Huge salaries for CEOs. Lavish corporate retreats at luxury hotels. Booze, first class airline tickets and car detailing.
Those are just some of the ways North Carolina’s largest managed care organization misused federal and state funds, according to a state audit release Thursday.
Cardinal Innovations Healthcare Solutions provides services for mental health, developmental disabilities and substance abuse to more than 85,000 North Carolinians.
The 22-page audit lays out some unorthodox spending by the company, including:
* More than $400,000 in spending on chartered planes, luxury hotel stays in Charleston, S.C., monthly detailing of the CEO’s personal car and alcohol purchases.
The retreat expenses, broken down in the audit, are particularly interesting.
Then there’s the Christmas parties.
From the report:
In FY 2016, Cardinal hosted 75 attendees at the Whitehead Manor Conference Center, a retreat-like historic venue. Cardinal paid $18,130, with an average cost of $242 per attendee. The total includes $3,250 for facility rental, $6,122 for a caterer, $1,337 for hotel stays, $668 for hotel cancelation fees, $1,385 for decorations, and $1,126 for alcohol. In FY2015, Richard Topping21 hosted 69 attendees at his personal residence. Cardinal paid $9,621, with an average cost of $139 per attendee. The total cost includes $1,141 for hotel rooms, $3,491 for a caterer, $2,072 for decorations, and $683 for alcohol.
* Annual salaries of between $400,000 and $650,000 for current and former CEOs of the company – far above the $187,365 salary cap got mental health directors set by the Office of State Human Resources.
According to the audit report, Cardinal’s CEO made $260,000 in 2014. Cardinal increased the CEO salary three times until, by 2016, the CEO salary was $635,000.
The audit concludes Cardinal spent nearly $1.2 million in unauthorized salaries that could have been used for other services.
The audit points out that Cardinal could have to reimburse the state for any unauthorized payroll expenditures.
Cardinal denies it did anything wrong in a reply to the audit. The company says the spending was necessary, it was never told to scale it back and that it did not violate any specific laws or statutes in spending the money the way it did.
The audit argues that Cardinal’s spending is “unreasonable” and could erode public trust.
The unreasonable spending on board retreats, meetings, Christmas parties, and travel goes against legislative intent for Cardinal’s operations, potentially resulting in the erosion of public trust. Cardinal was established by North Carolina General Statute 122C as a local management entity (LME) and a local political subdivision of the State to plan, develop, implement, and monitor Behavioral Health services within a specified geographic area to ensure expected outcomes for consumers within available resources. Furthermore, if Cardinal has money available for these types of expenses, it raises questions about whether this money could be used for services to advance its core mission.