Audit finds Medicaid billing supervisor wasted $1.6 million

The phone rang last summer on a hotline in the office of the state auditor, Beth Wood. The caller, a tipster, wanted to speak directly with Wood.

The concern: Angie Sligh, a middle manager in the N.C. Department of Health and Human Services. Sligh was in charge of replacing North Carolina’s billing system for Medicaid, the health program that serves the poor, elderly and disabled.

“They wanted to meet with me, personally,” Wood recalled, “because the abuse, the nepotism, was just awful over there, and they didn’t know how much longer they could take it.”

The tipster got Wood’s attention. And Sligh already had it.

“We already had evidence she was capable of this,” the auditor said.

The call led to an audit – the third in a decade of what is now called NCTracks, the billing system Sligh oversaw. Previous audits had been critical of Sligh’s handling of the complex technology project, which had been plagued by years of delays, hundreds of millions of dollars in unanticipated costs, and lawsuits.

But with the third audit, prompted by the tipster’s call, auditors found that problems with the project were even worse than they thought: Sligh was responsible for at least $1.6 million wasted over three years through excessive pay to temporary employees, paying temp agencies instead of the state’s less expensive in-house service, paying unjustified overtime and giving holiday pay to ineligible employees.

At least 15 people with personal connections to Sligh had been hired in her office, at least seven of whom were not qualified for the job or were paid higher than the established pay scale, sometimes both. Sligh also received unauthorized comp time that inflated her retirement benefits, the audit report says.

Previous audits found Sligh received $238,000 in overtime over four years, and criticized the Medicaid project she ran for its cost overruns and blown schedules.

Last month’s report added to serious questions among some lawmakers about how DHHS, the state’s largest agency, is managed. Some are pushing to break up the agency to provide separate oversight of Medicaid through an appointed authority.

Since they took control of the legislature in 2011, Republican lawmakers have focused on Sligh and the way the state runs Medicaid as examples of the kind of government waste they pledged to root out. After the audit was published last month, their frustration boiled over.

“It was swept under the rug,” Rep. Justin Burr, a Republican from Albemarle who is co-chairman of a legislative health and human services oversight committee, said in a recent interview. “I really wish the department would have been more receptive and listened to the warnings we tried to give them.”

Sligh could not be reached for comment. The state health agency, which is part of the administration of Gov. Pat McCrory and previously under Gov. Bev Perdue, has disagreed with many of the findings in the audits and says the project has saved the state millions of dollars. Yet, DHHS officials say they have taken all of the concerns seriously and made corrections where needed.

First audit

Angie Sligh, 60, and her husband, Gregory Sligh, 59, raised a family in Raleigh while they worked at St. Augustine’s College. During her 22 years there, she became vice president of information technology, and he became a special assistant to the president.

Both took jobs with state government in 2000. Gregory Sligh ended up at what was then called the Department of Crime Control and Public Safety as a purchasing agent, and Angie Sligh was hired at DHHS as a computing consultant.

Within a few years, Angie Sligh was running the Office of Medicaid Management Information Systems Services. She took on a big job: Overseeing the replacement of a massive computer system widely seen as outdated.

A computer vendor, Affiliated Computer Services, in 2004 was awarded a $171 million contract. Legal disputes soon arose over an inability by ACS to meet requirements of the contract. Federal officials also became concerned.

Sligh put a positive spin on the problems in a February 2005 memo she wrote to federal Medicaid officials, saying the replacement project “continues to forge ahead with great expectations.” The rest of her memo blamed the contractor’s legal protests for causing cost overruns and missed deadlines, saying her staff had to take time to dig up records and provide testimony in depositions.

Just five months later, the state’s information technology office was concerned enough about the pace and cost of the project that it placed it on its highest level of alert.

By the following spring, the situation had further deteriorated. George Bakolia, who was the state’s chief information officer, warned Carmen Hooker Odom, who was then the head of DHHS, that he would suspend the project unless health officials and ACS resolved their differences within a month.

At a minimum, Bakolia wrote, new project management by ACS and DHHS had to be put in place.

Before the month was up, DHHS canceled the contract and paid ACS $5.6 million. Some project managers were replaced.

But not the supervisor, Sligh.

The company sued for breach of contract and wrongful termination, and the state settled the lawsuit for $10.5 million. As part of the settlement, ACS gave software to the state meant to help generate savings.

In 2008, a new vendor was brought in to replace the Medicaid management system, and said it needed more time to complete the $265 million contract. The operational contract was extended for two more years, and the cost increased to $494 million.

The auditor decided to spend most of 2011 taking a close look at what was going on with the project. Its report, released in January 2012, criticized the project for taking too long, costing too much, lacking documentation and noted that it was hobbled by high staff turnover. DHHS rejected most of the audit’s findings, and called it a distraction.

“It is regrettable that such a beneficial IT project for the state has been subject to such ill-informed, negative and unfounded criticism,” then-Secretary Lanier Cansler wrote in response.

But Republican legislators in the General Assembly demanded answers. Burr’s oversight committee was openly skeptical of Sligh’s explanation at a public meeting on the report.

At one point, in a legislative hearing, Sligh was asked to assign her handling of the project a letter grade. She gave herself an “A,” stunning the lawmakers.

Burr said Sligh was brought before the committee several times – “before they stopped letting her come to the meetings.”

“She did a good job of digging a hole,” Burr said.

