Maryland Audit Exposes Millions In Improper Payments And Widespread Payroll Failures

ANNAPOLIS, Md. — A new legislative audit has found that Maryland’s Office of Personnel Services and Benefits (OPSB) failed to stop millions of dollars in improper health-benefit payments, did not ensure payroll accuracy across state agencies, and continued longstanding issues flagged in prior reviews.

The Office of Legislative Audits examined OPSB’s operations from November 2021 through February 2025 and concluded that the personnel agency lacked effective safeguards to verify employee eligibility, enforce premium payments, and monitor overtime costs. The audit was released in December 2025.

The findings come as Maryland has faced months of critical state audits across multiple agencies, including recent reviews uncovering unresolved investment fee verification at the State Retirement Agency, oversight gaps in more than $8.5 billion in exempt spending, questionable expenditures at the state tax agency, and failures that may have placed children in homes of registered sex offenders.

Auditors reported that OPSB continued medical coverage, paid insurance claims, and issued state subsidy payments for thousands of plan participants who failed to pay required premiums. In 2024 alone, 7,574 participants had unpaid premiums totaling about $5 million, the report said. As of January 2025, the state was still covering 5,825 of those individuals, with delinquent premiums amounting to $4.1 million.

A sample review found instances where premiums went unpaid for years while the state continued to fund coverage. In one case, a participant missed 44 premium payments but still received more than $42,000 in subsidy payments and over $136,000 in medical claim reimbursements.

The audit also found that OPSB did not complete annual eligibility audits on time and was slow to recover improper payments—issues previously identified in earlier audits. For example, auditors said review cycles meant to conclude by September were sometimes delayed up to 11 months. The 2022 audits identified $1.7 million in invalid claims, but recovery efforts did not begin until five months after completion.

Payroll oversight problems were also widespread. Reviewers identified 130 employees across 22 agencies who were paid despite failing to submit timesheets in multiple pay periods. Those employees earned a combined $740,000 during the periods examined. Separate tests showed that 915 former employees remained on payroll for days, months, or longer after leaving state service—resulting in overpayments of at least $135,000, including $35,900 auditors deemed improper.

In addition, OPSB lacked a comprehensive system to monitor excessive overtime, despite being legally responsible for doing so. Auditors found 775 employees whose annual overtime earnings exceeded their base salaries for three consecutive years. Some individuals earned more than double their regular salary through overtime alone.

The audit also determined that OPSB overpaid between $3.3 million and $6.6 million in administrative fees to two health-plan administrators because contracts failed to specify which Consumer Price Index category should be used to calculate rate increases.

Cybersecurity-related findings were redacted from the public report under state law but were communicated to responsible officials.

In its formal response, OPSB agreed with many of the audit’s recommendations and said new procedures are being implemented, including automated premium tracking for COBRA participants, payroll integration for contractual employees, and improved auditing timelines. However, the agency disputed portions of the report, arguing that some errors stemmed from pandemic-era restrictions and that responsibility for payroll corrections rests primarily with individual state agencies.

The audit findings have been forwarded to the Joint Audit and Evaluation Committee, which will monitor corrective actions.

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