Colorado is facing a $1 million sanction after Gov. John Hickenlooper’s administration made changes to Colorado’s food-assistance program without receiving federal approval.

The state’s total liability is potentially $3.9 million, according to a previously undisclosed letter obtained by The Denver Post, and involves a contract extension and amendments to its agreement with a private company to help operate the system that provides 500,000 low-income residents money for food.

The violations identified by federal authorities in the March 19 letter to Colorado Department of Human Services executive director Reggie Bicha are likely to renew questions about the troubled $800 million food-assistance program and amplify concerns about the agency’s embattled leader.

More than 80 state lawmakers signed a no-confidence letter delivered to the governor May 11 regarding Bicha’s management of the department. But Hickenlooper continues to champion the director, and Bicha has vowed to restore confidence by meeting individually with lawmakers.

The chairman of the legislative budget committee, who signed the letter, said this week that he was unaware of the federal claims about food assistance and questioned why the department did not mention them earlier. Sen. Kent Lambert, R-Colorado Springs, noted that when the letter arrived, the General Assembly was still in session, “when we could have done something.”

The state is appealing the $1 million sanction and negotiating with federal authorities on the total amount of the violation.

Problems from 2013

In an interview Wednesday, Bicha said he was surprised by the federal letter, which dates the violations back to July 2013. Federal authorities discovered the problems in November 2013.

“I’ve got my best people looking at it,” Bicha said. “We are shaking the sheets on this to see why and how this happened, and we’re working to get it corrected.”

Human services officials acknowledged that they failed to seek permission before spending the federal dollars, as required by the U.S. Department of Agriculture, which administers and funds the Supplemental Nutrition Assistance Program in conjunction with the states. In their zealousness to improve the system, state officials said they did not receive pre-approval.

“It sounds like it’s a little bit of an oversight issue, on our part,” said Julie Krow, the human services department’s deputy executive director of community partnerships. “I’m not sure that people knew that they needed to seek prior approval. I’m not sure they were aware. We have processes in place now to do that.”

The changes to the Colorado Benefits Management System, Krow said, involved buying new computer software mainly to improve efficiency in processing food-assistance applications and identify people who had committed fraud in other states. The state contracts with Deloitte Consulting to run the technical side of the system under a contract renewed in June 2013 for four more years.

“It’s not a fine or a penalty. We submit costs, and they let us know if they are allowable costs,” Krow said. “We bought real things that were good. They are just questioning whether they should have paid their share.”

Any money returned to the federal government will not come from dollars used to pay for food assistance, Krow said.

USDA regional administrator Darlene Barnes sent Colorado a bill for $953,787.81 in unauthorized expenses and demanded repayment within 30 days. An additional $2.9 million liability is possible.

For now, federal authorities are only asking for the lower amount, but the letter makes clear that they could pursue the full $3.9 million if the state doesn’t take corrective action. The state received a 120-day extension to dispute the amount .

“When I learned about this, … we immediately started digging into what the basis for the disallowance was,” Bicha said. “The people of our state shouldn’t have to pay a disallowance unless there’s a good reason.”

But Colorado’s program has been under scrutiny for the past decade, facing significant pressure after a 2007 legal settlement that required it to comply with federal guidelines for processing requests within 30 days for new applicants.

The USDA letter also disclosed that the state agreed in October to make 44 changes to the system to bring it into compliance, some of which are expected to take until June 2016 to complete. Hickenlooper administration officials were not able to provide more details about the changes being made nor their progress.

Deadline struggle

Since 2011, when Hickenlooper took office and appointed Bicha, Colorado has struggled to meet its targets for processing applications on time, according to state figures. The rate fell below the 95 percent goal in October 2013 and stayed there, according to human services data. Meanwhile, error rates for eligibility determination and the amount of benefits have remained above the national average since 2012.

Krow, who oversees the office, said the state’s performance is improving and officials have met with county offices that administer the program to identify problem areas. She said the administration inherited the technical system challenges.

The rate of new applications processed on time increased to 94 percent in April, she said, up from 92 percent in January.

“We are still not entirely where we want to be,” she said. “It’s been all hands on deck to improve these numbers.”

Kathy Underhill, executive director of Hunger Free Colorado, an advocacy organization, said the letter is a big deal.

“It’s not something they just do lightly,” she said when contacted by The Post. “The USDA is generally very hesitant to actually levy a sanction.”

Staff writer Joey Bunch contributed to this report.