The Montgomery County controller said Tuesday he had found "lax oversight" and "the potential for impropriety" in an audit of legal fees paid by the county from 2008 through 2011.

Controller Stewart J. Greenleaf Jr., a Republican, applauded steps taken last month by a new Democratic-controlled administration in Norristown to address some of the problems.

But he said the steps fell short of fully reining in potential abuses by continuing to permit lax standards - "a loophole," he said - for the preferential awarding of contracts to firms that are small, local, or owned by minorities.

"We found lax oversight in the selection, payment, and budgeting of outside legal counsel," Greenleaf said in an interview.

"Our report didn't see any evidence of criminal activity," he said. "But the haphazard way in which outside legal counsel was chosen certainly opened the possibility for that sort of thing."

The audit report was requested last month by Republican Commissioner Bruce L. Castor Jr., who often battled fellow GOP Commissioner James R. Matthews during the four years covered by the audit.

Matthews did not run for reelection in November and is out of office. He faces a misdemeanor criminal charge that he swore a false oath while testifying before a grand jury investigating corruption. The charge is not related to the awarding of legal contracts.

Greenleaf's audit verified a report by Uri Monson, the county's chief financial officer, that the previous administration consistently underbudgeted the cost of hiring laws firms for county work.

The underbudgeting, it said, amounted to $1 million over the four years.

The audit found that former county solicitor Barry Miller "had failed to comply with county ordinances" in selecting law firms and, in some cases, had paid for duplicate work. In one case, a firm was paid more than authorized by the commissioners' board.

Miller said Tuesday he was puzzled by the audit findings. He said his office never overpaid or double-paid for work. He said there were occasions when the county had to spend more for legal help than anticipated, but only because work levels had increased.

"I'm not aware that we did anything wrong," he said.

Castor said he wanted to know what "recourse" the county had if Miller violated county ordinances.

"I know they budgeted $100,000 a year [for law firms], and we spent an average of a half-million dollars," Castor said. "And a number of those expenses did not go through the commissioners."

Greenleaf said that, even if not budgeted, all legal expenses were properly accounted for in the year-end annual reports.

He said he looked into allegations of pay-to-play in legal contracts. He cross-referenced the hiring of law firms with political contributions to county political candidates.

He found no direct correlation, he said.

"While there certainly are firms that did work for the county and contributed to commissioners' campaigns from 2007 to 2011, the opposite was also true," he said. "There were firms that did significant work for the county and didn't contribute much money."

He found that one firm, Buchanan, Ingersoll & Rooney, did most of the labor-law work but "gave pennies compared to what some other firms contributed."

The reason the firm retained the work year after year seemed to be that "it always had," he said.

Castor, along with Democrats Josh Shapiro and Leslie Richards, voted last month to set up new procurement procedures. Opportunities for legal work will be publicized and open for bidding.

The commissioners carved out some exceptions for small, local, and "disadvantaged" firms. Greenleaf did not dispute the goal of broadening the range of firms that win county business, but said the definitions of small and disadvantaged were too broad - "a loophole I could drive a dump truck through."

Frank Custer, a spokesman for Shapiro, the board chairman, said he could not comment on specifics in the audit.

"The administration believes that the new procurement policy is a vast improvement over what was in place," Custer said.

Contact Tom Infield at 610-313-8205 or tinfield@phillynews.com, or follow on Twitter @tinfield.