DHS faces $200 million in deficiency requests after FY24 closeout errors; agency outlines fixes and data reforms

Analysts from the Department of Legislative Services told Maryland’s Health and Social Services Subcommittee that the Department of Human Services' fiscal 2026 allowance totals about $4.2 billion, an increase of roughly $55.1 million (1.3%) from fiscal 2025, and that the department requested deficiency appropriations of about $200.1 million to cover fiscal 2024 and 2025 shortfalls.

Saviksha Bujel and colleagues summarized DLS findings: the largest proposed deficiency—roughly $64.3 million—would replace assistance‑payments funds that DLS said were reverted in error at fiscal 2024 closeout. DLS reported other shortfalls: roughly $47.3 million for social‑services administration (including foster‑care shortfalls) and $30.9 million for the Office of Home Energy Programs (OHEP) to cover bill‑assistance and operational shortfalls. DLS also flagged delayed responses to information requests and outstanding mandated reports.

"During the fiscal 2024 closeout process, the department made several errors including reverting funds in error, spending on entitlements greater than the appropriation and incorrectly reporting expenditures by fund source for benefit programs," Saviksha Bujel said. DLS asked DHS to explain causes and corrective steps.

DLS analysts detailed caseload and fund‑balance issues. They described a $228 million annual federal TANF block grant and noted the TANF balance fell from roughly $57 million in fiscal 2024 as the department used reserves to cover closeout and shortfalls. DLS also noted changes to how TANF had been used since the American Rescue Plan funding swap in fiscal 2021–2022, and recommended aligning TANF spending with the grant's annual receipts going forward.

DLS flagged child‑welfare concerns as well. It reported children experiencing out‑of‑home placements in hotels—154 in fiscal 2023 and 180 in fiscal 2024—and growing expenditures in related categories, particularly flexible funds. The report recommended adding budget‑bill language requiring DHS to report on hotel placements; DLS said improved data collection and reporting would aid oversight.

Karnitra White, principal deputy secretary for the Department of Human Services, acknowledged the closeout errors and outlined actions DHS has taken and will take. White said the agency has rebuilt financial leadership, loaded detailed financial data into the state's financial system (FAMIS) for the first time in 2024, and established quarterly expenditure monitoring with local departments of social services.

"We acknowledge that we continue to face major challenges in our efforts to modernize our department," White said. "To meet these challenges, we continue to invest in our people, our policies, and our practices." She described initiatives already in the field: the Maryland Sun Bucks summer nutrition program (distributed $120 per eligible child during summer 2024 and served more than 594,000 children), implementation of kinship‑care law (Senate Bill 708) to prioritize placements with relatives or kin, and the December 2024 launch of a Unified Benefits Screener on MyMDTHINK that has already recorded tens of thousands of checks.

Jessica Smith, the department’s acting chief financial officer, told the committee that DHS found gaps in standard operating procedures and has worked with the Office of Legislative Audits and the Department of Budget and Management to correct processes, create quarterly monitoring, and improve federal drawdown practices. "We have been proactive in communicating our budgeting challenges with the Department of Budget and Management and beginning in 2023 ... we have made major changes in our office of budget and finance," Smith said.

On the foster‑care and hoteling issues, White said DHS has taken several steps: improving data collection, holding weekly staffings on urgent placements, issuing rate‑reform expectations to residential providers to reduce delays in accepting placements, and encouraging provider innovation to increase in‑state placements. She said hotel placements are "never an acceptable setting" and reported progress: the department said there were fewer children in hotels at the most recent count (the department reported 28 children were in hotels as of Jan. 27, 2025, down from higher counts earlier in the period covered by DLS).

Committee members pressed DHS on a range of issues raised by DLS: the causes of closeout discrepancies and the $64.3 million reversion and how DHS will prevent future errors; the TANF balance and whether continued TANF draws will be sustainable; timelines for the outstanding reports DLS requested; and large disparities in hotel placements across local jurisdictions (Baltimore County and Prince George's County were identified as having larger numbers in the DLS review).

White and Smith committed to providing follow‑up materials and timelines for outstanding reports, noted the department’s progress lowering vacancy rates and modernizing financial systems, and said they will continue to monitor potential federal funding uncertainty. White said DHS has already been drawing available federal funds while awaiting final federal guidance on certain discretionary programs and said the department is mapping contingency plans.

Why it matters: DLS concluded the FY24 closeout errors and later deficiency requests materially affect the state's fiscal picture for DHS programs that serve low‑income families, child welfare and energy assistance. The committee asked DHS for documentation of steps taken and a schedule for outstanding reports; DHS committed to additional briefings and to providing the recommended hotel‑placement reporting language.

No votes were taken at the hearing; DHS and DLS agreed on follow‑up deliverables and DHS described immediate corrective measures for finance, data and program operations.