Annual Report Office Of Inspector General Fiscal Year 2007 .

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Annual ReportOffice of Inspector GeneralFiscal Year 2007October 2007Office of Inspector GeneralMontgomery County, Maryland

This report is available to the public in printed or electronic format.To obtain a printed copy, please call or write:Office of Inspector General51 Monroe Street, Suite 802Rockville, Maryland 20850Telephone 240-777-8240E-mail: ig@montgomerycountymd.govWebsite: http://www.montgomerycountymd.gov/igPlease address specific inquiries about this report to Thomas J. Dagley, InspectorGeneral, in writing or by calling 240-777-8240.Fraud, waste, and abuse can be reported to the confidential OIG Fraud Hotline. Call24 hours a day, 7 days a week to 1-800-971-6059.

A Message from the Inspector GeneralIn fiscal year 2007, the Office of Inspector General (OIG) focused on key factors set forth inMontgomery County Code §2-151 - increase efficiency and effectiveness of programs andactivities funded by the Council; prevent and detect fraud, waste, and abuse; and increase legal,fiscal, and ethical accountability.Highlights of this annual report include summaries of audit work that examined MontgomeryCounty Government overtime compensation and selected capital improvements program projectswith development district funding. We also summarize our reviews of the Planning Board sdraft Development Review Manual and the Child Welfare Service s gift card program. Selectedfraud, waste and abuse investigations are also reported, including two criminal prosecutions anda hearing officer s decision that resulted in the reversal of a contract award. OIG performance inthese areas contributed to the County s governance system and leadership s priority for aresponsive, accountable County Government.Another highlight is the implementation of an OIG Fraud Hotline in December 2006, providingall individuals in the MCG workforce the opportunity to report, anonymously if desired, illegalor improper activity. The Hotline generated more than 40 reports of fraud, waste, or abuse in thefirst six months of operation. The success of the Hotline in its first year of operation provides asolid foundation to explore in fiscal year 2008 the benefits of extending the model to otherCounty-funded agencies to further protect taxpayer dollars.The Four-Year Work Plan issued in August 2005 continues to serve as the OIG strategic plan.The goals, strategies, and action items focus on improving performance in substantive areas.Some action items and performance measures have been modified to ensure our work reflects theneeds of today s stakeholders.We acknowledge the invaluable assistance by the leaders and staff of County Government andindependent County agencies with whom we work to bring about meaningful results. We lookforward to working with the Council and Executive in fiscal year 2008.

Office of Inspector GeneralFiscal Year 2007 Annual ReportTable of ContentsPageMission, Vision, and Goals . 1Statutory Responsibilities. 1Challenges . 2Work Plan. 3Fiscal Year 2007 Results. 4Increase Efficiency and Effectiveness. 4Prevent and Detect Fraud, Waste, and Abuse . 6Increase Legal, Fiscal and Ethical Accountability . 10Administrative Issues . 12APPENDIX .A-1Office of Inspector General Annual Report FY 2007October 2007Page i

