State Politics

$1.2 million pay for government employees came without required state approval, says NC audit

Cardinal Innovations Healthcare Solutions had been under fire from legislators and the former head of the state Department of Health and Human Services for paying its CEO Richard Topping more than $600,000 this year. He makes considerably more than leaders of the six other regional mental health offices and more than state policy allows.
Cardinal Innovations Healthcare Solutions had been under fire from legislators and the former head of the state Department of Health and Human Services for paying its CEO Richard Topping more than $600,000 this year. He makes considerably more than leaders of the six other regional mental health offices and more than state policy allows.

The state’s largest regional mental health office decided to pay its leaders $1.2 million more than the state allows without getting proper approvals, according to a state audit released Thursday.

Cardinal Innovations Healthcare Solutions had been under fire from legislators and the former head of the state Department of Health and Human Services for paying its CEO Richard Topping more than $635,000 in salary this year. He makes more than leaders of the six other regional mental health offices and more than state policy allows.

The report from State Auditor Beth Wood’s office said Cardinal decided on Topping’s pay without getting required approvals from the state Human Resources office. That office established about $187,000 as the maximum salary for that job in 2010, according to the audit.

Under state law, Cardinal would have had to get approval from the state personnel office and give reasons why its CEOs should get more than the maximum. The audit says the state can seek reimbursement of the $1.2 million Cardinal has paid in unauthorized CEO salaries since 2014.

Cardinal disputed nearly every finding in the report.

Cardinal’s official response said the Office of the State Auditor, or OSA, didn’t find any problems with the agency meeting patient needs, and instead makes “subjective judgments that Cardinal explored opportunities outside its core mission, that it failed to seek authorization to exceed a non-existent salary range for its CEO, and that it spent a de minimis portion of its administrative funds in a legal, but in OSA’s view, questionable manner.”

The audit faults Cardinal for purchases of first-class airplane tickets and alcohol, charter flights for in-state travel, and board of directors’ meetings at what it called “high-end venues.” In 2015 and 2016, the board held its retreat at the Belmond Charleston Place in Charleston, S.C.

“You will not find another state agency or subdivision of the state that’s spending to this level,” Wood said in an interview. The agency could have used its excess administrative money to provide services for people with mental illnesses, she said.

Amy Kendall, Cardinal’s chief administrative officer, said the audit focuses on a fraction of a percent of its administrative costs, and the agency is spending less on administration than the law allows. The auditor did not find any problems with the way Cardinal is managing patient care, she added. The agency spent $580 million on patient services last year, she said.

The state has seven regional offices that operate like government-funded mental health insurance agencies. The offices are managed-care organizations that get set amounts of money from federal government, state and local governments to cover mental health services. Cardinal covers care for about 850,000 people in 20 counties, including Mecklenburg.

In Mecklenburg, Cardinal controls more than $200 million in Medicaid spending for residents with mental illnesses, addictions, autism and similar issues.

The audit faults the agency for paying both Topping and former CEO Pam Shipman more than the state limit.

Starting in 2014, Shipman was paid $436,680 more than the maximum over three years. That includes part of the $417,214 in severance pay she received in 2015-16, which was $229,877 over the state limit for the position.

Topping made $760,158 over the limit since June 2015.

Kendall said the state salary range for regional agency CEOs is outdated, and besides, few outside the state personnel office knew about it.

“We first learned of this proposed salary range as a result of the state audit,” she said.

Cardinal works with a consulting firm every two years on a market compensation study to make sure its salaries are competitive.

“We believe in recruiting and retaining the best talent,” she said.

Lynn Bonner: 919-829-4821, @Lynn_Bonner

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