ANNAPOLIS, Md. — A newly released audit is highly critical of Maryland's Department of General Services (DGS), the government agency tasked with maintaining and managing state facilities.
The most notable of all 11 findings concerns $410.9 million in lease agreements to move state agencies out of the old State Center complex in midtown Baltimore to newer locations in the City's Central Business District.
"DGS could not document that it conducted a cost-benefit analysis weighing the benefits of purchasing property for use by the nine agencies instead of awarding leases to private entities," auditors concluded. "For example, the [Maryland Department of Health] lease will cost the State $277.9 million over 15 years for a building that the current landlord purchased for $7 million in 2016."
According to the audit, the Departments of Labor and Information Technology were the only state agencies signing onto a shared lease.
"DGS advised that it considered the agencies preferences regarding co-location with other agencies during the procurement's but did not formally analyze whether agencies should be co-located to maximize the State’s purchasing power and to achieve operational efficiency," the audit states.
In securing new leases, auditors accuse DGS of not presenting the total cost to the state spending board "in a transparent manner."
"Our review of the BPW agendas and related meeting transcripts for the eight leases disclosed that DGS only reported the first-year cost of the leases instead of the full cost over the 10-to-15-year terms," auditors wrote. "The first-year rates did not accurately reflect the total cost because the agreements provided for annual rate increases of between two to three percent."
RELATED: Maryland to transfer midtown State Center complex to Baltimore City
On top of that, the audit states DGS withheld from the board other related costs such as parking, amounting to an additional $4.7 million.
DGS pushed back on the findings, claiming they did "conduct cost-benefit analyses for the State Center campus in order to determine the most cost beneficial option for the state agencies located on this site."
The agency took extra exception with auditors suggesting they failed to seek out private entities to lease with.
"DGS also contracts with independent commercial real estate brokers to accurately determine the fair market rates for all leases in order to ensure that leases are procured at rates that are either at, or below, market rates for the area," DGS wrote in response.
Among other findings, auditors note DGS "did not structure lease solicitations in accordance with State procurement regulations and did not ensure that the solicitations sufficiently addressed each agency’s needs."
For their part DGS called the findings "not factually accurate."
"DGS followed applicable State procurement regulations in the lease procurement process and worked closely with each agency to ensure their space needs were adequately addressed in the Request for Proposals (RFP) for leased space that were issued," the agency responded.
Auditors also raised concerns over how DGS renews leases, citing several "questionable" examples.
That too was deemed "not factually accurate," by DGS in their response.
Additionally, the report alleges DGS neglected to publish 94 percent of its lease awards between July 2021 and July 2024.
State regulations require contracts worth more than $50,000 to be published within 30 days.
"DGS did not obtain required procurement documentation from grantees and did not have a comprehensive policy for conducting site visits of the projects to ensure the funds were being used as intended," auditors determined.
The agency did confirm the accuracy of that statement.
The audit goes onto highlight several other accounting and documentation issues within DGS.
Despite DGS disagreeing with a majority of the report, auditors say they stand by their findings.
Below is a copy of the full audit.
Just last month Governor Wes Moore announced redevelopment plans for the 28-acre State Center, revealing what he called a "transit-oriented concept" to that will include new housing, retail, and green spaces.
“For this to be Maryland’s decade, it has to be Baltimore’s time,” said Moore. "This next chapter for State Center will expand our mission to create jobs, build housing that’s affordable, and create new pathways to work, wages, and wealth in all corners of the state.”
The State Center Metro Subway and Cultural Center Light Rail stations surround the complex in close proximity to Baltimore's Penn Station.
Former Governor Larry Hogan officially terminated state government leases there back in 2022, officially launching the move.