Mission, Vision, and GoalsThe OIG s mission is to conduct objective and independent audits, inspections, andinvestigations relating to Montgomery County Government (MCG) programs, operations, andindependent County agencies to:promote economy, efficiency, and effectiveness;prevent and detect fraud, waste, and abuse;promote legal, fiscal, and ethical accountability;strengthen professional relationships; andinform stakeholders of problems and corresponding corrective actions.Statutory ResponsibilitiesThe OIG was established by the Montgomery County Council in 1997. The OIG is anindependent office its responsibilities as prescribed by Montgomery County Code §2-151 are:1. review the effectiveness and efficiency of programs and operations of CountyGovernment and independent County agencies;2. prevent and detect fraud, waste, and abuse in government activities; and3. propose ways to increase the legal, fiscal, and ethical accountability of CountyGovernment and County-funded agencies1.To carry out our responsibilities, we:maintain an independent objective organization to conduct audits, reviews, andinvestigations. We comply with generally accepted government auditing standardspublished by the Comptroller General of the United States. In addition, we rely onstandards published by the Institute of Internal Auditors, the President s Council onIntegrity and Efficiency, and the Association of Inspectors General;take appropriate action to prevent and detect fraud, waste, and abuse;receive and investigate credible complaints from any person or entity;report violations of law to the State s Attorney for Montgomery County or anotherappropriate agency;notify the County Council and Executive of serious problems in County programs;review existing and proposed legislation and regulations to strengthen controls andincrease accountability; andsubmit reports with recommendations, as appropriate, to the County Council andExecutive.1The County-funded agencies include the Montgomery County Public Schools, the Maryland-National Capital Park andPlanning Commission, the Washington Suburban Sanitary Commission, Montgomery College, the HousingOpportunities Commission, the Revenue Authority, and any other governmental agency (except a municipal governmentor a State-created taxing district) for which the County Council appropriates or approves funding, sets tax rates, orapproves programs or budgets.Office of Inspector General Annual Report FY 2007October 2007Page 1

ChallengesReferral of Fraud, Waste, and Abuse InformationIn our 2006 annual report, we reported the challenge of effectively implementing an independentFraud Hotline to ensure County employees, contractors, suppliers, and residents have theopportunity to communicate, anonymously if desired, concerns about fraud, waste, and abuse.We reported that through fiscal year 2006, the vast majority of individuals who contacted theOIG were residents and that while it is important for this flow of information to continue,employees and those doing business with County-funded agencies needed to be encouraged andgiven the means to confidentially report concerns.In fiscal year 2007, considerable progress was made with the implementation of an OIG FraudHotline for Montgomery County Government (MCG), beginning with a press conference onDecember 14, 2006 by the new County Executive and Inspector General. An importantchallenge we continue to face at year-end is effectively communicating the Hotline s existence toall employees, contractors, and suppliers of MCG. It appears we were successful reaching out toall MCG employees with active email accounts as of December 2006, as well as all newemployees who attended the mandatory orientation sessions beginning January 2007 sponsoredby the Office of Human Resources. However, approximately 2,000 MCG employees withoutactive email accounts may not have received the same detailed hotline information. In fiscalyear 2008, we will continue working with Executive staff to address this challenge, as well asprovide MCG contractors and suppliers with hotline information.Regarding other County-funded agencies, only MCG was part of the Fraud Hotline s first year ofoperation. We will work with the Council, Executive, and other leaders in fiscal year 2008 toexplore expanding the hotline to other County-funded agencies to prevent and detect fraud,waste, and abuse.Whistleblower ProtectionAnother unresolved challenge reported a year ago that is related to the effectiveness of the OIGFraud Hotline involves Montgomery County Code §33-10 (the County s whistleblower law).This law was enacted prior to the Council s creation of an OIG. In this regard, Section 33-10states, in part, employees should first report illegal or improper actions to the individualresponsible for corrective action. The law and related County personnel regulations state that theindividual may be anyone from the employee s immediate supervisor up to and including theCounty Executive, or for legislative branch employees, the County Council. The law also statesin unusual circumstances, or if a retaliatory action or coercion has taken place, the employee mayfile a report directly with either the Merit System Protection Board or the Ethics Commission. Inour 2006 annual report, we reported that several employees advised the OIG that they werediscouraged or prohibited from reporting concerns to the OIG. We recommended the CountyCode be updated to include the specific role of the OIG as an oversight office, and clearly stateeach employee s responsibility to report fraud, waste, and abuse.While no specific action was taken to update Section 33-10 or related County personnelregulations in fiscal year 2007, the new County Attorney demonstrated his commitment topreventing fraud, waste, and abuse and prohibiting retaliation against employees who discloseOffice of Inspector General Annual Report FY 2007October 2007Page 2

