Preliminary findings of an audit of Gov. Josh Stein’s DHHS released by State Auditor Dave Boliek’s team this week revealed that in the 2024-25 FY DHHS generated $386 million in lapsed salary funds. This was through $151 million from state funding and $235 million from receipts and federal funding.

The State Auditor’s findings come among the backdrop of an ongoing standoff between Gov. Josh Stein and DHHS and legislative leaders at the North Carolina General Assembly regarding Medicaid reimbursements. Gov. Stein’s administration implemented unprecedented cuts to Medicaid reimbursements on October 1st, 2025, despite having enough money to fully fund the program well into 2026.

Forward thinking leadership at the NCGA has prioritized empowering the Office of the State Auditor this year to increase government transparency and efficiency. House Bill 549, Clarify Powers of State Auditor, became law in July following an override of a veto by Gov. Stein. The legislature also passed into law a “mini budget” that included further strengthening of the State Auditor, with a provision known as “The Division of Accountability, Value, and Efficiency (DAVE) Act.” This week’s report was able to be done because of the DAVE provision in House Bill 125.

The report also states DHHS’ statutorily mandated report on lapsed salaries to the Joint Legislative Oversight Committee on Health and Human Services that was due on November 1st has yet to be provided. According to the report DHHS has failed to publish their report on time since 2017, being late on average 296 days.

While State Auditor Boliek’s team acknowledges that the Medicaid rebase shortfall would not necessarily have been able to be covered by lapsed salary funds, this report does paint a fuller picture of mismanagement and poor budgeting by DHHS, stretching back to former Gov. Roy Cooper’s first term.