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Colin Campbell: Transparency needed to prevent Cardinal scandal

Writer

Colin Campbell is editor of the Insider State Government News Service.

RALEIGH — State lawmakers had a rare moment of bipartisan unity recently. Everyone, it seemed, was outraged about a state-funded healthcare agency that was paying its CEO a $635,000 salary.

Until the overpaid executive and his agency’s lavish spending on parties and flights made headlines, few of us had even heard of Cardinal Innovations. The agency oversees mental health services for 850,000 people in 20 counties, with an annual budget of $682.6 million that mostly comes from Medicaid.

Your tax dollars are footing the bill for Cardinal, but recently ousted Cardinal CEO Richard Topping — the $635,000 man — told radio station WFAE that the agency uses “a private sector personnel system” and must therefore pay “market-based compensation.”

Legislators and the N.C. Department of Health and Human Services disagreed, and the state took over the agency, firing Topping and other top executives. Rep. Nelson Dollar, R-Wake, said the $3.8 million in severance payments to the departing executives was “immoral.” Rep. Ed Hanes, D-Forsyth, said the agency’s leaders were “overstepping and overestimating their authority.”

The Cardinal scandal highlights the potential downsides when state government outsources responsibilities to a private agency and hands them a boatload of money to do it. Organizations like Cardinal have appointed governing boards that are supposed to hold staff accountable, but the boards can easily become corrupted themselves.

It’s not hard for someone like Topping to convince board members — some of whom don’t have professional expertise in healthcare — that they are God’s gift to the organization and must be paid accordingly. A few fancy dinners with alcohol can also help get board members in your corner.

Fortunately, egregious examples of greed like Cardinal aren’t common. While DHHS is running Cardinal for now, it’s highly unlikely the state will take over these responsibilities permanently.

Making agencies like Cardinal part of state government would require the state to fund pensions and healthcare. As long as Republicans are in charge, they’ll continue to support public-private partnerships and as a way to cut costs and shrink the size of government.

So what’s to stop state-funded agencies from turning tax dollars into personal slush funds? More transparency. Obscenely high pay is rare in state government (with the exception of university coaches) in part because salaries are a public record, and they’ll show up in an online database.

A $635,000 salary would quickly attract notice in that database because it’s double the highest paid non-sports state employee — the leader of the N.C. Museum of Art, who earns $295,788 a year. Any organization that gets the bulk of its funding from the government should be required to post salaries online and report them to the state.

The same goes for agency budgets, although state leaders would need to require a lot of details to make sure questionable expenses can’t be hidden. Cardinal, for example, spent $18,130 on a Christmas party, including $1,126 for alcohol and $1,337 for hotel stays, according to the state auditor’s office.

I like booze as much as the next guy, but my tax dollars shouldn’t be helping someone have a holly jolly drunken Christmas. That sort of spending should be banned, especially because this was money that should have gone to help treat folks with mental illness — including those struggling with alcoholism.

The state auditor’s office has a good track record of catching agencies like Cardinal, but auditors can’t audit everyone all the time. In Cardinal’s case, it might be too late to recover the money paid out in severance.

At the end of the day, the buck stops with legislators — and it will be up to them to craft disclosure requirements and regulations to keep state contractors in line. Strong statements bashing Cardinal won’t be enough to stop a similar situation in the future.

Campbell is editor of the Insider State Government News Service. Email him at ccampbell@ncinsider.com.

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