RALEIGH, N.C. — Last week, state auditor Ralph Campbell released an audit extremely critical of the state health system. Now, a leading health official says Campbell knew about the problems all along.

Campbell and Health and Human Services secretary Carmen Hooker Odom are expected to speak before members of a legislative oversight committee Tuesday afternoon.

Campbell calls the DHHS audit his agency's most damaging report ever.

"This was clearly a scheme," state auditor Ralph Campbell said after the release of the report. "Of real concern to us was an attitude that obviously existed in the division for several years that it could do whatever it wanted regardless of federal rules and regulations," he said.

Auditors say millions of dollars went to ineligible hospitals like Durham Regional. They say control of federal monies was handed over to the hospitals that benefited from them.

The finger is pointed at Hooker Odom. A spokeswoman says the problems existed before the secretary took the helm of DHHS and that her staff took measures to correct them.

"It would have been useful if the auditors office in all his years at this division had actually found these problems instead of waiting for us to find them," DHHS spokeswoman Debbie Crane said.

Gov. Mike Easley also defends his administration, saying leaders like Hooker Odom started working to fix the problems before the audit began.

Last week, Campbell forwarded the audit to state and federal law enforcement agencies so they can decide if the problems rose to the level of fraud.

Legislators are interested in the supposed mismanagement of millions of dollars in federal funds, who knew about it and when.