Maryland lawmakers, officials blame lack of accounting procedure, bare-bones staffing for MDH’s financial problems

Thank you for supporting our journalism. This article is available exclusively for our subscribers, who help fund our work at The Baltimore Sun.

Maryland legislators and audit officials pointed to staffing shortages and a lack of proper accounting at Tuesday’s meeting of the General Assembly’s Joint Audit and Evaluation Committee as the cause for the Maryland Department of Health’s money woes.

“This is something that’s clearly been going on for a very long time, and we know the previous administration did not fill or choose to invest in staff. You can’t divorce that from any of these conversations,” said Del. Jared Solomon, a Democrat and the co-chair of the Joint Audit and Evaluation Committee. “If you don’t have the people, if you don’t pay them appropriately, if you don’t value them appropriately, we don’t fill the positions.”


Last month, a report from the Office of Legislative Audits — a unit of the Maryland General Assembly’s Department of Legislative Services — revealed shocking weaknesses within the health department’s accounting practices and how it recovers federal money its due, which could leave the state on the hook for $1.4 billion.

As of Nov. 6, the Department of Health’s unreconciled balance stood at $243.7 million, $13.7 million of which is federal funds it hasn’t received.


The audit covers agency practices from February 2019 to June 2022, when Dennis Schrader took control of the department after Robert Neall’s retirement during the coronavirus pandemic. During that time, the state health department also struggled with procurement snafus as it tried to abate the effects of COVID-19 on the state and suffered a cyberattack, which disrupted the agency.

To receive federal funding, the Maryland Department of Health is supposed to record its payments to service providers in the state’s Medicaid Management Information System. The agency then submits weekly requests for reimbursement from the federal government based on the system’s records, and is supposed to perform quarterly reconciliations to ensure that the reimbursement requests were submitted.

Quarterly reconciliations are fundamental accounting processes that ensure the actual money received or spent in a quarter matches the money that entered or left the account.

The department did not know quarterly reconciliations were not being performed until the Office of Legislative Audits mentioned it, and failed to recover hundreds of millions of dollars from the federal government because of the oversight.

Greg Hook of the Office of Legislative Audits said that the state health department went three years without performing quarterly reconciliations. The employee responsible for the reviews left the agency and wasn’t replaced, and his responsibilities were not reassigned.

According to Maryland Health Secretary Dr. Laura Herrera Scott, there was a 15% vacancy rate departmentwide when she took her position earlier this year. The current vacancy rate is 11.3%.

Vacancies aside, Hook said that knowledge isn’t being shared between employees in Maryland’s state agencies: When someone leaves their position, there aren’t instructions for the person who takes their place.

The report also found that the department did not have a procedure to track whether federal funds were being allocated to the correct accounts, leaving auditors unable to determine if all requested funds were recovered.


“A failure to properly allocate federal revenue resulted in the lack of assurance that any of the account balances are accurate, and MDH cannot determine whether all federal funds were ultimately recovered,” said Hook.

Last month’s report also left the agency unable to document whether it received $1.4 billion in federal funds. If the state health department cannot recover that money, it will have to come out of the state’s general fund.

Brian Tanen of the Office of Legislative Audits told lawmakers that the department likely is suffering a financial deficit and will have to tap the state’s general fund for help.

“The amount of the deficit? I don’t feel comfortable saying anything,” he said. “But what I can tell you is based on the lack of documentation they were able to provide us during and subsequent to our audit, they cannot come to this table and tell me definitively there is not.”

Asked how legislators could determine the size of the deficit, Tanen said it will take “time.” He explained that the department would need to make sure it’s keeping records regarding spending, requests and funds received going forward, which would allow them to identify what hasn’t been accounted for.

“At the time we did our audit, that detail and that level of accuracy was not available,” said Tanen after being asked.


But Herrera Scott assured lawmakers that she does not anticipate needing to lean on the state’s general fund. According to Herrera Scott, $230 million has been received in the department’s clearing account and will be allocated fully and reconciled by the budget closeout for fiscal year 2024.

Maryland Policy & Politics


Keep up to date with Maryland politics, elections and important decisions made by federal, state and local government officials.

Herrera Scott said that the audit gave her pause and highlighted the need for a “comprehensive look at the department’s fiscal procedures and compliance.”

“Our annual budget with federal funds included is nearly $20 billion, and we need to ensure that we have the correct tools, procedure and staffing models to ensure fiscal stewardship moving forward,” she said Tuesday morning.

The secretary also assured lawmakers that the agency is working with an external accounting firm to implement standard operating procedures. This would allow for a smooth transition when one employee leaves and another takes their place.

“Though the period covered in the audit is prior to the current administration and prior to me joining the department as secretary, I commit to you that the work to address these findings and rebuild trust in the department is well underway,” Herrera Scott said.

A follow-up audit will be performed in the spring or summer of 2024.