The Montgomery County Council wants to give a financial watchdog broader oversight power.
Expanding the responsibilities of the county’s inspector general is a wonky issue with a big impact on responsible spending, said Council Member Andrew Friedson. It would also require dramatically increasing the department’s funding to ensure the changes can be effectively implemented.
Requiring the inspector general’s office to review just 1% of the county’s highest-risk contracts — and only including those valued at more than $1 million — would require 13 more employees and more than double the department’s roughly $1.23 million budget, according to a recent analysis by former Inspector General Ed Blansitt.
The discussion dominated a large portion of Tuesday’s Government Operations & Fiscal Policy council committee meeting, where legislators dissected a bill proposed in May. The bill would require the Office of the Inspector General — a watchdog for fraud, waste, and abuse in government activities — to audit high-risk county contracts and review the internal accounting procedures in executive departments.
The office is currently directed to identify actions that could improve government efficiency and conduct financial investigations if necessary. But the county’s administrative code does not require those actions on a regular basis or instruct the inspector general to review specific transactions.
Council members introduced the bill months after the prosecution of a former Montgomery County employee who stole nearly $7 million from the government. The county’s financial oversight agencies were unaware of the embezzlement until Internal Revenue Service agents began investigating the employee’s financial transactions.
The bill, newly amended after the committee meeting, would give the inspector general broad discretion over which contracts to review. But however widely it’s implemented, increasing the inspector general’s responsibility would require increasing the budget anywhere from $1.4 million to more than $2 million, should the changes require an anticipated 19 additional employees.
“As I looked at the bill, I was really worried that we would face a situation where the office desperately wants to do this, but is unable to because of resources,” said current Inspector General Megan Limarzi, who took over the position on Sept. 1. “Right now, we’re overseeing the Montgomery County government with a staff of seven people. We certainly can’t get to everything with what we have now.”
To help ensure those resources, Council Members Andrew Friedson, Nancy Navarro, and Sidney Katz took the unusual step of recommending additional funding for the department as a condition of the bill.
“Generally, we don’t do that,” senior legislative attorney Robert Drummer said at the meeting. “Essentially, it stems from the principle that you can’t bind future councils and you can’t bind yourselves to fund something.”
Adding the language still wouldn’t require either the county executive to recommend additional funding or the council to approve it, Drummer continued. But it would indicate the council’s commitment to granting the inspector general greater oversight capabilities.
“Our goal — or at least my goal — would be to have it as part of the county executive’s budget before it comes over,” Friedson said. “It becomes increasingly difficult when that expectation isn’t set from the beginning.”
The push to extend fiscal oversight comes after the federal prosecution of Peter Bang, a former economic development officer who stole $6.7 million from Montgomery County over a six-year period.
Bang was sentenced to four years in prison in February. The county is also seeking $450,000 in damages in an ongoing civil case against the former employee.
An inspector general report published after the federal Internal Revenue Service uncovered the embezzlement scheme documented serious gaps in oversight over Bang’s department, which the county operated until 2016.
The Office of Economic Development was never audited over that six-year period, the report found, and no one questioned repeated transfers of county funding into a private company Bang created for the scheme. That lack of scrutiny allowed his theft to continue unchecked until the IRS began investigating his personal transactions, the report concluded.
“The basic point of this bill is to move the inspector general from a reactive mode to a proactive mode,” Drummer said. “In the past, the office has been handling complaint-based examples of waste and abuse, for the most part, instead of actively looking for them.”
The amended legislation would require the inspector general’s office to conduct systematic reviews of accounting procedures in each of the roughly 22 executive departments and primary offices.
The office would also audit some “high-risk” contracts — financial agreements between the county government and outside companies that help provide services, from scrap metal collection to a support and re-entry program for youthful offenders.
The bill now allows the office to determine which contracts it considers “high-risk,” but initially defined the term as any worth more than $1 million. In fiscal year 2018, the county had roughly 299 contracts valued at or above $1 million, according to a financial impact statement from Rich Madaleno, director of the Office of Management and Budget.
The wide scope of the legislation, even with new amendments, makes the funding recommendation especially vital, Friedson said. The county’s OIG is already underfunded compared to nearby jurisdictions, including Baltimore City and Fairfax County, Va., which each allocate more than $5 million to their financial oversight departments.
“We’ve said from the beginning that to achieve this goal, it’s going to require public dollars,” he said. “But I think it’s going to make up for it in public trust.”
The bill would also require the Office of Internal Audit, part of the county executive’s office, to identify areas of risk within the county and begin submitting annual work plans to the chief administrative officer and the County Council. The office would be required to submit an annual report to the inspector general’s office.
