Audit: Half million dollars misused in state workers’ benefits plan

State employees including the manager of an insurance program for state workers misappropriated about $525,000 by submitting fraudulent receipts for reimbursement over three years, according to an audit released Wednesday.

That amount is higher than what has been previously disclosed in indictments in October and June against the longtime manager, Chakrapani Tademeti of Raleigh. He has been charged with obtaining property by false pretense and larceny by an employee.

No other employees have been indicted, according to the State Bureau of Investigation.

After Tademeti’s arrest in October, a legislative oversight committee called for an audit of NC Flex, which lets state employees set aside pre-tax money for purposes including uninsured medical costs and day care. Auditors also looked at whether an older, post-tax supplemental benefits program called the Employee Insurance Committee was prone to the same kind of fraud alleged in the NC Flex program.

The audit concluded that there was not an opportunity for embezzlement in the EIC program because it does not have a separate fund for promotion, marketing and communications, as NC Flex did. That fund was managed by a third-party administrator outside of state control. Tademeti is accused of submitting false claims for travel, rent, electronic equipment and other expenses, according to the Wake County grand jury indictment.

A separate audit was conducted of the state Office of Human Resources by the state Office of State Budget and Management in May. That report found that two benefits providers bought thousands of dollars worth of hotel rooms, airfare, gift cards, and mobile computer devices for workers enrolled in NC Flex, according to State Auditor Beth Wood’s report. Wood’s audit did not find that any providers had given similar gifts to EIC program members.

Wood’s audit concluded the General Assembly should consider ending the post-tax program and allow employees to switch to NC Flex pre-tax benefits. The older program is costly and has been the focus of four investigations or reviews over the past 22 years that found significant problems.

Legislators should consider whether NC Flex could do a better job of providing post-tax insurance benefits, the state audit concluded.

This story was originally published August 31, 2016 at 12:29 PM with the headline "Audit: Half million dollars misused in state workers’ benefits plan."