Maryland Highway Agency Booked $358.7M It Wasn't Authorized
Summary
A Maryland legislative audit found the State Highway Administration charged $358.7 million in project expenses to federal grants the federal government never authorized -- a total that grew 3,523% since June 2020, with 84% of the increase landing in the final 14 months alone. Agency managers told auditors they knowingly booked the costs as federal to minimize a shortfall in the state's Transportation Trust Fund. The same audit found SHA could not support $449 million in accrued federal revenue, and that 128 employees were paid overtime worth at least half their salary in 2023 with no consistent written policy governing who could work it or how much.
From $9.9 million to $358.7 million in five years
The unauthorized total didn't jump all at once. Auditors traced it growing from $9.9 million in June 2020 to $358.7 million by August 2025⧉ -- a 3,523% increase -- after holding roughly flat, between $7.7 million and $9.9 million, through the prior four fiscal years (2017-2020). Eighty-four percent of the growth, $163.5 million, arrived in just the final 14 months of the audit window. For scale: SHA's entire federal-fund draw for fiscal year 2024 was $789.3 million, so the unauthorized total alone equals about 45% of one year's federal funding, on an agency whose Transportation Trust Fund was projected to close fiscal 2025 with just a $400 million balance.
View data as table
| June 2020 | 9,900,000 |
|---|---|
| June 2021 | 59,100,000 |
| July 2022 | 89,000,000 |
| June 2023 | 111,700,000 |
| June 2024 | 195,200,000 |
| August 2025 | 358,700,000 |
SHA's own term for it: "unbillable expenditures"
According to agency management, SHA knowingly charged these costs as federal funds⧉ on the state's books specifically to minimize the Transportation Trust Fund's deficit -- routing even small, traditionally state-funded projects through federal grants and hoping to backfill the authorization later. One project authorized for $2.7 million in federal money had an additional $3.1 million charged to it after the grant was already spent -- more than double the original award, and money auditors say may never come back. In its official response, SHA disputed the word "unauthorized," saying it followed federally approved accounting rules and that no expenses were purposefully miscoded. The auditor's published reply doesn't back down: it discloses that SHA's own internal records referred to this same money as "unbillable expenditures," even while SHA was recording it as a federal expenditure and booking an accrued federal receivable against it -- without disclosing, on the state's books, that the funds were unbillable.
A second finding: $449 million nobody could vouch for
Auditors also could not confirm SHA's $449 million in accrued federal revenue⧉ entered on the books at the close of fiscal year 2024 -- an accrual (money booked as owed before it's actually collected) equal to 56.9% of SHA's entire year of federal expenditures, even though SHA says it bills the federal government weekly. $37.6 million of that accrual sat in accounts with no federal billing activity at all during the year. SHA's explanation: some of the underlying transactions migrated from a prior accounting system without enough detail to trace, a problem it says it's still working to untangle. Under the Comptroller of Maryland's own year-end closing rules, an accrual is only supposed to represent money collectible within 60 days -- with documentation kept on file to prove it.
Contractors without the paperwork -- or the certifications
SHA pays outside architectural and engineering (A&E) firms to inspect and manage its highway construction -- $882.9 million worth of it between November 2020 and October 2024. Testing two of those contracts, auditors found 4 of 8 sampled payments, worth $1.4 million of $2.5 million tested⧉, weren't backed by the inspection daily reports and time records the contracts require -- in one case, an inspector's time record claimed 12 hours of work on a day the daily report could only document 6. Separately, as of March 2025, 25 of 46 inspectors tested -- including 9 with none of the required credentials at all -- lacked the certifications their contracts require for testing construction materials like asphalt, concrete, and soil. Without them, the audit notes, test results "may not be acceptable." MDOT set a March 2026 deadline to retrain inspection staff, but said fixing the contract language that created the certification gap will take until 2030 for most districts, because those multi-year construction-management contracts had just started new terms.