such conduct. In his article Protecting County Government from Fraud and Abuse in theAugust 2007 edition of Legal Views newsletter, he includes the statement The hotline enablesCounty employees and/or contractors to confidentially provide information to the Office ofInspector General about potential fraud, waste, and abuse.We look forward to working with the County Attorney and other MCG offices in fiscal year2008 to encourage all employees to report concerns to the OIG and ensure they are protectedwhen doing so. We recommended that all County managers be trained on the rights of Countyemployees under Whistleblower Protection laws and the role and utilization of the Fraud Hotline.Work PlanThis annual report addresses OIG activities in fiscal year 2007 (July 1, 2006 through June 30,2007), including some audits and investigations that were completed during this period andreported in early fiscal year 2008. Similar to activities reported a year ago, our fiscal year 2007work addressed various action plans described in our Four-Year Work Plan published in August2005. Although some of this year s work represents a modification to one or more action plans,the modifications were not deemed significant enough to publish a revised work plan.Our planning process for fiscal year 2007 comprised four main steps: (1) identify a universe ofCouncil-funded programs and activities; (2) determine a list of potential OIG projects from thisuniverse; (3) conduct risk assessment; and (4) develop a plan to conduct audits, reviews, andinvestigations consistent with our legislative mandate. In fiscal year 2007, we had theopportunity to focus on several key components of the County s governance system, includingthe adequacy of controls to ensure accountability for management actions, independence ofinternal audits, and transparency of operations.Office of Inspector General Annual Report FY 2007October 2007Page 3

Fiscal Year 2007 ResultsThe table below summarizes key OIG performance measures and results.Table 1: Fiscal Year 2007 Performance Measures and ResultsOutcomes/Results:Percentage of audit recommendations accepted2County funds recovered or put to different use as theresult of audit findings or investigationsQuestioned costs or potential savingsFormal responses to fraud, waste, and abuse mattersreported to management by the Office of Inspector General4Workload/Outputs:Joint investigations with prosecutorsComplaints openedComplaints closed (includes those received prior to FY 2007)Pending complaints (June 30, 2007)Audits/reviews/inspections begun5Audits/reviews/inspections reportedInputs:ExpendituresWorkyears67 3,065,0003 1,100,00010254533744 534,6144.9Fiscal Year 2007 Results: Increase Efficiency and EffectivenessOvertime Compensation - Interim Audit ReportIn April 2007, we issued an interim audit report on a review of Montgomery County Government(MCG) overtime compensation policies and procedures as well as documents used to budget andcompensate employees for overtime in selected departments. The review includes evaluatinginternal controls used to safeguard against the potential for abuse. Our work through June 30,2007 included the two largest users of overtime compensation the Fire and Rescue Service(FRS) and Police Department as well as the Board of Elections, one of the smallest users ofovertime.Our report identified strengths in the approach used to manage overtime as well as conditionsthat required immediate corrective action. The audit disclosed no reportable findings for thePolice Department or Board of Elections. We found generally that the Police Department2Based on audit reports regarding MCG Overtime Compensation and Selected CIP Projects with Development DistrictFunding3 3,000,000 in budget reductions by Council as a result of the overtime audit; 65,000 from a court-ordered restitutionas a result of a recovery agent scheme investigation4Does not include management responses pending on June 30, 20075MCG Overtime Compensation; Planning Board Development Review Manual; HHS Gift Cards; Selected CIP Projectswith Development District FundingOffice of Inspector General Annual Report FY 2007October 2007Page 4

