"There's no consistent reason why money was budgeted in one area or another," said Uri Monson, the chief financial officer hired as part of a new county administration this year. "These aren't what I would consider honest budgets."
Each year, the former commissioners allotted $100,000 for legal payments to outside firms. But year after year, actual expenses exceeded that amount, sometimes by as much as $700,000 in one year.
To cover the gap, the county often tapped its general fund - a "rainy day" reserve it at times refused to touch when it came to spending for other departments.
Former Montgomery County Solicitor Barry Miller, who drafted the legal spending plans, defended the payments. The money bought legitimate legal services, even if the annual budget never accurately reflected the costs, he said.
"You know as well as I do that budgets are all about smoke and mirrors," he said. "Sometimes you just have to be creative."
The hidden spending came to light earlier this month and has since driven a wedge between members of the county's previous administration, led by former Commissioners' Chairman James R. Matthews, a Republican, and the current one, chaired by Democrat Josh Shapiro.
A 69-page grand jury report issued days before Matthews left office in 2011 lambasted his administration for reckless spending, awarding plum positions to friends, and doling out contracts to contributors.
Matthews was charged with false swearing and perjury as a result - counts he has denied. A judge has since thrown out the perjury charge.
Miller, whom the grand jury painted as Matthews' right hand, was fired shortly after the report was released.
The document did not mention any of the unbudgeted legal expenses incurred under his watch. But asked about them last month, Matthews said he didn't know why payments to bond lawyers and attorneys representing the county in employee liability claims and labor contract negotiations never appeared on the budget.
"You'll have to ask Barry [Miller] about that," he said. "I'm interested to hear what he says."
Miller explained the issue as a difference of opinion in how a county solicitors' office should be run.
As Matthews' administration took office in 2008 at the height of an economic downturn, Miller said he sought to staff a legal team that relied less on full-time government lawyers and outsourced much of its work to firms that could handle it more cost effectively.
Over the years, that included payments to Philadelphia firm Dilworth Paxson for labor contract negotiations with the county detectives ($160,000), Blank Rome for representation as bond counsel ($285,000) and defense of employment liability cases between 2008 and 2011 ($500,000 plus).
"If these came up tomorrow, they wouldn't handle any of these matters in house," Miller said.
Many of the firms that benefited from outside spending had given often to the commissioners' campaign coffers.
Combined, members of the old administration - Matthews, fellow Republican Bruce L. Castor Jr., and Democrat Joseph M. Hoeffel III - accepted at least $58,000 in campaign donations from firms or individual lawyers that were later awarded unbudgeted legal contracts between 2007 and 2011.
Matthews' campaign was by far the largest beneficiary, taking in $36,000, or more than 60 percent of the total, either through his individual campaign account or through the one he shared with Castor during their 2007 run for office.
Miller, who was in charge of recommending firms for contracts, served as treasurer of Matthews' campaign.
Asked about the campaign contributions he received from firms that got county contracts, Matthews maintained that big Philadelphia legal shops such as Blank Rome, Cozen O'Conner, and Saul Ewing were some of the most frequent political givers in Pennsylvania politics.
"Is that illicit? No," he said. "These people have a vested interest in the county. They want to make sure no one undercuts their business or knocks them out of contention."
But Castor, the lone member of the previous administration reelected to a second term and Matthews' avowed political enemy, questioned how those firms were chosen.
"I am not so sure that all of those lawyer expenses were voted on by the commissioners," he said. "I guarantee you I didn't vote on $2 million in lawyer's bills over the last four years."
Castor voted for at least $706,000 of the outside expenses, according to a review of meeting minutes during the trio's four-year term.
More troubling than the contracts themselves, Monson said, is their concealment throughout the annual budgeting process.
Though the combined bill for outside legal services ranged from $235,000 to $821,000 each year, Miller consistently proposed setting aside only $100,000 annually.
"You can't always predict what legal matters will come up," he said.
But many of the contracts were given for predictable work such as annual legal insurance for liability claims or periodic labor negotiations.
Meanwhile, during the yearly budgeting process, the commissioners routinely chastised department heads who could not keep their spending within tight constraints. Miller conceded that in some cases, departments were also asked to absorb the salaries of part-time staff lawyers to hide his own office's payroll.
Since Shapiro's administration took over this year, at least 13 such positions have been identified and eliminated.
"For budget purposes, when we had to take a hit in the commissioners' office, we cut someone from the solicitor's staff," Miller said. "Sometimes we put those people in other offices. And part-time employees aren't counted in budget numbers."
For the new administration, though, the result has been confusion.
Monson has spent weeks combing through spending records to straighten out where the money was going. The county's new solicitor, Ray McGarry, said he still receives phone calls from firms claiming to represent the county in matters he has never heard of.
For Shapiro, the disorder only points to the need for change. He was elected last year on a platform that included revamping the budgeting process.
"We need to begin the budget at zero and build it up in a way that is fiscally responsible and accurately reflects county activities and priorities," he said. "We've cut the smoke and mirrors."
Contact Jeremy Roebuck
at 267-564-5218, jroebuck@phillynews.com, or follow @jeremyrroebuck on Twitter.
