A new audit finds the Maryland State Highway Administration (SHA) “knowingly charged” nearly $359 million in excess project costs to federal accounts — an accounting move designed to mask a growing deficit in the State’s Transportation Trust Fund (TTF).
The Office of Legislative Audits describes a pattern of charging federal accounts beyond their authorized limits — a tactic auditors say SHA used to paper over shortfalls in Maryland’s core transportation fund.
According to auditors, SHA repeatedly billed federal highway projects for amounts exceeding their authorized limits, thereby pushing unapproved costs into federal ledgers to minimize the TTF shortfall.
“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. 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).”
The practice surged from under $10 million in 2020 to $358.7 million by August 2025. In one case, auditors found that SHA billed $3.1 million in excess of an already-maxed-out $2.7 million federal project.
SHA pushed back on the audit findings, stating that the projects were authorized but that some charges exceeded initial limits, and that State funds would ultimately cover any costs deemed ineligible for federal reimbursement.
What’s at Stake
Because the federal government has not authorized these additional charges, the audit warns that the State may never recover the funds. That would force Maryland to backfill hundreds of millions of dollars with scarce TTF funds or State general funds.
Auditors also flagged $449 million in accrued federal revenue entries without proper documentation — another signal of accounting practices that obscure, rather than clarify, the actual condition of the fund.
Why It Matters for Counties
Counties depend on the TTF through Highway User Revenues to maintain local roads and bridges. A hole this large in the fund could directly squeeze the already limited dollars that flow back to local governments.
As previously reported on Conduit Street, while the Maryland Department of Transportation’s Draft Consolidated Transportation Program (CTP) for fiscal years 2026–2031 adds nearly $300 million compared to last year’s program, the headline for counties is far more sobering: Highway User Revenues are on track to plunge off a cliff, wiping out nearly $110 million in local road funding practically overnight.
Using a modest 2.5% inflation assumption, the cumulative shortfall for counties and Baltimore City will reach about $520 million by fiscal 2031 — a permanent loss unless the General Assembly acts.
Stay tuned to Conduit Street for more information.
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