SHA ‘knowingly charged’ $360 million in unauthorized expenses to federal projects
by Bryan P. Sears, Maryland Matters
September 11, 2025
A troubling audit of State Highway Administration finances could draw the scrutiny of a legislative oversight panel in Annapolis later this year, lawmakers said Thursday.
State Highway Administration officials “knowingly charged” nearly $360 million in unauthorized expenses to federal fund projects in an attempt to hide a deficit in the state’s Transportation Trust Fund, according to a report released Thursday by the Office of Legislative Audits.
The audit looked at the period between Nov. 1, 2020, and Oct. 31, 2024, based on a complaint to the office’s fraud, waste and abuse hotline reporting a recent “rapid increase in the federal funds receivable balance.”
It found that expenditures for more than 500 projects with $50,000 or more in expenses may not be recoverable. To cover the gap, the state may have to tap a $400 million Transportation Trust Fund balance or state general funds, according to the audit.
Del. Jared Solomon (D-Montgomery), the House co-chair of the Joint Audit and Evaluation Committee, said the committee could bring the agency in for a hearing later this year.
“I’m concerned with the findings and look forward to reviewing the documents and working with our auditors and agency partners to better understand how this happened,” Solomon said Thursday after the release of the audit.
Timing of a hearing is uncertain: Solomon said he and Sen. Shelly Hettleman (D-Baltimore County), the Senate co-chair, are working to finalize the committee’s fall schedule.
House Republicans, meanwhile, called for the attorney general to investigate the “stunning budget shortfall.”
“Over the last two years, the Governor and Democratic Leadership have imposed massive tax and fee increases on Maryland drivers to close gaps in the Transportation Trust Fund,” House Minority Leader Del. Jason C. Buckel (R-Allegany) said in a statement from the House Republican Caucus. “To now be told there has been an ongoing effort, bordering on malfeasance, to hide the true breadth of that deficit is incredibly disturbing. The Attorney General must review these findings.”
Besides the overall budget, Legislative Auditor Brian Tanen wrote in his report that, “More concerning is that the amount of unauthorized spending increased by 3,523 percent, including an additional $163.5 million between June 2024 and August 2025.”
Auditors reported a sharp increase of expenses carried as billable to the federal government, even though they had not yet been authorized.
Between 2017 and 2020, the amount of unauthorized expenses ranged between $7.7 million and about $10 million. But by June 2024, the amount had grown to more than $195 million. And in August 2025, the amount approached $360 million.
“SHA also was unable to provide documentation to support the propriety of accrued federal fund revenue entries totaling $449 million (which would include the aforementioned unauthorized expenses) or the subsequent recovery of the funds,” Tanen wrote. “To the extent that the federal funds are not available, Transportation Trust funds or State general funds, may be needed to cover any related deficits.”
The findings in the report supported the allegation in the tipster’s complaint but “did not identify any matters that warranted” referral to the Office of the Attorney General for a criminal investigation.
Republicans disagreed.
“The Attorney General should really take a look at this,” said House Minority Whip Del. Jesse T. Pippy (R-Frederick), noting that Marylanders now pay “significantly more” for transportation fees, through higher registration fees or gas prices.
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“Now, not only has their trust been violated, but they may be on the hook for even more costs,” Pippy said. “This goes beyond gross mismanagement; this could be fraudulent activity. Our citizens deserve better.”
In one example, auditors found that the highway administration had fully spent $2.7 million in federal funds on an approved, unnamed project by September 2023. Even so, the agency charged an additional $3.1 million to the same project through August 2025.
Auditors noted that while the projects were authorized by the federal government, the amounts charged to them by SHA exceeded authorized federal aid.
Those additional charges, the auditors noted, “may not be recoverable.”
“According to agency management, SHA knowingly charged these costs as federal funds on the State’s accounting records to minimize the Transportation Trust Fund deficit,” auditors wrote. “Specifically, SHA management advised that they have sought additional federal funding when expenditures exceeded the federal grant and have attempted to find federal funds to cover more projects (including smaller projects that were traditionally funded through the Transportation Trust Fund).
“However … the federal granting agency has not authorized additional funding for these projects which will need to be funded with Transportation Trust Funds … or state funds,” the audit said.
In their response, state transportation officials said it was “not factually accurate to say that projects were not authorized, but it is accurate that in some cases, expenses charged exceeded the initial authorized amounts.”
The agency said it works to determine if additional costs warrant modifications to its request for federal reimbursement.
“If the expenditure is deemed federally ineligible for reimbursement, it would be expensed to state funds,” the agency wrote in its response.
Auditors said they also found that in some cases, the highways administration “purposefully recorded” some “unbillable expenditures” as a federal receivable “without disclosing the unbillable nature of these funds.”
Transportation officials agreed with the findings and said it was working to “quantify any unrecoverable amounts and adjust account balances.”
– This story was updated at 10:30 p.m. on Thursday to include legislators’ reactions.
Maryland Matters is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Maryland Matters maintains editorial independence. Contact Editor Steve Crane for questions: editor@marylandmatters.org.
