State auditors found that the Maryland State Department of Education failed to adequately oversee hiring and background checks by local school systems to ensure that new hires were properly vetted and credentialed.
In an audit released Thursday, the Office of Legislative Audits also said the department may have risked millions in federal payments by not seeking federal funding reimbursement in a timely manner. And auditors were sufficiently concerned about the handling of two no-bid contracts that they referred the issue to the attorney general’s criminal division for further investigation.
State school officials did not immediately respond to a request for comment Thursday. In their written reply in the audit, however, they agreed with most of the findings on local schools and said they are working to correct the issues with local school systems.
But the department disagreed with the suggestion that it had risked federal funding, saying it is working to get reimbursement but that the task has been made more difficult by mayhem at the federal level, due to job cuts and program elimination.
The audit covered a review of MSDE’s operational and financial procedures from June 1, 2021, through July 15, 2024.
The department oversees Maryland’s 24 local education agencies (LEAs), which are responsible for hiring personnel to work in local schools. The hiring process is supposed to include background checks and screenings to ensure that employees are safe to work with children.
But according to the audit, MSDE did not have a procedure in place to check whether local agencies were conducting those screenings. Meanwhile, three local education agencies disclosed that “required screenings were not always being performed,” auditors said.
The pre-employment screenings require a “written statement by the applicant attesting they were not the subject of a child sexual abuse or sexual misconduct investigation by any employer that resulted in a finding,” the audit notes. The screening process also requires that the local agencies contact an applicant’s current or previous employer to verify that information.
The audit had a similar concern regarding criminal background checks, saying the department did not have “comprehensive procedures to ensure individuals with disqualifying criminal backgrounds were not employed at LEAs.” Disqualifying criminal backgrounds include convictions of certain offenses against minors and crimes of violence.
MSDE agreed with those findings and promised to develop regulations and procedures “to require each LEA to submit an annual attestation to the State Board of Education that it has complied” with pre-hiring screenings and criminal background check requirements. The agency also plans to “establish a new regulation requiring each LEA to annually provide a copy of its hiring procedures.”
Lost federal funds
The audit also found that MSDE did not always request federal funding reimbursement in a timely manner, risking millions in federal payments that may no longer be recoverable.
In one example, the state spent $194 million from a federal grant program from December 2023 through July 2024, but it did not request reimbursement until September 2024. As a result, the state “lost investment interest totaling at least $3.6 million from these grants that would have been earned had the funds been requested and received timely,” the audit said.
The audit also found that the education department did not request reimbursement for $20.7 million in federal COVID-19 relief funds, potentially losing those dollars too.
“During January 2024, MSDE requested and received $90.5 million from the federal government related to one grant, when it should have requested only $20.7 million,” the audit said. “MSDE advised us that it detected this error and returned the entire $90.5 million to the federal government in May 2024, but has not requested the $20.7 million that should have originally been recovered.”
State auditors acknowledged that recent developments from the Trump administration may create challenges for other COVID-19 related reimbursements.
In March, the U.S. Department of Education notified states that COVID-19 grant liquidation period was ending, effective immediately, which complicated retrieval of COVID-19 reimbursements. A court-ordered injunction of that federal funding freeze may allow for some of those funds to be released, but “there is still a possibility that these funds may no longer be available,” the auditors said.
MSDE told auditors in April the sudden halt to COVID-19 grant payments would result in an potential loss of at least $232 million in COVID-19 grants.
“This includes approximately $127 million for amounts expended by MSDE, and $105 million for local education agency (LEA) expenditures that were not yet paid by MSDE,” the audit said.
In its response, MSDE stressed that it has worked to get as much COVID-19 relief funding back from the federal government as possible.
“MSDE has been engaged in multi-prong efforts in recovering the COVID-19 grants from the federal government,” MSDE said. “These included direct engagement with the USED [federal department], participating in a multi-state coalition lawsuit against the federal government and engaging Maryland’s congressional delegations to impress upon the USED the importance of timely reimbursement.
“In June 2025, the USED reversed the decision to end the extended liquidation period and restored the original liquidation period,” MSDE’s response continued. “However, due to the continued layoffs and attrition within the USED as well as the federal government shutdown, the reimbursement process did not progress as quickly as anticipated.”
Non-competitive contracts
Meanwhile, another finding led auditors to notify the Office of the Attorney General’s Criminal Division about some of the agency’s contract procurements.
Auditors found that MSDE awarded about $1.2 million in grants and contracts without performing a competitive procurement process and “could not always support that the related deliverables were received.”
The audit points to two grants in 2023 where an out-of-state vendor was paid $700,000 to conduct an analysis of 138 Title 1 schools and provide intensive coaching for 27 of those schools. MSDE awarded that funding “without a competitive process when these services may have been provided by a State university,” the audit said.
MSDE could not provide documentation that the vendor conducted the analysis or the coaching services.
“Based on the questionable nature of the awards and the lack of support of the related deliverables we were able to substantiate the allegation, which we referred to the Office of the Attorney General’s Criminal Division,” the audit says. “A referral to the Criminal Division does not mean that a criminal act has actually occurred or that criminal charges will be filed.”
The contract finding started with a tip to the Office of Legislative Audits’ fraud, waste and abuse hotline, the audit said.