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State Audit: 'Operational Defects' Led to 21CT Deal

Texas Tribune
Texas Health and Human Services Commission Kyle Janek and former HHSC chief counsel, Jack Stick.

From the Texas Tribune: A scathing state audit of the Texas Health and Human Services Commission's $20 million deal for fraud tracking software has revealed "operational defects" within the agency's procurement process. 

According to the report, which was released on Thursday, no one took ownership of the deal or ever questioned why it should not be competitively awarded. 

"The Commission and the [Office of Inspector General] did not form an agreement with 21CT that adequately protected the state’s interests and that ensured that the OIG received the goods and services it sought to procure," the audit said. 

The troubled deal has resulted in two forced resignations and four different investigations, including one led by the FBI. It has made reforming state contracting one of the top issues before lawmakers this session.

The health commission’s bungling of the 21CT contract has been in the news since December, when a $90 million extension was canceled after news reports revealed that a lobbyist for the company was a former business partner of Jack Stick, who was deputy inspector general for the agency when the deal was struck in 2012.

Both Stick, who had been promoted to chief counsel for the health commission, and his former boss, inspector general Doug Wilson, were forced to resign.

Stick did not immediately respond to a request for comment for this article.

The audit made several new damning conclusions: that Stick's promotion to chief counsel should never have happened because it violated the agency's employment policy regarding conflicts of interest. His wife, Erica was executive commissioner Kyle Janek's chief of staff.

Erica Stick was placed on paid administrative leave in December, and she later resigned.

"Reporting to a spouse represented a structural conflict of interest that undermined the effectiveness of the Commission’s processes and was a violation of the Commission’s employment policies," the audit reads.

The audit also pointed out, as the Texas Tribune has reported, how Stick and others at HHSC misled the feds when it said the 21CT deal had been competitively awarded. It was not.

There were also new revelations in the audit, which suggested that Stick improperly communicated directly through his personal email account with 21CT. Also, the 21CT deal was set up as an installment plan, instead of the state paying for work and goods that actually were provided. That left the agency holding the bag.

For example, the health commission paid $405,000 for laptop computers from 21CT that never materialized. The audit also revealed how the agency is now engaged in a quiet battle to get money back from 21CT. 

The audit came out three days after a “strike force” appointed by Gov. Greg Abbott released its own critical report on the health commission, saying the agency “has experienced a program failure.”

That report said that missteps at the commission resulted in a contract with 21CT that “skirted” the edge of state law and revealed problems that should delay a planned agency consolidation.

Abbott, who called the findings "deeply troubling," said he wanted time to consider the report before making any decisions about the agency.

This is a developing story. 

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