View data as table
| Total SHA overtime, FY2024 | 15,100,000 |
|---|---|
| Overtime in the 15 districts/offices auditors surveyed | 13,300,000 |
| Of that, overtime paid with no written policy in place | 5,600,000 |
128 employees, half their salary in overtime, no policy behind it
SHA operates seven district offices plus a Baltimore headquarters, and auditors found each was left to set its own overtime rules -- with no requirement that anyone check whether those rules were consistent, adequate, or enforced. Surveying 15 districts and offices that paid $13.3 million in overtime in fiscal year 2024 (of $15.1 million agency-wide), auditors found 7 of them, covering $5.6 million in overtime, had no written policy at all⧉; pre-approval for non-emergency overtime mixed written and undocumented verbal sign-offs, with no cap on hours anywhere. Nobody at SHA was tracking who was racking up unusual amounts of it: in calendar year 2023, 128 employees were paid overtime worth at least half their regular base salary, and 9 of those were paid more in overtime than in regular wages for the entire year. When auditors tested a sample of 20 pay periods worth $81,500 in overtime, SHA couldn't produce approved time records for $13,300 of it -- 294 hours across 3 employees lacking that documentation.
The takeaway
- A $358.7 million bill nobody has agreed to pay. SHA knowingly booked project overruns as federal expenditures to minimize a Transportation Trust Fund shortfall; the federal government never authorized the money, and 84% of the exposure appeared in the final 14 months alone.
- A second, larger unverified balance sits behind it -- and it likely overlaps with the first. $449 million in accrued federal revenue -- more than half a year's federal draw -- had no documentation to show it was ever collectible, including $37.6 million tied to accounts with zero federal billing activity all year. The audit's own transmittal letter says this $449 million figure would include the $358.7 million in unauthorized charges above, so the two totals shouldn't simply be added together; $449 million, not $807.7 million, is the audit's own outer bound on the federal-fund accounting now in question.
- Three of four prior findings are confirmed resolved; the fourth is redacted, not resolved. Three of the four findings from SHA's 2022 audit -- contract-publication compliance, vendor-proposal security, and ethics disclosures -- were confirmed not repeated here. The fourth, on malware protection, is cybersecurity-related, so its status is redacted from this public report rather than confirmed; these are new failures regardless, in an agency MDOT says leaned harder on federal financing after 2020 state-funding cuts. MDOT agreed to every recommendation, with fixes due between November 2025 and 2030 depending on the finding.
MDOT's response attributes the growth in unauthorized charges to a 2020 cut in available state funding that pushed SHA to lean more heavily on federal "Advance Construction" financing (23 C.F.R. §115), which lets a state spend ahead of full federal obligation on the expectation of later reimbursement -- a legitimate federal mechanism, MDOT says, that nonetheless left SHA repeatedly spending past what any single grant had actually authorized. MDOT agreed with all recommendations across all four public findings. The federal-fund and accrued-revenue fixes (Recommendations 1 and 2) carry a September 1, 2026 target date; the overtime directive (Recommendation 4) was targeted for November 1, 2025 -- a date that has already passed as of this piece's publication, though this audit report contains no independent confirmation of whether that directive was actually completed on schedule. Two further findings, both related to cybersecurity, are redacted from the public report under Maryland law and are not addressed here.
Sources(1) ▾
- Maryland Office of Legislative Audits, Department of Legislative Services, Maryland General Assembly, Audit Report: Maryland Department of Transportation -- State Highway Administration (2025-09-08) — Fiscal compliance audit of the Maryland Department of Transportation's State Highway Administration (SHA), covering the period November 1, 2020 through October 31, 2024 (with federal-fund and accrued-revenue balances tested through August 2025). Triggered by a fraud, waste, and abuse hotline referral. Signed by Legislative Auditor Brian S. Tanen, CPA, CFE. Fetched directly from dls.maryland.gov and converted with pdftotext -layout; read in full (Findings 5-6, cybersecurity-related, are redacted from the public report by Maryland state law -- State Government Article Section 2-1224(i) -- and are not used here). dls.maryland.gov · original document
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A Maryland Office of Legislative Audits⧉ report -- OLA is the Maryland General Assembly's own independent watchdog, answerable to lawmakers rather than to the agencies it audits -- found the State Highway Administration (SHA), the Maryland Department of Transportation's road-building arm, routinely charged expenses to federal-grant highway projects that the federal granting agency never authorized. As of August 2025 that came to $358.7 million across 505 projects, each exceeding its authorized federal amount by $50,000 or more -- money that, because the federal government isn't obligated to pay it, may instead have to come out of Maryland's own Transportation Trust Fund or general fund.