implemented effective overtime policies and procedures including internal controls to protectagainst overtime abuse. In addition, the Department implemented a management informationsystem capable of documenting and providing management with the tools needed to monitorovertime use. For the Board of Elections, although there were no findings in our interim report,we provided the Director with suggestions to strengthen internal controls for overtime in aseparate memorandum.The interim report includes six findings and recommendations that address deficiencies in thedesign or operation of internal controls as it relates to the payment of overtime compensation inFRS. Our findings and recommendations identified corrective actions needed by FRS, theDepartment of Finance, and the Office of Management and Budget (OMB):Finding 1 - FRS overtime policies and procedures have not been updated since 1993 eventhough significant changes in the management of overtime have taken place. Werecommended FRS update or re-write its policies and procedures and disseminate them toall FRS personnel to ensure all significant changes in the use and management ofovertime are clear. We also recommended that a component of the FRS overtime policyinclude periodic self-assessments by management to ensure compliance.Finding 2 - FRS internal controls and management oversight were not sufficient to ensurethe accuracy of timesheets used to pay overtime and protect against abuse. Werecommended that FRS, in consultation with the Department of Finance, develop andimplement sufficient internal controls to ensure the accuracy and completeness of FRStimesheets and protect against abuse. We recommended that the internal controls addressthe need for a specific separation of duties between individual employees, supervisors,and management.Finding 3 - FRS did not have a comprehensive management system for collecting,analyzing, and reporting available overtime data needed to measure the efficiency andeffectiveness of overtime compensation and develop budgetary requirements. Werecommended that FRS identify the operational and funding requirements for acomprehensive FRS management system, capable of tracking and analyzing the use ofovertime. As part of the process, we recommended FRS conduct research to identify andevaluate other County systems, including the Police Department system, and firedepartments in other jurisdictions for use as a benchmark and to save development timeand costs.Finding 4 - The use of FRS overtime compensation from fiscal years 2004 to 2007 wasnot linked to efficiency or other key performance measures and results developed by FRSand approved by OMB. We recommended that FRS, in consultation with OMB, developand implement appropriate measures for the Administrative Services, Community RiskReduction Services, Operations, and Wellness, Safety, and Training programs that helpensure the use of overtime compensation by employees is linked to the FRS performancemanagement system and the County s budget decision-making process.Finding 5 - Formal County-wide responsibility for oversight of timekeeping proceduresused to record and approve overtime compensation has not been established. Werecommended the Department of Finance establish formal responsibility for oversight ofMCG timekeeping procedures used to record and approve overtime compensation. Wealso recommended the oversight include conducting, on a risk assessment basis, periodicOffice of Inspector General Annual Report FY 2007October 2007Page 5

internal audits of procedures and business processes used to record, approve, and justifyovertime compensation at selected County departments/offices.Finding 6 - Unrealistic FRS overtime budgets used during the fiscal years 2004 to 2008budget process did not provide FRS management, the Executive, and Council withaccurate and meaningful cost data. We recommended that FRS, in consultation withOMB and Finance, develop an effective and efficient overtime budget process bycollecting accurate and timely overtime information on employee timesheets, and usingthis information to: analyze overtime trends by project; target areas of high overtime use;prepare staffing requests; and develop realistic overtime budgets.Incident to the audit, we identified approximately 1.1 million in questionable FRS overtimecompensation payments for calendar year 2006, based on documentation available to us duringthe audit. In addition, incident to the approval of the fiscal year 2008 operating budget for FRS,the Council reduced the Executive s recommended FRS overtime budget by 3 million. Thesefigures are reflected in Table 1 of this annual report. A final report for this audit will be issued infiscal year 2008.Management s response and our assessment of corrective action to date for these findings andrecommendations are summarized in the Appendix.Fiscal Year 2007 Results: Prevent and Detect Fraud, Waste, and AbuseThe OIG opened 54 new fraud, waste, and abuse complaints in fiscal year 2007. Complaintswere handled in a variety of ways. For example, after preliminary investigation, somecomplaints were closed because we were unable to validate the allegation(s). For otherinvestigations in which the allegation was validated, our results were reported to managementand/or a prosecutor for a decision. Further, information not of a confidential nature from certaincomplaints was referred to management for attention after determining an independent OIGinvestigation was not the best way to address the concern. As reported in Table 1, 10 formalresponses wer

Office of Inspector General Annual Report FY 2007 October 2007 Page 3 such conduct. In his article Protecting County Government from Fraud and Abuse in the August 2007 edition of Legal Views newsletter, he includes the statement The hotline enables

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