Second audit

As pressure to meet project deadlines mounted, Sligh’s staff began working longer hours to get the job done. That attracted further scrutiny from auditors, who determined that over four years, more than $580,000 was paid in excessive overtime to 12 employees in her office who wouldn’t normally qualify for overtime pay without written authorization.

Most of it went to nine managers and executive level employees – $238,000 of it to Sligh herself.

As auditors were wrapping up their investigation, Sligh received a 25 percent raise, reflected in department records as a “competency level increase.” It brought her salary to $135,000, the same as the governor’s.

DHHS says the raise was initiated by the Perdue administration in December 2012, and then given final approval by the state personnel office the following month, when the McCrory administration took over. The agency refused to make public a copy of the document showing who signed off on the raise.

That January, Burr and two other Republican lawmakers – Sen. Andrew Brock of Mocksville and Sen. Ralph Hise of Spruce Pine – say they told Health and Human Services Secretary Aldona Wos that Sligh was a problem that needed to be addressed because of the overruns and overtime abuse. Hise said he was especially concerned that the department seemed to think Sligh was the only person who could run the project, and didn’t have someone in place to back her up.

Wood says she twice mentioned her concerns about Sligh to the new DHHS administration.

“So you would think somewhere in management they would be keeping their eye on it, too,” Wood said. “If you just came in to an organization and there was not the red flag that two audits brought out, that would be one thing. But when you’ve got two red flags, two audits that say this person is not doing everything they should be, they aren’t on the up and up, they’ve abused overtime, you’d think there would be closer scrutiny.”

The agency didn’t make Wos available for an interview. A spokeswoman acknowledges Wos was met with a litany of complaints about the system when she started in January 2013, but says Wos responded to them.

“There were a number of well-known and well-documented operational and staffing challenges confronting DHHS upon Secretary Wos’ arrival at DHHS in January 2013,” a department spokeswoman wrote in an email message. “It was widely known that the NCTracks project was several years behind schedule and several hundreds of millions of dollars over budget.”

In response, Wos created the agency’s first chief information officer and hired Joe Cooper, whose background was in banking technology, to oversee all technology projects, including NC Tracks. Sligh remained in her same job.

The Medicaid billing system finally went into operation in July 2013, but has continued to have problems, underpaying medical providers over the past two years.

The spokeswoman said that after the overtime audit in February 2013, Wos’ second month in office, the department took steps to prevent future overtime pay abuse like that which had occurred for four years under the previous administration. In its response to the audit, DHHS said it would seek approval for future exemptions to personnel policies and that it had improved internal controls. But problems remained.

Third audit

Last summer Wood met with the tipster, who urged her to examine who worked with Sligh.

Wood launched another investigation, having her staff comb through records, conduct interviews and search computers.

What investigators found was that the agency had “failed to take steps to prevent and detect abuse and waste of state resources,” including nepotism and even more instances of improper and inflated pay and lack of oversight.

Sligh had hired friends and others with personal connections to her, including some who knew her from St. Aug’s or through the church she attended, Life International Church in Durham. One hire was the sister of Sligh’s hairdresser. Another’s mother was Sligh’s neighbor.

Even her ex-husband was spotlighted in the audit: He was hired for a job in payroll. His wife was hired for a support job.

Sligh’s daughter was made an office assistant.

Besides hiring people who were unqualified and connected to her, Sligh was also faulted for excessive salaries to temporary employees, higher commission rates to employment agencies than the state’s in-house agency, unjustified overtime and inflating her own retirement benefits through the unauthorized accumulation of compensatory time.

Auditors learned that when Sligh had reported to the legislative committee a count of overtime it had demanded, she had omitted at least $260,000 of overtime and comp time that she and her hires had accumulated.

Sligh’s executive assistant, whose base pay was $54,000, received $86,852 in regular and overtime pay – calculated that way, it made her by far the highest paid executive assistant in state.

The examples covered a three-year period, about half of it during the McCrory administration.

Wood said although Cooper should have better supervised Sligh, he and Wos cooperated with auditors.

In all, the audit accused Sligh of wasting at least $1.6 million in improper pay over the previous two years. The department disagreed with many of the findings but agreed that Sligh exercised questionable judgment in hiring friends and family.

Looking ahead

In February this year, as auditors put the finishing touches on their third audit, Sligh retired from state government with a final salary of nearly $136,000 a year, and enough time in for the state to pick up half of her medical insurance coverage. Her husband, whom she did not hire, remains at DHHS.

Burr, the state legislator, says he thinks Sligh should have to pay back the state for the overtime. He still doesn’t understand why the agency didn’t fire her after the second audit came out.

“They should have addressed it and dealt with Ms. Sligh,” he said. “She worked two more years, which led to another audit and more abuse.”

Hise, one of the lawmakers who alerted Wos about Sligh, says he hopes the experience can be instructive. A proposal in the Senate’s and the governor’s budget would make agency IT projects more accountable by housing them in a new Department of Information Technology.

Wood acknowledges that the Medicaid management system is a complex challenge, but says the agency wasn’t following the fundamentals of budgeting to notice that employees were claiming to work 32 hours of overtime a week.

The real cost of the episode, Wood said, is a loss in public confidence.

“In these tough economic times, when families are out there struggling, they’re sending their tax dollars to Raleigh, this is the kind of thing that makes the citizens of North Carolina lose faith in what we’re doing here in Raleigh,” she said. “And it makes them angry.”

This story was originally published June 27, 2015 at 3:11 PM with the headline "Audit finds Medicaid billing supervisor wasted $1.6 million."