Balance Sheet Bombshell: Maryland Audit Finds Billions In Unverified Federal Funds

ANNAPOLIS, Md. — A new legislative audit has identified $3.42 billion in unsupported federal revenue entries and nearly $1 billion in potential and known unfunded liabilities across multiple Maryland state agencies following the closeout of fiscal year 2025, according to a report released this month by the Office of Legislative Audits.

The Statewide Review of Budget Closeout Transactions for Fiscal Year 2025, dated December 2025, examined year-end accounting entries made by eight major state agencies responsible for the majority of Maryland’s federal spending. Auditors found that seven of the eight agencies reviewed could not provide sufficient documentation to support large federal revenue accruals recorded at the end of the fiscal year, raising concerns about whether the funds will ever be recovered.

Auditors reported that unsupported revenue entries totaled $3.42 billion, with agencies unable to show that the federal government owed or later paid those amounts. As of October 2025, agencies also could not document receipt of $3.44 billion associated with the questioned accruals.

The largest unsupported amounts were attributed to the Department of Human Services, which recorded $1.31 billion in unsupported federal revenue, and the Maryland Transit Administration, which recorded $755 million, including nearly $688 million tied to expenditures without executed federal grant agreements. The State Highway Administration recorded $600 million in unsupported accruals, including more than $330 million for project costs not authorized by the federal government, the report found.

Other agencies cited include the Maryland Department of Health ($425 million), Maryland State Department of Education ($176 million), Maryland Department of Emergency Management ($86 million), and the Maryland Department of Labor ($63 million).

In addition to unsupported revenue, auditors identified $888 million in potential unfunded liabilities and $67 million in known unfunded liabilities that could ultimately require state general funds if federal reimbursement is denied or delayed. The Department of Health alone reported $280.9 million in unfunded liabilities, including federal disallowances and unapproved Medicaid payments.

The audit also found that some agencies failed to properly report significant payables to the Comptroller’s General Accounting Division, including $28 million in potential federal penalties related to SNAP error rates and $103.6 million in unexplained deficit balances in non-budgeted accounts at the Department of Human Services.

Auditors noted that many of the issues identified are repeated findings from prior years, pointing to longstanding weaknesses in accounting controls and oversight. While agencies were informed of the findings, formal responses were not requested because the report does not include recommendations. Officials said corrective actions are expected to be addressed in future compliance audits.

The eight agencies reviewed accounted for approximately $18.1 billion, or 91%, of Maryland’s federal fund expenditures during fiscal year 2025.

The full report was issued by the Office of Legislative Audits, part of the Department of Legislative Services, and presented to the General Assembly’s Joint Audit and Evaluation Committee.

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