Raleigh, N.C. — A dozen Department of Health and Human Services employees improperly collected $580,758 in overtime over the last five years while working to upgrade a Medicaid billing system, according to a state audit released Thursday.

Angie Sligh, the program director for the Medicaid Management Information System, or MMIS, collected 41 percent of the overtime paid out, according to the audit. Eight other managers collected another 47 percent of the overtime, while three rank-and-file employees collected the remaining 12 percent.

"That is a lot of money, and almost half of it went to one person," State Auditor Beth Wood said. "I would say it's fair to call this abusive, (an) abuse of the system."

DHHS obtained verbal approval from the Office of State Personnel to pay the overtime to "regular staff" who otherwise were prohibited from receiving pay for extra hours worked, according to the audit. The agency bolstered its argument for the overtime by noting that the federal government would pick up the bulk of the costs and that speeding the MMIS implementation would eventually save the state money.

The lack of documentation about the exception to state personnel rules meant no controls were in place to monitor the payments, according to the audit.

"Prohibiting overtime pay for exempt employees provides for better control and management of the state’s and agencies’ budgets. Consequently, it is imperative that any exceptions be thoroughly vetted and justified," the audit states.

DHHS even assigned someone to manually enter the overtime into the state's payroll system because the system could account for the overtime since there was no record of it being approved, according to the audit. There is no way to determine if the times and amounts were entered correctly or the cost of using state personnel to handle the task.

The MMIS implementation didn't meet its 2011 deadline – DHHS officials have said it will be online this July – so the employees continued to collect overtime until last month, when new agency officials learned of it and stopped the practice, according to the audit.

"Neither one of (the new personnel officials) knew what was going on. Then, you have DHHS over there doing it, so they're not going to run out and tell anybody," Wood said.

The Office of State Personnel adopted new policies and procedures last fall to ensure exceptions to overtime rules are properly documented.

Wood said the case could result in criminal charges if an investigation determines that the employees were paid for time they didn't actually work.

"This whole process was not managed appropriately," she said.

The audit was the second time in about two weeks that an audit has criticized spending in the Medicaid program. Previously, auditors determined that mismanagement and lax oversight led to high administrative costs in the program.

New DHHS Secretary Aldona Wos said in a statement Thursday that she considers the findings to be serious and has "already taken steps to ensure improved accountability within the department."

Department officials declined to say whether any action has been taken against Sligh or any of the other employees who were paid overtime, saying the audit was about policies and procedures, not individuals.