construction projects. He said, "It makes you second-guess all of those things, but I haven't heard Morgan's version yet."
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