ANNAPOLIS, Md. — Maryland’s State Retirement Agency did not fully verify hundreds of millions of dollars in private investment management fees and was cited for a separate cybersecurity issue in its latest fiscal compliance audit, according to a report released this month by the Office of Legislative Audits.
The audit, covering May 1, 2021, through April 15, 2025, found the agency lacked procedures to confirm the accuracy of about $260 million in private fund management fees paid in fiscal 2025. Auditors said the agency checked whether fees were calculated using the correct contract rate but did not obtain documentation to verify the underlying figures used in those calculations for most private fund managers.
The agency contracts with more than 400 public and private fund managers to invest pension assets, which totaled about $70.3 billion as of March 31, 2025. Roughly $27.6 billion was invested with private fund managers, $29.5 billion with public fund managers and $13.2 billion was managed internally, the report said. Total management fees paid to all external managers in fiscal 2025 were $383.9 million.
For 18 private fund managers whose quarterly fees exceeded $1 million, the agency did obtain and review detailed support. Those managers accounted for about $81.2 million, or 24 percent, of private fund management fees. But for the remaining 306 private managers, auditors said the agency had “a lack of assurance that the fees charged were proper.” In test work on five quarterly fees under $1 million, totaling about $1.1 million, auditors initially found the agency had no supporting detail, though fund managers later provided documentation when asked.
Auditors recommended the agency obtain and review sufficient supporting documentation for private management fees and seek recovery of any unsupported amounts. In a written response, the agency agreed and said it would expand its sampling of private fund fees using a broader, rotational review beginning in early 2026. It noted that private funds are subject to annual independent audits, that managers must certify the accuracy of their financial statements and that the agency performs quarterly reconciliations and performance reviews.
The report also references a separate cybersecurity-related finding in the agency’s information systems security and controls. Details of that issue, the related recommendations and the agency’s response were redacted under state law, which requires cybersecurity findings to be withheld from public versions of audit reports. Those specifics were provided in an unredacted report to officials responsible for corrective action.
The State Retirement Agency administers the State Retirement and Pension System, which includes retirement plans for teachers, state employees, state police, judges and certain law enforcement officers. As of June 30, 2024, the system had about 176,000 retirees and beneficiaries and roughly 205,000 active participants. A chart in the audit shows the system paid $5.0 billion in benefits in fiscal 2024, with total contributions of $3.7 billion and net investment income of $4.4 billion. The system’s net position was $67.9 billion, with an unfunded actuarial accrued liability of $25.4 billion.
An independent accounting firm issued clean opinions on the system’s financial statements for fiscal years 2021 through 2024, concluding they fairly presented the system’s financial position in accordance with generally accepted accounting principles.
The audit noted that one major finding from the prior 2022 report — involving investment reconciliations with the custodial bank — was resolved and not repeated. A prior cybersecurity-related finding remains redacted in the public documents.
In a letter to the Joint Audit and Evaluation Committee dated Nov. 25, 2025, Legislative Auditor Brian S. Tanen said his office would follow up with the agency on its responses and advise lawmakers of any unresolved issues.
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