Managers of one of the state's largest service contracts came in for a barrage of criticism Tuesday after legislators were provided a copy of an audit detailing why the project is hundreds of millions of dollars over budget and nearly two years behind schedule.

State Department of Health and Human Services officials failed to properly document delays in building a new Medicaid claims system and did not notice when the company hired to do the job started building a system different from the one approved by the state, the audit says.

The end result: The state's $265 million contract with Computer Sciences Corp. will now cost $494.8 million and take 22 months longer to finish. And the state will spend $90.6 million more than planned to keep the old system running.

Although the federal government is expected to pay 90 percent of the costs, that didn't lessen legislators' anger.

"If this was the private sector, someone would have been let go long ago," said Rep. Justin Burr, an Albemarle Republican, calling the project a "money pit."

In an unusual public exchange, legislators on Tuesday asked the head of the Medicaid Management Information System office, Angeline Sligh, to justify her job performance.

"I feel like I've done a good job leading the program," she said. "I would give myself an A."

The contract to build a computer system to handle Medicaid claims touches millions of state residents and hundreds of hospitals, doctors' offices, pharmacies and private companies.

More than 1.5 million residents are enrolled in the government health insurance program for the poor and disabled. Health care providers file tens of millions of claims for payment each year.

The proper handling of those claims is crucial to controlling costs and detecting fraud.

The state's effort to build a new Medicaid claims system has suffered numerous setbacks since the state signed a contract in 2004 with Affiliated Computer Services.

Former DHHS Secretary Carmen Hooker Odom canceled that contract, but the state still ended up paying the company $5.6 million for its work and another $10 million to settle a lawsuit in 2007. The state hired Virginia-based CSC to build the new system in 2009.

At the time the contract was signed, current DHHS Secretary Lanier Cansler was working as a lobbyist for CSC. He said he served as a consultant for CSC on what North Carolina needed in a new system but resigned his position when he accepted the DHHS job.

Cansler said he has distanced himself from monitoring CSC and is not involved in contract negotiations.

Sligh said the CSC delays resulted mainly from changes the state and federal governments required and because modifications need to be made to the current system. Only six months of the 22-month delay can be attributed to "schedule slippage," she said.

New York connection

The project fell behind schedule because CSC thought it would be able to use 73 percent of the code it wrote for New York's Medicaid claims system in North Carolina's system. But it could use only 32 percent.

CSC has also had problems with its New York system. New York's former comptroller wrote scathing assessments about cost overruns and lack of state oversight. A 2010 New York comptroller report said the system had limited ability to detect fraud.

Cansler said the reported problems with New York's system are not related to CSC's inability to use it in North Carolina. He said all states have problems building the complex Medicaid billing systems because the old programs must be continuously updated and the new systems built to match them.

"It's not the vendor, it's not the state. It's the fact that you're trying to change the engines on the plane while it was in the air," he said.

Cansler defended Sligh and said she is not the only person responsible for monitoring CSC's work. Dan Stewart, an assistant DHHS secretary, is responsible for day-to-day oversight, and there's a state committee watching progress and changes, he said.

"I have confidence in the folks," he said. "If I didn't I would have changed it."

CSC, in a statement, defended its work in New York and said the company is working to deliver a high performance health care system in North Carolina.

"As with most large-scale transformation projects, there are work changes that must be made to best meet the evolving needs of the customer and the communities served by the customer," the company said.

What happens next

The state audit given to legislators Tuesday is officially in draft form because it does not include a response from DHHS.

It is unusual to have even limited distribution of an audit before it is final. State Auditor Beth Wood said the law allows her to give a report to a legislative oversight committee at its request.

Wood said she had planned to have the final version ready for Tuesday's meeting, but negotiations with DHHS on the details lasted until Monday.

"Feet were dragged," Wood said.

DHHS has up to 30 days to send its official response.

DHHS released a statement calling the overruns and delays "old news."

Republican legislators were trying to divert attention from the $139 million shortfall in the Medicaid budget "and the potential of slashing funding for children, seniors and the disability community," the statement said.

Staff writer Joseph Neff contributed to this report.

Bonner: 919-829-4821