RALEIGH — The North Carolina Office of the State Auditor’s Division of Accountability, Value, and Efficiency, or DAVE, released its first report last week, finding $386 million in lapsed salaries due to vacant positions at the state Department of Health and Human Services.
According to the N.C. Office of the State Auditor (OSA), 340 positions at the Department of Health and Human Services (DHHS) were not posted or advertised over a one-year period, resulting in “$16.5 million in lapsed salary funds, with $4.9 million from state appropriations and $11.6 million from receipts.”
A lapsed salary is when budget dollars for a state job’s salary and benefits are received by a state agency, but the job is vacant.
“When a state agency is generating hundreds of millions of tax dollars from job openings it fails to fill, and then voluntarily enacts cuts to health care services, bureaucracy is being placed ahead of the needs of North Carolinians,” state Auditor Dave Boliek said in a press release.
“Lapsed salary funds are not meant to be a permanent supplement to agency budgets. Taxpayers in North Carolina expect state agencies to provide services to the people, not let job openings stay vacant so budgets can be buoyed.”
According to the report, DHHS had $386 million in lapsed salary funds for fiscal year 2024-25 — $151 million in state appropriations and $235 million in federal funding and receipts.
The $386 million “represented 30.6% of all lapsed salary funds in North Carolina for fiscal year 2024-25 and was the most of any state agency,” according to the OSA, which estimated DHHS could rack up $210 million in lapsed salary funds from September 2025 through next June.
Since 2017, DHHS was also found to be an average of 296 days late in publishing statutorily required reports on how the agency used its lapsed salary funds.
The first DAVE report also touched on the state’s Medicaid funding in the context of lapsed salaries.
The report notes DHHS requested $819 million for the Medicaid rebase in fiscal year 2025-26, warning that less funding would force program cuts.
The General Assembly appropriated $600 million in July 2025, leaving a $319 million shortfall tied to administrative costs.
As a result, DHHS implemented cuts, including a 3% across-the-board provider rate reduction and 8% to 10% reductions to select services. Two separate judges have blocked portions of the cuts for autism therapy and certain adult care home services.
Republican lawmakers have called the DHHS cuts a “manufactured crisis” and rejected a call by Gov. Josh Stein to hold an extra special session on Medicaid rebase funding.
“It should be noted that OSA is not expressing that the lapsed salary figures cited above can be directly diverted to cover the Medicaid funding gap,” the report states. “It is likely that DHHS has already expended or encumbered these funds for future expenses. The Division is publishing part of its assessment of DHHS to provide insight into budget practices and their potential impact on Medicaid funding and overall fiscal transparency.”
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