RALEIGH — A withering state audit uncovered a pattern of abuses by a division director at the Department of Health and Human Services, unearthing $1.6 million in excessive salaries and wages, rampant nepotism, failure to follow state policies, and continuing lax oversight at the agency.

State Auditor Beth Wood said she hopes exposure of the ongoing improprieties in the Office of Medicaid Management Information Systems Services finally will lead to reform.

“It’s the fourth audit, and then now an investigative report on basically the same division,” Wood said. OMMISS handles computer systems for Medicaid, and was responsible for developing the beleaguered NC Tracks system that manages Medicaid claims.

The mismanagement is “just unimaginable,” Wood said. “Not in anything we’ve ever done across state government have we ever seen an abuse of their authority like this,” Wood said.

In a 17-page response to the audit, DHHS Secretary Aldona Wos disputed most of the audit’s findings.

She said most of the temporary employees cited in the audit were hired more than two years before she took over DHHS in 2013, some no longer work in the department, and others were terminated when it was learned their qualifications did not match their compensation.

“DHHS believes the attempt, in several situations in [the auditor’s] draft report, to apply inapplicable standards and policies, results in a flawed analysis of some of the important and valuable findings of [the auditor’s] investigators,” Wos wrote.

The audit placed much of the blame for the mayhem in OMMISS on now-retired director Angeline Sligh, the subject of a 2013 audit detailing $237,500 in overpayments.

According to the audit, Sligh chose temporary staffing agencies outside of normal channels, paying them $598,673 for commissions that exceeded the rates charged by the state-operated temporary staffing service. Employees collected $234,724 in unjustified overtime, and ineligible employees received $26,026 for holiday pay.

In all, 5,841 hours of overtime were recorded by temp workers “without documented justification,” the audit said. Undocumented overtime was a problem cited in past audits.

Those employees “could not provide reasonable explanations” to justify the overtime, according to the audit. Some cited making copies or name tags, answering phones, and “lots and lots of typing” for their overtime.

By going to an outside temp agency, Sligh was not constrained by state rules limiting temporary employees to 12 months of service. Some temp workers stayed with the agency for years.

The audit said Sligh’s “abuse of her authority through the hiring process caused these excessive costs.”

According to the audit, Sligh hired 15 people connected to her, including her daughter, ex-husband, and ex-husband’s wife. Six were members of her church, and one was a son of a fellow church member. Also hired under Sligh’s watch were a neighbor’s daughter, her hairdresser’s sister, and two ex-colleagues at St. Augustine’s University.

The audit said agency paid 12 temporary employees $807,741 “more than their qualifications justified,” according to the Office of State Human Resources. In numerous instances Sligh overruled the temp agency’s determination of appropriate pay scales and directed them to beef up the amounts.

As examples from July 1, 2011, to June 30, 2014, the audit noted, one manager was paid $89.39 per hour, 78 percent more than appropriate, and $244,420 more than justified. A business analyst should have received $33.57 per hour but got $70, a 109 percent increase, resulting in $199,183 in excessive payments. A second business analyst should have been paid $23.31 per hour, received $36, and collected $60,404 more than justified. A health insurance claims consultant collected $74 hourly, or 73 percent above a justifiable level, for $103,484 more overall.

The audit said Sligh improperly received 2,120 hours of compensatory time to which she was not entitled. The comp time allowed Sligh to save her sick time and vacation days, potentially inflating her retirement benefits that are calculated partially on those accumulated days. Wos denied the comp time bumped up Sligh’s retirement pay.

The audit admonished DHHS Chief Information Officer Joe Cooper, Sligh’s supervisor, who signed off on the comp time even though he was informed by department HR officials that Sligh was not entitled to the perk.

Cooper told investigators: “I don’t really understand comp time. I’ve never seen comp time in my life.”

Even though earlier audits had reported on failings at OMMISS, Wos disagreed with one finding in the current audit citing DHHS with providing inadequate oversight. Wos said hiring Cooper in 2013 showed that oversight increased.

“This is Medicaid money,” Wood said of the wasteful spending. “This is your tax dollars that this person is walking away with, and everybody that she hired that was overpaid and not qualified for their salaries, or the hourly rates that they received. … Here are people walking away with your money, and somebody let them.”

The state is unlikely to recoup any of the overpayments.

“It sounds like a legal matter that would have to be handled from someone other than the Office of State Human Resources,” said David Prickett, spokesman for that agency. Although he is not aware of any action his agency is considering, “it doesn’t mean things wouldn’t be looked at down the road.”

Wood said it would be difficult to recover the overpayments because supervisors signed off on the pay sheets, “so therefore it’s going to be hard to ask for something back that you approved.”

In the same vein, she said, there is little to be done with the nepotism in hiring.

“People keep hanging their hat on the fact that [Sligh] didn’t break any policies because none existed,” Wood said. Just because no policies regarding nepotism and other abuses outlined in the audit have not been issued statewide should not prevent individual agencies from developing them, she said.

“Just go and ask the average citizen on the street trying to make a living and paying in taxes,” Wood said.

“Do they think it was prudent for the director of a division, something as critical as NC Tracks … to hire your hairdresser’s daughter, your ex-husband, your ex-husband’s wife, your daughter, friends from your church, and bring them in and pay them two times what the temporary agency says they should have made?” Wood said.

The audit said OMMISS management misrepresented overtime and comp time in its monthly reports to the General Assembly, short-circuiting lawmaker oversight. Managers omitted 2,811 overtime hours ($191,630) from Aug. 1, 2013, through July 31, 2014, and 1,078 compensatory hours ($69,930).

Because of lax oversight by OMMISS management, Sligh could circumvent state hiring policies, the audit said. She hired information technology staff through temp agencies and personal service contracts without required approvals. The state could have saved $961,020 or reduced the amount on those positions by using state employees “or creating state time-limited positions,” the audit said.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.